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 March 31, 2009
 Or
  ̈
                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.
 (Exact
name of registrant as specified in its charter)
 
 Maryland
                    
                    20-1352180(State
      or other jurisdiction of incorporation or organization)
                    
                    (I.R.S.
      Employer Identification No.)530
      Oak Court Drive, Suite 300, Memphis, Tennessee
                    
                    38117(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. 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 during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o 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):
 
 Large accelerated filer
      o
                
                Accelerated filer
      xNon-accelerated filer o
                  (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 Exchange Act). Yes o No x
 
 As of May
8, 2009, the latest practicable date, the Registrant had outstanding 28,518,966
shares of common stock, $.01 par value per share.
 
  
  EDUCATION
REALTY TRUST, INC.
 FORM
10-Q
 QUARTER
ENDED MARCH 31, 2009
 TABLE
OF CONTENTS
 
 PagePART
      I—FINANCIAL INFORMATIONItem 1.
      Financial Statements
                          3Condensed
      Consolidated Balance Sheets of Education Realty Trust, Inc. and
      Subsidiaries as of March 31, 2009 and December 31,
    2008
                          3Condensed
      Consolidated Statements of Operations of Education Realty Trust, Inc. and
      Subsidiaries for the three months ended March 31, 2009 and
      2008
                          4Condensed
      Consolidated Statements of Changes in Equity of Education Realty Trust,
      Inc. and Subsidiaries for the three months ended March 31, 2009 and the
      year ended December 31, 2008
                          6Condensed
      Consolidated Statements of Cash Flows of Education Realty Trust, Inc. and
      Subsidiaries for the three months ended March 31, 2009 and
      2008
                          7Notes
      to Condensed Consolidated Financial Statements
                          9Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations
                          22Item 3.
      Quantitative and Qualitative Disclosures About Market Risk
                          37Item 4.
      Controls and Procedures
                          38PART
      II — OTHER INFORMATIONItem 1.
      Legal Proceedings
                          39Item 1A.
      Risk Factors
                          39Item 2.
      Unregistered Sales of Equity Securities and Use of
Proceeds
                          39Item 3.
      Defaults Upon Senior Securities
                          40Item 4.
      Submission of Matters to a Vote of Security Holders
                          40Item 5.
      Other Information
                          40Item 6.
      Exhibits
                          40Signatures
                          41
  2
 
 Part
I — Financial Information
 
 Item 1.
Financial Statements.
 
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (Amounts
in thousands, except share and per share data)
 
 March 31, 2009
                          
                          
                          December 31, 2008(Unaudited)ASSETSAssets:Student
      housing properties, net
                          
                          $
                          727,005
                          
                          
                          $
                          731,400Student
      housing properties – held for sale
                          
                          
                          2,082
                          
                          
                          
                          2,107Assets
      under development
                          
                          
                          15,910
                          
                          
                          
                          6,572Corporate
      office furniture, net
                          
                          
                          1,342
                          
                          
                          
                          1,465Cash
      and cash equivalents
                          
                          
                          8,889
                          
                          
                          
                          9,003Restricted
      cash
                          
                          
                          5,342
                          
                          
                          
                          5,595Student
      contracts receivable, net
                          
                          
                          413
                          
                          
                          
                          533Receivable
      from affiliate
                          
                          
                          25
                          
                          
                          
                          25Management
      fee receivable from third party
                          
                          
                          407
                          
                          
                          
                          401Goodwill
      and other intangibles, net
                          
                          
                          3,099
                          
                          
                          
                          3,111Other
      assets
                          
                          
                          13,019
                          
                          
                          
                          17,435Total
      assets
                          
                          $
                          777,533
                          
                          
                          $
                          777,647LIABILITIES AND
      EQUITYLiabilities:Mortgage
      and construction loans, net of unamortized
premium/discount
                          
                          $
                          444,787
                          
                          
                          $
                          442,259Revolving
      line of credit
                          
                          
                          32,900
                          
                          
                          
                          32,900Accounts
      payable and accrued expenses
                          
                          
                          11,535
                          
                          
                          
                          10,605Deferred
      revenue
                          
                          
                          8,626
                          
                          
                          
                          9,954Total
      liabilities
                          
                          
                          497,848
                          
                          
                          
                          495,718Commitments
      and contingencies (see Note 6)
                          
                          
                          —
                          
                          
                          
                          —Redeemable
      noncontrolling interests
                          
                          
                          11,836
                          
                          
                          
                          11,751Equity:Education
      Realty Trust, Inc. stockholders’ equity:Common
      stock, $.01 par value, 200,000,000 shares authorized, 28,488,855 and
      28,475,855 shares issued and outstanding at March 31, 2009 and
      December 31, 2008, respectively
                          
                          
                          285
                          
                          
                          
                          285Preferred
      shares, $0.01 par value, 50,000,000 shares authorized, no shares issued
      and outstanding
                          
                          
                          —
                          
                          
                          
                          —Additional
      paid-in capital
                          
                          
                          305,599
                          
                          
                          
                          308,356Accumulated
      deficit
                          
                          
                          (40,948
                          )
                          
                          
                          (41,381
                          )Total
      Education Realty Trust, Inc. stockholders’ equity
                          
                          
                          264,936
                          
                          
                          
                          267,260Noncontrolling
      interest
                          
                          
                          2,913
                          
                          
                          
                          2,918Total
      equity
                          
                          
                          267,849
                          
                          
                          
                          270,178Total
      liabilities and equity
                          
                          $
                          777,533
                          
                          
                          $
                          777,647
 See
accompanying notes to the condensed consolidated financial
statements.
  3
  CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Amounts
in thousands, except share and per share data)
 (Unaudited)
 
 Three
      months
                        ended
                        March
      31,
                        2009
                      
                      
                      Three
      months
                        ended
                        March
      31,
                        2008Revenues:Student
      housing leasing revenue
                      
                      $
                      28,720
                      
                      
                      $
                      26,231Student
      housing food service revenue
                      
                      
                      593
                      
                      
                      
                      655Other
      leasing revenue
                      
                      
                      —
                      
                      
                      
                      1,945Third-party
      development services
                      
                      
                      1,457
                      
                      
                      
                      1,787Third-party
      management services
                      
                      
                      909
                      
                      
                      
                      975Operating
      expense reimbursements
                      
                      
                      2,190
                      
                      
                      
                      2,619Total
      revenues
                      
                      
                      33,869
                      
                      
                      
                      34,212Operating
      expenses:Student
      housing leasing operations
                      
                      
                      12,598
                      
                      
                      
                      11,995Student
      housing food service operations
                      
                      
                      572
                      
                      
                      
                      633General
      and administrative
                      
                      
                      3,994
                      
                      
                      
                      3,937Depreciation
      and amortization
                      
                      
                      7,164
                      
                      
                      
                      7,569Reimbursable
      operating expenses
                      
                      
                      2,190
                      
                      
                      
                      2,619Total
      operating expenses
                      
                      
                      26,518
                      
                      
                      
                      26,753Operating
      income
                      
                      
                      7,351
                      
                      
                      
                      7,459Nonoperating
      expenses:Interest
      expense
                      
                      
                      6,352
                      
                      
                      
                      6,164Amortization
      of deferred financing costs
                      
                      
                      301
                      
                      
                      
                      243Interest
      income
                      
                      
                      (49
                      )
                      
                      
                      (118
                      )Total
      nonoperating expenses
                      
                      
                      6,604
                      
                      
                      
                      6,289Income
      before equity in earnings (losses) of unconsolidated entities, income
      taxes, redeemable noncontrolling interests and discontinued
      operations
                      
                      
                      747
                      
                      
                      
                      1,170Equity
      in earnings (losses) of unconsolidated entities
                      
                      
                      100
                      
                      
                      
                      (1
                      )Income
      before income taxes, redeemable noncontrolling interests and discontinued
      operations
                      
                      
                      847
                      
                      
                      
                      1,169Income
      tax expense
                      
                      
                      188
                      
                      
                      
                      191Income
      from continuing operations before redeemable noncontrolling
      interests
                      
                      
                      659
                      
                      
                      
                      978Income
      attributable to redeemable noncontrolling interests
                      
                      
                      201
                      
                      
                      
                      84Income
      from continuing operations
                      
                      
                      458
                      
                      
                      
                      894Income
      (loss) from discontinued operations
                      
                      
                      (16
                      )
                      
                      
                      8Net
      income
                      
                      
                      442
                      
                      
                      
                      902Less:
      Net income attributable to the noncontrolling interest
                      
                      
                      9
                      
                      
                      
                      13Net
      income attributable to Education Realty Trust, Inc.
                      
                      $
                      433
                      
                      
                      $
                      889
  4
 
 Three
      months
                        ended
                        March
      31,
                        2009
                      
                      
                      Three
      months
                        ended
                        March
      31,
                        2008Earnings
      per share information:Income
      attributable to Education Realty Trust, Inc. common stockholders per share
      — basic:Continuing
      operations
                      
                      $
                      0.02
                      
                      
                      $
                      0.03Discontinued
      operations
                      
                      
                      —
                      
                      
                      
                      —Net
      income attributable to Education Realty Trust, Inc. common stockholders
      per share
                      
                      $
                      0.02
                      
                      
                      $
                      0.03Income
      attributable to Education Realty Trust, Inc. common
      stockholders  per share — diluted:Continuing
      operations
                      
                      $
                      0.02
                      
                      
                      $
                      0.03Discontinued
      operations
                      
                      
                      —
                      
                      
                      
                      —Net
      income attributable to Education Realty Trust, Inc. common stockholders
      per share
                      
                      $
                      0.02
                      
                      
                      $
                      0.03Weighted
      average common shares outstanding – basic
                      
                      
                      28,516,522
                      
                      
                      
                      28,508,788Weighted
      average common shares outstanding – diluted
                      
                      
                      29,637,517
                      
                      
                      
                      29,678,393Amounts
      attributable to Education Realty Trust, Inc. – common
      stockholders:Income
      from continuing operations, net of tax
                      
                      $
                      449
                      
                      
                      $
                      881Income
      (loss) from discontinued operations, net of tax
                      
                      
                      (16
                      )
                      
                      
                      8Net
      income
                      
                      
                      433
                      
                      
                      
                      889Distributions
      per common share
                      
                      $
                      0.1025
                      
                      
                      $
                      0.2050
 See
accompanying notes to the condensed consolidated financial
statements.
  5
 
 CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 (Amounts
in thousands, except share data)
 
 Common Stock
                  
                  
                  AdditionalPaid-In
                  
                  
                  Accumulated
                  
                  
                  NoncontrollingShares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  Interest
                  
                  
                  TotalBalance,
      December 31, 2007
                  
                  
                  28,431,855
                  
                  
                  $
                  284
                  
                  
                  $
                  330,969
                  
                  
                  $
                  (33,434
                  )
                  
                  $
                  3,242
                  
                  
                  $
                  301,061Common
      stock issued to officers and directors
                  
                  
                  8,000
                  
                  
                  
                  —
                  
                  
                  
                  101
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  101Amortization
      of restricted stock
                  
                  
                  36,000
                  
                  
                  
                  1
                  
                  
                  
                  604
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  605Cash
      dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (23,379
                  )
                  
                  
                  —
                  
                  
                  
                  (260
                  )
                  
                  
                  (23,639
                  )PIU’s
      forfeited
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  61
                  
                  
                  
                  —
                  
                  
                  
                  (61
                  )
                  
                  
                  —PIU’s
      issued
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  49
                  
                  
                  
                  49Net
      loss
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (7,947
                  )
                  
                  
                  (52
                  )
                  
                  
                  (7,999
                  )Balance,
      December 31, 2008
                  
                  
                  28,475,855
                  
                  
                  
                  285
                  
                  
                  
                  308,356
                  
                  
                  
                  (41,381
                  )
                  
                  
                  2,918
                  
                  
                  
                  270,178Common
      stock issued to officers
                  
                  
                  4,000
                  
                  
                  
                  —
                  
                  
                  
                  15
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  15Amortization
      of restricted stock
                  
                  
                  9,000
                  
                  
                  
                  —
                  
                  
                  
                  151
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  151PIU’s
      issued
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  13
                  
                  
                  
                  13Cash
      dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (2,923
                  )
                  
                  
                  —
                  
                  
                  
                  (27
                  )
                  
                  
                  (2,950
                  )Net
      income
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  433
                  
                  
                  
                  9
                  
                  
                  
                  442Balance,
      March 31, 2009
                  
                  
                  28,488,855
                  
                  
                  $
                  285
                  
                  
                  $
                  305,599
                  
                  
                  $
                  (40,948
                  )
                  
                  $
                  2,913
                  
                  
                  $
                  267,849
 
 See
accompanying notes to the condensed consolidated financial
statements.
  6
  CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts
in thousands)
 (Unaudited)
  Three
      months
                                                          
                                                          
                                                          Three
      monthsended
                                                          
                                                          
                                                          endedMarch
      31,
                                                          
                                                          
                                                          March
      31,2009
                                                          
                                                          
                                                          2008Operating
      activities:Net
      income
                                                          
                                                          $
                                                          442
                                                          
                                                          
                                                          $
                                                          902Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                                                          
                                                          
                                                          7,164
                                                          
                                                          
                                                          
                                                          7,569Depreciation
      included in discontinued operations
                                                          
                                                          
                                                          25
                                                          
                                                          
                                                          
                                                          24Deferred
      taxes
                                                          
                                                          
                                                          (38
                                                          )
                                                          
                                                          
                                                          (144
                                                          )(Gain)/loss
      on disposal of assets
                                                          
                                                          
                                                          (71
                                                          )
                                                          
                                                          
                                                          513Amortization
      of deferred financing costs
                                                          
                                                          
                                                          301
                                                          
                                                          
                                                          
                                                          243Gain
      on interest rate cap
                                                          
                                                          
                                                          (8
                                                          )
                                                          
                                                          
                                                          —Amortization
      of unamortized debt premiums/discounts
                                                          
                                                          
                                                          (101
                                                          )
                                                          
                                                          
                                                          (159
                                                          )Distributions
      of earnings from unconsolidated entities
                                                          
                                                          
                                                          85
                                                          
                                                          
                                                          
                                                          58Noncash
      compensation expense related to PIUs and restricted stock
                                                          
                                                          
                                                          192
                                                          
                                                          
                                                          
                                                          213Equity
      in (earnings) losses of unconsolidated entities
                                                          
                                                          
                                                          (100
                                                          )
                                                          
                                                          
                                                          1Redeemable
      noncontrolling interest
                                                          
                                                          
                                                          201
                                                          
                                                          
                                                          
                                                          84Change
      in operating assets and liabilities
                                                          
                                                          
                                                          4,317
                                                          
                                                          
                                                          
                                                          (510
                                                          )Net
      cash provided by operating activities
                                                          
                                                          
                                                          12,409
                                                          
                                                          
                                                          
                                                          8,794Investing
      activities:Purchase
      of corporate furniture and fixtures
                                                          
                                                          
                                                          (23
                                                          )
                                                          
                                                          
                                                          (27
                                                          )Restricted
      cash
                                                          
                                                          
                                                          253
                                                          
                                                          
                                                          
                                                          787Investment
      in student housing properties
                                                          
                                                          
                                                          (2,614
                                                          )
                                                          
                                                          
                                                          (1,322
                                                          )Proceeds
      from sale of assets
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          2,578Insurance
      proceeds received from property damage
                                                          
                                                          
                                                          75
                                                          
                                                          
                                                          
                                                          —Investment
      in assets under development
                                                          
                                                          
                                                          (9,338
                                                          )
                                                          
                                                          
                                                          (4,857
                                                          )Investment
      in unconsolidated entities
                                                          
                                                          
                                                          (171
                                                          )
                                                          
                                                          
                                                          (76
                                                          )Net
      cash used in investing activities
                                                          
                                                          
                                                          (11,818
                                                          )
                                                          
                                                          
                                                          (2,917
                                                          )Financing
      activities:Payment
      of mortgage notes
                                                          
                                                          
                                                          (639
                                                          )
                                                          
                                                          
                                                          (23,945
                                                          )Borrowings
      under mortgage notes and construction loans
                                                          
                                                          
                                                          3,268
                                                          
                                                          
                                                          
                                                          —Borrowing
      under line of credit, net
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          23,300Debt
      issuance costs
                                                          
                                                          
                                                          (268
                                                          )
                                                          
                                                          
                                                          (67
                                                          )Dividends
      and distributions paid to common and restricted
    stockholders
                                                          
                                                          
                                                          (2,923
                                                          )
                                                          
                                                          
                                                          (5,843
                                                          )Dividends
      and distributions paid to noncontrolling interests
                                                          
                                                          
                                                          (143
                                                          )
                                                          
                                                          
                                                          (300
                                                          )Net
      cash used in financing activities
                                                          
                                                          
                                                          (705
                                                          )
                                                          
                                                          
                                                          (6,855
                                                          )Net
      decrease in cash and cash equivalents
                                                          
                                                          
                                                          (114
                                                          )
                                                          
                                                          
                                                          (978
                                                          )Cash
      and cash equivalents, beginning of period
                                                          
                                                          
                                                          9,003
                                                          
                                                          
                                                          
                                                          4,034Cash
      and cash equivalents, end of period
                                                          
                                                          $
                                                          8,889
                                                          
                                                          
                                                          $
                                                          3,056
 See
accompanying notes to the condensed consolidated financial
statements.
  7
  Three
      months
                  
                  
                  Three
      monthsended
                  
                  
                  endedMarch
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008Supplemental
      disclosure of cash flow information:Interest
      paid
                  
                  $
                  5,685
                  
                  
                  $
                  6,344Income
      taxes paid
                  
                  $
                  126
                  
                  
                  $
                  —Supplemental
      disclosure of noncash activities:Redemption
      of minority interest from unit holder
                  
                  $
                  —
                  
                  
                  $
                  893
 See
accompanying notes to the condensed consolidated financial
statements.
  8
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
in thousands, except share and per share data)
 (Unaudited)
 
 1.
Organization and description of business
 
 Education
Realty Trust, Inc. (the “Trust”) was organized in the state of Maryland on
July 12, 2004 and commenced operations as a real estate investment trust
(“REIT”) effective with the initial public offering (the “Offering”) that was
completed on January 31, 2005. Under the Trust’s 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 Trust
operates primarily through a majority-owned Delaware limited partnership,
Education Realty Operating Partnership, LP (the “Operating Partnership”). The
Operating Partnership owns, directly or indirectly, interests in student housing
communities located near major universities in the United States.
 
 The Trust
also provides real estate facility management, development and other advisory
services through the following subsidiaries of the Operating
Partnership:
 
 •
              Allen
      & O’Hara Education Services, Inc. (“AOES”), a Delaware corporation
      performing student housing management
  activities.
 
 •
              Allen
      & O’Hara Development Company, LLC (“AODC”), a Delaware limited
      liability company providing development consulting services for third
      party student housing properties.
 
 The Trust
is subject to the risks involved with the ownership and operation of residential
real estate near major universities throughout the United States. The
risks include, among others, those normally associated with changes in the
demand for housing by students at the related universities, competition for
tenants, creditworthiness of tenants, changes in tax laws, interest rate levels,
the availability of financing, and potential liability under environmental and
other laws.
 
 2.
Summary of significant accounting policies
 
 Basis
of presentation and principles of consolidation
 
 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 represent the assets and liabilities and
operating results of the Trust and its majority owned subsidiaries.
 
 The
Trust, as the sole general partner of the Operating Partnership, has the
responsibility and discretion in the management and control of the Operating
Partnership, and the limited partners of the Operating Partnership, in such
capacity, have no authority to transact business for, or participate in the
management activities of the Operating Partnership. Accordingly, the Trust
accounts for the Operating Partnership using the consolidation
method.
 
 All
intercompany balances and transactions have been eliminated in the accompanying
condensed consolidated financial statements.
 
 Interim
financial information
 
 The
accompanying unaudited interim 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, 2008, filed with the Securities and Exchange Commission
(the “SEC”).
  9
  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 period. Significant estimates and assumptions are used by
management in determining the recognition of third-party development consulting
services revenue under the percentage of completion method, useful lives of
student housing assets, the valuation of goodwill, the initial valuations and
underlying allocations of purchase price in connection with student property
acquisitions, the determination of fair value for impairment assessments, and in
the recording of the allowance for doubtful accounts. Actual results could
differ significantly from those estimates.
 
 Cash
and cash equivalents
 
 All
highly liquid-investments with a maturity of three months or less when purchased
are considered cash equivalents. Restricted cash is excluded from cash for the
purpose of preparing the condensed consolidated statements of cash flows. The
Trust maintains cash balances in various banks. At times, the amounts of cash
held in certain bank accounts may exceed the amount that the Federal Deposit
Insurance Corporation (FDIC) insures.  At March 31, 2009, the Trust
had no cash on deposit that was uninsured by the FDIC or in excess of FDIC
limits.
 
 Restricted
cash
 
 Restricted
cash includes escrow accounts held by lenders for the purpose of paying taxes,
insurance, principal and interest, and to fund future repairs and capital
improvements.
 
 Distributions
 
 The Trust
currently pays regular quarterly cash distributions to stockholders. These
distributions are determined quarterly by the Board of Directors based on the
operating results, economic conditions, capital expenditure needs, the Internal
Revenue Code’s REIT annual distribution requirements, leverage covenants imposed
by our revolving credit facility and other debt documents, and any other matters
the Board of Directors deems relevant.
 
 Student
housing properties
 
 Land,
land improvements, buildings and improvements, and furniture, fixtures and
equipment are recorded at cost. Buildings and improvements are depreciated over
30 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.
 
 Acquisitions
of student housing properties are accounted for utilizing the purchase method in
accordance with Statement of Financial Accounting Standards (“SFAS”)
No. 141,Business
Combinations, and accordingly, the acquired student housing
properties’ results of operations are included in the Trust’s results of
operations from the respective dates of acquisition. Pre-acquisition costs,
which include legal and professional fees and other third-party costs related
directly to the acquisition of the property, are accounted for as part of the
purchase price. Appraisals, estimates of cash flows and 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. On January
1, 2009 the Trust adopted SFAS No. 141R, which changes the requirements for how
an acquirer recognizes and measures the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired.  SFAS No. 141R also enhances the disclosures to
enable the evaluation of the nature and financial effects of the business
combination.  The Trust will apply the provisions of SFAS No. 141R to
all future acquisitions.
  10
 
 Management
assesses impairment of long-lived assets in accordance with SFAS
No. 144,Accounting for
the Impairment and Disposal of Long-lived Assets.  SFAS
No. 144 requires that long-lived assets to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In accordance with SFAS
No. 144, management uses an estimate of future undiscounted cash flows of
the related asset over the remaining life in measuring whether the assets are
recoverable.
 
 Certain
student housing properties may be classified as held for sale based on the
criteria within SFAS No. 144. When a student housing property is identified
as held for sale, the net realizable value of such asset is estimated. If the
net realizable value of 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 student housing property has met the held for sale
criteria. Operations of student housing properties that are sold or classified
as held for sale are recorded as part of discontinued operations for all periods
presented. No impairment loss on student housing properties held for sale was
recognized in the accompanying condensed consolidated statement of
operations.
 
 Repairs,
maintenance and major improvements
 
 The costs
of ordinary repairs and maintenance are charged to operations when incurred.
Major improvements that extend the life of an asset are capitalized and
depreciated over the remaining useful life of the asset. Planned major repair,
maintenance and improvement projects are capitalized when performed. In some
circumstances, the lenders require the Trust to maintain a reserve account for
future repairs and capital expenditures. These amounts are classified as
restricted cash as the funds are not available for current use.
 
 Investment
in unconsolidated joint ventures, limited liability companies and limited
partnerships
 
 The
Operating Partnership accounts for its investments in unconsolidated joint
ventures, limited liability companies and limited partnerships using the equity
method whereby the cost of an investment is 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, limited
liability companies and limited partnerships are allocated based on each owner’s
respective ownership interests. These investments are classified as other assets
in the accompanying condensed consolidated balance sheets.
 
 Deferred
financing costs
 
 Deferred
financing costs represent costs incurred in connection with acquiring debt
facilities. These costs are amortized over the terms of the related debt using a
method that approximates the effective interest method. Deferred financing
costs, net of amortization, are included in other assets in the accompanying
condensed consolidated balance sheets.
 
 Offering
costs
 
 Specific
incremental costs directly attributable to the issuance of common stock are
charged against the gross proceeds. Accordingly, underwriting commissions and
other stock issuance costs are reflected as a reduction of additional paid-in
capital.
 
 Debt
premiums/discounts
 
 Differences
between the estimated fair value of debt and the principal value of debt assumed
in connection with student housing property acquisitions are amortized over the
term of the related debt as an offset to interest expense using the effective
interest method.
  11
 
 Income
taxes
 
 The Trust
qualifies as a REIT under the Internal Revenue Code of 1986, as amended (the
“Code”). The Trust is generally not subject to federal income tax to the extent
that it distributes at least 90% of its taxable income for each tax year to its
stockholders. REITs are subject to a number of organizational and operational
requirements. If the Trust fails to qualify as a REIT in any taxable year, the
Trust will be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income and property and to federal
income and excise taxes on its undistributed income.
 
 The Trust
has elected to treat its management company, AOES, as a taxable REIT
subsidiary (“TRS”). The TRS is subject to federal, state and local income taxes.
AOES manages the Trust’s non-REIT activities which include management services
and development services, which are provided through AODC. The Trust follows
SFAS No. 109,Accounting
for Income Taxes, which requires the use of the asset and liability
method. 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
also follows Interpretation No. 48, Accounting for Uncertainty in Income
Taxes. The Trust had no unrecognized tax benefits as of March 31, 2009
and 2008.  As of March 31, 2009, the Trust does not expect to record
any unrecognized tax benefits.  The Trust, or its subsidiaries, files
income tax returns in the U.S. Federal jurisdiction and various states’
jurisdictions. As of March 31, 2009, open tax years generally include tax years
2005-2007. The Trust’s policy is to include interest and penalties related to
unrecognized tax benefits in general and administrative expenses.  At
March 31, 2009, the Trust had no interest or penalties recorded related to
unrecognized tax benefits.
 
 Noncontrolling
interests
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements-an amendment of Accounting Research Bulletin
No. 51 (“SFAS 160”).  SFAS 160 establishes the accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interests, changes in a parent’s ownership
interest and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated.  SFAS 160 also establishes disclosure
requirements to clearly distinguish between the interests of the parent and the
interests of the noncontrolling owners.   SFAS 160 was adopted by
the Trust on January 1, 2009.  The Operating Partnership Units, the
University Towers Operating Partnership Units and profits interest units (“PIU”)
(see Note 9) are now referred to as noncontrolling interests (formerly minority
interests).  In connection with the adoption, the Trust also
considered the guidance in FASB EITF Topic D-98, Classification and Measurement of
Redeemable Securities.  The Operating Partnership Units and the
University Towers Operating Partnership Units are redeemable at the option of
the holder into an equivalent number of shares of the Trust’s common stock, or
cash, and essentially have the same characteristics as common stock as they
participate in net income and distributions.  Accordingly, the Trust
determined that the Operating Partnership Units and the University Towers
Operating Partnership Units meet the requirements to be classified outside of
permanent equity and are therefore classified as redeemable noncontrolling
interests in the accompanying condensed consolidated balance
sheets.  The value of redeemable noncontrolling interests is reported
at the greater of fair value or historical cost at the end of each reporting
period.
 
 The
PIU’s were determined to be noncontrolling interests that are not redeemable and
accordingly these amounts were reclassified to equity in the accompanying
condensed consolidated balance sheets.  The PIU holder’s share of
income or loss is reported in the accompanying condensed consolidated statement
of operations as net income attributable to noncontrolling
interests.
 
 Earnings
per share
 
 The Trust
calculates earnings per share in accordance with SFAS No. 128,Earnings Per Share. Basic
earnings per share is calculated by dividing net earnings available to common
shares by weighted average common shares outstanding. Diluted earnings per share
is calculated similarly, except that it includes the dilutive effect of the
assumed exercise of potentially dilutive securities. The Trust adopted FASB
Staff Position EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating Securities,
on January 1, 2009.  Upon adoption 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.  The adoption resulted in shares of unvested restricted stock
being included in the computation of basic earnings per share as of March 31,
2009 and 2008.  The adoption did not have a material impact on the
Trust’s consolidated financial statements.
  12
 
 The
following reconciles the basic and diluted weighted average share as of March
31, 2009 and 2008:
 
 2009
                  
                  
                  2008Basic
      weighted average common shares outstanding
                  
                  
                  28,516,522
                  
                  
                  
                  28,508,788Operating
      Partnership units
                  
                  
                  913,738
                  
                  
                  
                  913,738University
      Towers Operating Partnership units
                  
                  
                  207,257
                  
                  
                  
                  255,867Diluted
      weighted average common shares outstanding
                  
                  
                  29,637,517
                  
                  
                  
                  29,678,393
 
 Goodwill
and other intangible assets
 
 The Trust
accounts for its goodwill and other intangible assets under SFAS
No. 142,Goodwill and
Other Intangible Assets. Goodwill is tested annually for impairment, and
is tested for impairment more frequently if events and circumstances indicate
that the assets might be impaired. An impairment loss is recognized to the
extent that the carrying amount exceeds the asset’s fair value.  The
carrying value of goodwill was $3,070 at March 31, 2009 and December 31,
2008.  Other intangible assets generally include in-place leases and
management contracts 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 $29 and $41 at Match 31, 2009 and December
31, 2008, respectively.
 
 Comprehensive
Income
 
 The Trust
follows SFAS No. 130,Reporting Comprehensive Income, which established standards for reporting
and displaying comprehensive income and its components. For all periods
presented, comprehensive income (loss) is equal to net income
(loss).
 
 Revenue
recognition
 
 The Trust
recognizes revenue related to leasing activities at the student housing
properties owned by the Trust, management fees related to managing third party
student housing properties, development consulting fees related to the general
oversight of third party student housing development and construction and
operating expense reimbursements for payroll and related expenses incurred for
third party student housing properties managed or developed by the
Trust.
 
 Student housing leasing
revenue — Student housing leasing revenue is comprised of all activities
related to leasing and operating the student housing properties and includes
revenues from leasing apartments by the bed, parking lot rentals, and providing
certain ancillary services. This revenue is reflected in student housing leasing
revenue in the accompanying condensed consolidated statements of operations.
Students are required to execute lease contracts with payment schedules that
vary from annual to monthly payments. Generally, the Trust requires each
executed leasing contract to be accompanied by a signed parental guarantee.
Receivables are recorded when billed. Revenues and related lease incentives and
nonrefundable application and service fees are recognized on a straight-line
basis over the term of the contracts. The Trust has no contingent rental
contracts, except as noted below, related to other leasing revenue. At certain
student housing facilities, the Trust offers parking lot rentals to the tenants.
The related revenues are recognized on a straight-line basis over the term of
the related agreement.
 
 Student housing food service
revenue — The Trust maintains a dining facility at University Towers,
which offers meal plans to the tenants as well as dining to other third-party
customers. The meal plans typically require upfront payment by the tenant
covering the school semester, and the related revenue is recognized on a
straight-line basis over the corresponding semester.
 
 Other leasing revenue — Other
leasing revenue relates to our leasing of the 13 properties (“Place Portfolio”)
we acquired from Place Properties, Inc. (“Place”) in January
2006.  Simultaneous with the acquisition of the Place Portfolio, the
Trust leased the assets to Place and received base monthly rent of $1,145 and
had the right to receive “Additional Rent” annually if the properties exceeded
certain criteria defined in the lease agreement. Base rent was recognized on a
straight-line basis over the lease term and Additional Rent was recognized only
upon satisfaction of the defined criteria. The lease was terminated on February
1, 2008.  In connection with the termination of the lease, Place paid
the Operating Partnership a lease termination fee of $6,000 of which $800 was
recognized in the first quarter of 2008.
  13
 
 Third-party development services
revenue — The Trust provides development consulting services in an agency
capacity with third parties whereby the fee is determined based upon the total
construction costs. Total fees vary from 3-5% of the total estimated costs, and
we typically receive a portion of the fees up front. These fees, including the
upfront fee, are recognized using the percentage of completion method in
proportion to the contract costs incurred by the owner over the course of
construction of the respective projects.  Occasionally, the
development consulting contracts include a provision whereby the Trust can
participate in project savings resulting from successful cost management
efforts.  These revenues are recognized once all contractual terms
have been satisfied and no future performance requirements
exist.  This typically occurs after construction is
complete.  For the three months ended March 31, 2009 and 2008 there
was no revenue recognized related to cost savings.
 
 Third-party management services
revenue — The Trust enters into management contracts to manage
third-party student housing facilities. Management revenues are recognized when
earned in accordance with each management contract. Incentive management fees
are recognized when the incentive criteria have been met.
 
 Operating expense
reimbursements — The Trust pays certain payroll and related costs to
operate third-party student housing properties that are managed by the Trust and
certain costs for third-party development services. Under the terms of the
related management and development agreements, the third-party owners reimburse
these costs. The amounts billed to the third-party owners are recognized as
revenue in accordance with Emerging Issues Task Force No. 01-14,Income Statement
Characterization of Reimbursements Received for “Out of Pocket” Expenses
Incurred.
 
 Costs
related to third party development consulting services
 
 Costs
associated with the pursuit of development consulting contracts are expensed as
incurred, until such time that management has been notified of a contract award.
At such time the reimbursable costs are recorded as receivables and are
reflected as other assets in the accompanying condensed consolidated balance
sheets.
 
 3.
Investments in unconsolidated entities
 
 As of
March 31, 2009, the Trust had investments, directly or indirectly, in the
following active unconsolidated joint ventures, limited liability companies and
limited partnerships that are accounted for under the equity
method:
 
 •
              University
      Village-Greensboro LLC, a Delaware limited liability company, 25% owned by
      the Operating Partnership
 
 •
              WEDR
      Riverside Investors V, LLC, a Delaware limited liability company, 10%
      owned by the Operating Partnership
 
 •
              APF
      EDR, LP, a Delaware limited partnership, 10% owned by the Operating
      Partnership
 
 •
              APF
      EDR Food Services, LP, a Delaware limited partnership, 10% owned by the
      Operating Partnership
 
 •
              WEDR
      Stinson Investors V, LLC, a Delaware limited liability company, 10% owned
      by the Operating Partnership
 
 The
following is a summary of financial information for the Trust’s unconsolidated
joint ventures, limited liability companies and limited partnerships for the
three months ended March 31, 2009 and 2008:
 
 2009
                  
                  2008Results
      of Operations:Revenues
                  
                  $
                  4,593
                  
                  
                  $
                  4,359Net
      income (loss)
                  
                  
                  601
                  
                  
                  
                  (192
                  )Equity
      in earnings (losses) of unconsolidated entities
                  
                  $
                  100
                  
                  
                  $
                  (1
                  )
 
 These
entities primarily own student housing communities which are managed by the
Trust.  As of March 31, 2009 and December 31, 2008, the Trust’s
investment in unconsolidated entities totaled $2,945 and $2,759,
respectively.
  14
  4.
Debt
 
 Revolving
credit facility
 
 The
Operating Partnership has a revolving credit facility (the “Amended Revolver”)
dated January 31, 2005 with a maximum availability of $100,000.
Availability under the Amended Revolver is limited to a “borrowing base
availability” equal to the lesser of (i) 65% of the property asset value
(as defined in the amended agreement) of the properties securing the facility
and (ii) the loan amount which would produce a debt service coverage ratio
of no less than 1.30, with debt service based on the greater of two different
sets of conditions specified in the amended agreement. As of March 31,
2009, our borrowing base was $47,822, we had $32,900 outstanding and we had
letters of credit outstanding of $2,000 (see Note 6); thus, our remaining
availability was $12,922. We do, however, have additional unmortgaged properties
that can be pledged against the Amended Revolver to increase total
availability.
 
 The Trust
serves as the guarantor for any funds borrowed by the Operating Partnership
under the Amended Revolver. Additionally, the Amended Revolver is secured by a
cross-collateralized, first mortgage lien on six otherwise unmortgaged
properties.  The Amended Revolver had a term of three years and
matured on March 30, 2009.  However, the Operating Partnership
exercised its option to extend the maturity date until March 30, 2010, under
existing terms. The interest rate per annum applicable to the Amended Revolver
is, at the Operating Partnership’s option, equal to a base rate or London
InterBank Offered Rate (“LIBOR”) plus an applicable margin based upon our
leverage (3.50% at March 31, 2009).
 
 The
Amended Revolver contains customary affirmative and negative covenants and
contains financial covenants that, among other things, require the Trust and its
subsidiaries to maintain certain minimum ratios of “EBITDA” (earnings before
payment or charges of interest, taxes, depreciation, amortization or
extraordinary items) as compared to interest expense and total fixed charges.
The financial covenants also include consolidated net worth and leverage ratio
tests.
 
 The Trust
is prohibited from making distributions that exceed $1.20 per share unless prior
to and after giving effect to such action the total leverage ratio is less than
or equal to 60%. The amount of restricted payments permitted may be increased as
long as either of the following conditions is met: (a) after giving effect
to the increased restricted payment, the total leverage ratio shall remain less
than or equal to 60%; or (b) the increased restricted payment, when
considered along with all other restricted payments for the last 3 quarters,
does not exceed 95% of funds from operations for the applicable
period.
 
 Mortgage
and construction debt
 
 At March
31, 2009, the Trust had outstanding mortgage and construction indebtedness of
$444,787 (net of unamortized debt premium of $1,102).  $14,360 relates
to construction debt that is disclosed below and $233,117 pertains to
outstanding mortgage debt that is secured by the underlying student housing
properties or leaseholds bearing interest at fixed rates ranging from 4.92% to
6.97%.  The remaining $197,310 of the outstanding mortgage
indebtedness relates to the $222,000 secured credit facility the Trust entered
into on December 31, 2008 to prepay the mortgage debt maturing in July of
2009.  $49,768 of the outstanding amount under the secured credit
facility bears interest at variable rates based on the 30-day LIBOR plus an
applicable margin. The remaining outstanding balance of $147,542 bears interest
at a weighted average fixed rate of 6.01%.
 
 In order
to hedge the interest rate risk associated with the variable rate loans under
the secured credit facility, the Operating Partnership purchased an interest
rate cap from the Royal Bank of Canada on December 22, 2008 for
$120.  The notional amount of the cap is $49,874, the cap will
terminate on December 31, 2013 and the cap rate is 7.0% per
annum.  The Operating Partnership has chosen not to designate the cap
as a hedge and will recognize all gains or losses associated with this
derivative instrument in earnings.  At March 31, 2009, the cap had a
value of $90 and is classified in other assets in the accompanying condensed
consolidated balance sheet.
 
 At
March 31, 2009, the Trust had $10,657 and $3,512 outstanding on
construction loans of $11,000 and $12,285, respectively, related to the
development of phase I and phase II of a wholly-owned student apartment
community near Southern Illinois University (see Note 7). The loans bear
interest equal to LIBOR plus a 110 and 200 basis point margins, respectively,
and are interest only through June 14, 2010. Commencing on June 14, 2010,
and annually thereafter, a debt service coverage ratio calculated on a rolling
12 month basis, of not less than 1.25 to 1, must be maintained in order to
extend the loans until June 28, 2012, with principal and interest being
repaid on a monthly basis. The Trust incurred $81 in deferred financing costs in
connection with the construction loans.
  15
 
 At March
31, 2009, the Trust had $191 outstanding on a $14,300 construction loan related
to the development of a wholly owned student apartment community at Syracuse
University (see Note 7). The loan bears interest equal to LIBOR plus a 110 basis
point margin and is interest only through September 29, 2011. Commencing
with the quarter ended June 30, 2011, and annually thereafter, a debt
service coverage ratio calculated on a rolling 12 month basis, of not less
than 1.25 to 1, must be maintained in order to extend the loan until
September 29, 2013, with principal and interest being repaid on a monthly
basis.
 
 On
March 3, 2008, mortgage debt in the amount of $22,977, secured by the
student housing community referred to as University Towers, bearing interest at
an effective rate of 5.48%, matured and was repaid by the Trust with additional
borrowings on the Amended Revolver. On June 27, 2008, the Trust refinanced
the debt with a $25,000, interest only, fixed rate mortgage bearing interest at
5.99% through June 30, 2013. After the initial maturity, the Trust has the
option to extend the loan for 12 months with principal and interest equal
to LIBOR plus a 250 basis point margin per annum being repaid on a monthly
basis. The Trust used the proceeds from the refinancing to pay down the Amended
Revolver.
 
 The
scheduled maturities of outstanding mortgage and construction indebtedness at
March 31, 2009 are as follows:
 
 Fiscal
      Year Ending2009
      (9 months ending December 31, 2009)
                                
                                $
                                100,9922010
                                
                                
                                3,4752011
                                
                                
                                3,8232012
                                
                                
                                81,5992013
                                
                                
                                32,489Thereafter
                                
                                
                                221,307Total
                                
                                
                                443,685Unamortized
      debt premium/discounts
                                
                                
                                1,102Outstanding
      at March 31, 2009, net of unamortized premiums/discounts
                                
                                $
                                444,787
 
 At March
31, 2009, the outstanding mortgage and construction debt had a weighted average
interest rate of 5.72% and carried a weighted average term to maturity of
4.54 years.
 
 The Trust
has $98,600 of mortgage debt scheduled to mature in December 2009.  If
capital and equity markets continue to erode significantly and the Trust cannot
find replacement financing, the Trust would not have enough existing liquidity
to repay the mortgage debt at maturity.  If this occurs, the Trust
would pursue and expect to obtain an extension from the current lender in order
to provide additional time to obtain replacement financing.  If the
Trust is unable to obtain replacement financing, the nine encumbered properties
could be turned over to the lender and as a result the Trust could cross default
the Amended Revolver.  If this were to occur, management has reviewed
its cash flows and has identified plans that could be implemented in an effort
to repay the Amended Revolver.   These plans could include the
elimination of or the payment in kind of our dividends, suspension of capital
spend, cost reductions, and, subject to market conditions, possible asset
dispositions and/or a potential equity capital event.  Additionally,
management has assessed the remaining student housing assets that would remain
in the portfolio and currently believe they should be able to produce sufficient
cash flows to fund operations and service the remaining debt requirements in the
near future.
 
 5.
Segments
 
 The Trust
defines business segments by their distinct customer base and service provided.
The Trust has identified three reportable segments: student housing leasing,
development-consulting services and  management services. Management
evaluates each segment’s performance based on pretax income and on net operating
income, which is defined as income before depreciation, amortization, impairment
losses, interest expense, equity in earnings of unconsolidated entities, and
noncontrolling interests. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies. Intercompany fees are reflected at the contractually
stipulated amounts. Discontinued operations are not included in segment
reporting as management addresses these items on a corporate level. The
following table represents segment information for the three months ended March
31, 2009 and 2008:
  16
 
 Three
      Months Ended March 31, 2009
                                          
                                          
                                          Three Months
      Ended March 31, 2008Student
                                          
                                          
                                          Development
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          Student
                                          
                                          
                                          DevelopmentHousing
                                          
                                          
                                          Consulting
                                          
                                          
                                          Management
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          Housing
                                          
                                          
                                          Consulting
                                          
                                          
                                          ManagementLeasing
                                          
                                          
                                          Services
                                          
                                          
                                          Services
                                          
                                          
                                          Adjustments
                                          
                                          
                                          Total
                                          
                                          
                                          Leasing
                                          
                                          
                                          Services
                                          
                                          
                                          Services
                                          
                                          
                                          Adjustments
                                          
                                          
                                          TotalRevenues:Student
      housing leasing revenue
                                          
                                          $
                                          28,720
                                          
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          28,720
                                          
                                          
                                          $
                                          26,231
                                          
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          26,231Student
      housing food service revenue
                                          
                                          
                                          593
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          593
                                          
                                          
                                          
                                          655
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          655Other
      leasing revenue
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,945
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,945Third-party
      development consulting services
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,457
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,457
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,787
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,787Third-party
      management services
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          909
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          909
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          975
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          975Intersegment
      revenues
                                          
                                          
                                          —
                                          
                                          
                                          
                                          474
                                          
                                          
                                          
                                          1,125
                                          
                                          
                                          
                                          (1,599
                                          )
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,037
                                          
                                          
                                          
                                          (1,037
                                          )
                                          
                                          
                                          —Operating
      expense reimbursements
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          2,190
                                          
                                          
                                          
                                          2,190
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          2,619
                                          
                                          
                                          
                                          2,619Total
      revenues
                                          
                                          
                                          29,313
                                          
                                          
                                          
                                          1,931
                                          
                                          
                                          
                                          2,034
                                          
                                          
                                          
                                          591
                                          
                                          
                                          
                                          33,869
                                          
                                          
                                          
                                          28,831
                                          
                                          
                                          
                                          1,787
                                          
                                          
                                          
                                          2,012
                                          
                                          
                                          
                                          1,582
                                          
                                          
                                          
                                          34,212Operating
      expenses:Student
      housing leasing operations
                                          
                                          
                                          12,598
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          12,598
                                          
                                          
                                          
                                          11,995
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          11,995Student
      housing food service operations
                                          
                                          
                                          572
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          572
                                          
                                          
                                          
                                          633
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          633General
      and administrative
                                          
                                          
                                          —
                                          
                                          
                                          
                                          732
                                          
                                          
                                          
                                          1,968
                                          
                                          
                                          
                                          (37
                                          )
                                          
                                          
                                          2,663
                                          
                                          
                                          
                                          3
                                          
                                          
                                          
                                          731
                                          
                                          
                                          
                                          1,798
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          2,532Intersegment
      expenses
                                          
                                          
                                          1,125
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          (1,125
                                          )
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,037
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          (1,037
                                          )
                                          
                                          
                                          —Reimbursable
      operating expenses
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          2,190
                                          
                                          
                                          
                                          2,190
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          2,619
                                          
                                          
                                          
                                          2,619Total
      operating expenses
                                          
                                          
                                          14,295
                                          
                                          
                                          
                                          732
                                          
                                          
                                          
                                          1,968
                                          
                                          
                                          
                                          1,028
                                          
                                          
                                          
                                          18,023
                                          
                                          
                                          
                                          13,668
                                          
                                          
                                          
                                          731
                                          
                                          
                                          
                                          1,798
                                          
                                          
                                          
                                          1,582
                                          
                                          
                                          
                                          17,779Net
      operating income
                                          
                                          
                                          15,018
                                          
                                          
                                          
                                          1,199
                                          
                                          
                                          
                                          66
                                          
                                          
                                          
                                          (437
                                          )
                                          
                                          
                                          15,846
                                          
                                          
                                          
                                          15,163
                                          
                                          
                                          
                                          1,056
                                          
                                          
                                          
                                          214
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          16,433Nonoperating
      expenses(1)
                                          
                                          
                                          13,429
                                          
                                          
                                          
                                          (11
                                          )
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          13,418
                                          
                                          
                                          
                                          13,620
                                          
                                          
                                          
                                          (31
                                          )
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          13,589Income
      before equity in earnings (losses) of unconsolidated entities, income
      taxes, noncontrolling interests and discontinued
operations
                                          
                                          
                                          1,589
                                          
                                          
                                          
                                          1,210
                                          
                                          
                                          
                                          66
                                          
                                          
                                          
                                          (437
                                          )
                                          
                                          
                                          2,428
                                          
                                          
                                          
                                          1,543
                                          
                                          
                                          
                                          1,087
                                          
                                          
                                          
                                          214
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          2,844Equity
      in earnings (losses) of unconsolidated entities
                                          
                                          
                                          100
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          100
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          (1
                                          )
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          (1
                                          )Income
      before income taxes, noncontrolling interests and discontinued
      operations(2)
                                          
                                          $
                                          1,689
                                          
                                          
                                          $
                                          1,210
                                          
                                          
                                          $
                                          66
                                          
                                          
                                          $
                                          (437
                                          )
                                          
                                          $
                                          2,528
                                          
                                          
                                          $
                                          1,543
                                          
                                          
                                          $
                                          1,086
                                          
                                          
                                          $
                                          214
                                          
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          2,843Total
      segment assets, as of March 31, 2009 and December 31, 2008
    (3)
                                          
                                          $
                                          759,811
                                          
                                          
                                          $
                                          4,018
                                          
                                          
                                          $
                                          5,606
                                          
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          769,435
                                          
                                          
                                          $
                                          760,477
                                          
                                          
                                          $
                                          2,381
                                          
                                          
                                          $
                                          4,567
                                          
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          767,425
  17
 
 (1)
              Nonoperating
      expenses include interest expense, interest income, amortization of
      deferred financing costs, depreciation, and amortization of
      intangibles.
 
 (2)
                The
      following is a reconciliation of the reportable segments’ net
      income before income taxes, noncontrolling interests and discontinued
      operations to the Trust’s consolidated net income before income taxes,
      noncontrolling interests and discontinued operations for the three months
      ended March 31:
 
 2009
                        
                        
                        2008Net
      income before income taxes, noncontrolling interests and discontinued
      operations for reportable segments
                        
                        $
                        2,528
                        
                        
                        $
                        2,843Other
      unallocated corporate expenses
                        
                        
                        (1,681
                        )
                        
                        
                        (1,674
                        )Net
      income before income taxes, noncontrolling interests and discontinued
      operations
                        
                        $
                        847
                        
                        
                        $
                        1,169
 (3)
                The
      increase in segment assets related to development consulting services is
      primarily due to a $736 increase in the receivable for reimbursable
      project costs related to East Stroudsburg University and a $609 increase
      in the development fee receivable for Colorado State
      University-Pueblo.
 
 6.
Commitments and contingencies
 
 In
connection with one of the Trust’s student housing portfolio
acquisitions, the Trust became aware of a June 2001 notification from
the United States Department of Justice of an on-going investigation regarding
possible violations of the American Disabilities Act of 1990 and the Fair
Housing Amendments Act of 1988 related to one of its student housing properties.
In October 2002, the investigations were delayed for an undetermined period
of time and, therefore, have not been fully resolved. Management does not
believe the resolution of this matter will result in a material adverse effect
on the Trust’s consolidated financial condition or results of
operations.
 
 The
Operating Partnership entered into a letter of credit agreement in conjunction
with the closing of the acquisition of a student housing property at the
University of Florida. The letter of credit remains outstanding in the amount of
$1,500 at March 31, 2009 and is secured by the Operating Partnership’s existing
revolving credit facility.
 
 On
May 10, 2006, the Operating Partnership guaranteed $23,200 of construction
debt held by University Village-Greensboro LLC (“LLC”) in order to receive a 25%
ownership stake in the venture with College Park Apartments.  The debt
matures on May 10, 2011. Construction was completed and the student housing
community occupied in August 2007. The Operating Partnership has determined that
it will not guarantee the debt after the construction loan is refinanced. The
debt has an outstanding balance of $23,200 at March 31, 2009.  On
October 30, 2008, the LLC borrowed an additional $1,200 which matures on August
10, 2009 and has also been guaranteed by the Operating Partnership. In October
of 2007, the Operating Partnership entered into a note receivable with the LLC
in the amount of $845.  The note was interest only through December
31, 2007 and accrued interest at 10% per annum.  On January 1, 2008,
the entire principal balance was converted to a term loan maturing on January 1,
2028 with principal and interest of 10% per annum being repaid on a monthly
basis.  On the maturity date, all unpaid principal and interest are
due in full.  As of March 31, 2009, the note has an outstanding
balance of $830 and is subordinated to the construction debt held by the LLC
discussed above.  The balance is reflected in other assets in the
accompanying condensed consolidated balance
sheets.   Additionally, the Trust’s other investments in
unconsolidated entities have outstanding mortgage and construction indebtedness
totaling $88,121 at March 31, 2009 that is not guaranteed by the Operating
Partnership.
 
 As owners
and operators of real estate, environmental laws impose ongoing compliance
requirements on the Trust. The Trust is not aware of any environmental matters
or liabilities with respect to the student housing properties that would have a
material adverse effect on the Trust’s consolidated financial condition or
results of operations.
 
 In the
normal course of business, the Trust is subject to claims, lawsuits and legal
proceedings. While it is not possible to ascertain the ultimate outcome of such
matters, in management’s opinion, the liabilities, if any, in excess of amounts
provided or covered by insurance, are not expected to have a material adverse
effect on our financial position, results of operations or
liquidity.
  18
  Under the
terms of the University Towers Partnership agreement, so long as the
contributing owners of such property hold at least 25% of the University Towers
Partnership units, the Trust has agreed to maintain certain minimum amounts of
debt on the property to avoid triggering gain to the contributing owners. If the
Trust fails to do this, the Trust must repay the contributing owners the amount
of taxes they incur.
 
 Under the
terms of the purchase agreement with Place Properties, the Trust remains a party
to a tax indemnification agreement whereby a payment could be required to be
made to the former owner if any properties are sold within five years of the
purchase date.  The contingency expires in January 2011.
 
 The
Operating Partnership entered into a letter of credit agreement to the benefit
of the lender in conjunction with the termination of the lease with Place
Properties on February 1, 2008. The letter of credit remains outstanding in the
amount of $500 at March 31, 2009 and is secured by the Operating Partnership’s
existing revolving credit facility.
 
 After
being awarded a development consulting contract, the Trust will enter into
predevelopment consulting contracts with educational institutions to develop
student housing properties on their behalf.  The Trust will enter
into reimbursement agreements that provide for the Trust to be reimbursed for
the predevelopment costs incurred prior to the institution’s governing body
formally approving the final development contract.  At March 31, 2009
and December 31, 2008, the Trust had reimbursable predevelopment costs of $2,068
and $965, respectively, which are reflected in other assets in the accompanying
condensed consolidated balance sheets.
 
 The Trust
also has various operating lease commitments for corporate office space,
furniture and technology equipment which expire at various dates through
2015.
 
 7.
Acquisition and development of real estate investments
 
 On
June 28, 2007, the Trust acquired land in Carbondale, Illinois for $1,099
in order to develop a wholly owned student apartment community near Southern
Illinois University. After the acquisition, the Trust incurred an additional
$20,580 in costs to develop the first phase of the development which opened in
August of 2008. The second phase of the development started in 2008 and as of
March 31, 2009 the Trust has incurred $3,432 in development
costs.  During the three months ended March 31, 2009, the Trust
capitalized interest costs of $25 related to the second phase of the
development.
 
 During
2008, the Trust also began development of a wholly owned student apartment
property located on the campus of Syracuse University.  The Trust will
own and manage the property under a long-term ground lease from Syracuse
University.  As of March 31, 2009, the Trust has incurred $12,478 in
development costs.  During the three months ended March 31, 2009, the
Trust capitalized interest costs of $124 related to the
development.
 
 All costs
related to the development of student apartment communities are classified as
assets under development in the accompanying condensed consolidated balance
sheets until the development is complete and opens.
 
 8.
Disposition of real estate investments and discontinued
operations
  During
the first quarter of 2009, the Trust entered a definitive agreement to sell the
student housing community referred to as College Station located in Augusta,
Georgia.  In accordance with SFAS No. 144, the Trust ceased
depreciation on the property and classified the student housing property as held
for sale in the accompanying condensed consolidated balance
sheets.  The results of operations are reflected as discontinued
operations in the accompanying condensed consolidated statement of operations
for all periods presented. The following table summarizes
income/(loss)  from discontinued operations for the three months ended
March 31, 2009 and 2008:
 
 2009
                    
                    
                    2008Student
      housing leasing revenue
                    
                    $
                    121
                    
                    
                    $
                    122Student
      housing leasing operating expenses
                    
                    
                    112
                    
                    
                    
                    90Depreciation
      and amortization
                    
                    
                    25
                    
                    
                    
                    24Income/(loss)
      from discontinued operations attributable to Education Realty Trust,
      Inc.
                    
                    $
                    (16
                    )
                    
                    $
                    8
  19
  
 During
the first quarter of 2008, the Trust sold the parking garage and land associated
with the University Towers residence hall to a unit holder for a loss of
$512.  The Trust redeemed the unit holder’s units and received cash
totaling $2,616. The loss on the sale is included in student housing leasing
operations expense in the accompanying condensed consolidated statement of
operations.  The Trust simultaneously entered into a 40 year ground
lease.
 
 9.
Incentive plan
 
 The Trust
adopted the Education Realty Trust, Inc. 2004 Incentive Plan (the “Plan”)
effective upon the closing of the Offering. The Plan provides for the grant of
stock options, restricted stock, restricted stock units, stock appreciation
rights, other stock-based incentive awards and PIUs to employees, directors and
other key persons providing services to the Trust.  As of March 31,
2009, the Trust had 832,000 shares of its common stock reserved for issuance
pursuant to the Plan, subject to adjustments for changes in the Trust’s capital
structure, including share splits, dividends and recapitalizations. The number
of shares reserved under the Plan is also subject to an annual adjustment,
beginning on January 1, 2006, so that the total number of shares reserved
under the Plan is equal to 4% of the aggregate number of shares outstanding on
the last day of the preceding fiscal year; provided that such annual increase
generally may not exceed 80,000 shares.
 
 A
restricted stock award is an award of the Trust’s common stock that is subject
to restrictions on transferability and other restrictions as the Trust’s
compensation committee determines in its sole discretion on the date of grant.
The restrictions may lapse over a specified period of employment or the
satisfaction of pre-established criteria as our compensation committee may
determine. Except to the extent restricted under the award agreement, a
participant awarded restricted shares will have all of the rights of a
stockholder as to those shares, including, without limitation, the right to vote
and the right to receive dividends or distributions on the shares. Restricted
stock is generally taxed at the time of vesting. At March 31, 2009 and
December 31, 2008, unearned compensation totaled $506 and $657,
respectively, and will be recorded as expense over the applicable vesting
period. The value is determined based on the market value of the Trust’s common
stock on the grant date. During each of the three months ended March 31, 2009
and 2008, compensation expense of $151 was recognized in the accompanying
condensed consolidated statements of operations, related to the vesting of
restricted stock.
 
 PIUs,
are units in a limited liability company controlled by the Trust that holds
a special class of partnership interests in the Operating Partnership. For
purposes of the Plan, each PIU is deemed equivalent to an award of one share of
the Trust’s common stock and will entitle the owner of such unit to receive the
same quarterly per unit distributions as one common unit of the Operating
Partnership. This treatment with respect to quarterly distributions is similar
to the treatment of restricted stock awards, which will generally receive full
dividends whether vested or not. PIUs will not initially have full parity with
common units of the Operating Partnership with respect to liquidating
distributions. Upon the occurrence of specified capital equalization events,
PIUs may, over time, achieve full or partial parity with common units of the
Operating Partnership for all purposes and could accrete to an economic value
equivalent to the Trust’s common stock on a one-for-one basis. If such parity is
reached, PIUs may be exchanged into an equal number of the Trust’s shares of
common stock at any time. However, there are circumstances under which full
parity would not be reached. Until such parity is reached, the value that may be
realized for PIUs will be less than the value of an equal number of shares of
the Trust’s common stock, if there is any value at all. The grant or vesting of
PIUs is not expected to be a taxable transaction to recipients. Conversely, we
do not receive any tax deduction for compensation expense from the grant of
PIUs. PIUs are treated as noncontrolling interests in the accompanying condensed
consolidated financial statements at an amount equal to the holders’ ownership
percentage of the net equity of the Operating Partnership.
 
 Total
compensation cost recognized in general and administrative expense in the
accompanying condensed consolidated statements of operations for the three
months ended March 31, 2009 and 2008, was $192 and $227,
respectively.  Additionally during each of the three months ended
March 31, 2009 and 2008, the Trust issued 4,000 shares of common stock to an
executive officer pursuant to the Plan.
  A summary
of the stock-based incentive plan activity as of and for the three months ended
March 31, 2009 is as follows:
  20
  StockPIU’s
                    
                    Awards
      (1)
                    
                    TotalOutstanding
      at December 31, 2008
                    
                    
                    275,000
                    
                    
                    
                    208,000
                    
                    
                    
                    483,000Granted
                    
                    
                    5,000
                    
                    
                    
                    4,000
                    
                    
                    
                    9,000Forfeited
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Outstanding
      at March 31, 2009
                    
                    
                    280,000
                    
                    
                    
                    212,000
                    
                    
                    
                    492,000Vested
      at March 31, 2009
                    
                    
                    280,000
                    
                    
                    
                    181,889
                    
                    
                    
                    461,889
 (1) Includes
restricted stock awards.
 
 10.
Subsequent events
 
 On
April 7, 2009, the Trust sold the College Station student housing property
for a purchase price of $2,550.  The Trust received proceeds of $250
and a note receivable of $2,300 that is due on December 31, 2009 but extendable
under certain circumstances up to an additional 18 months.  As
discussed in Note 8 the operations of College Station have been classified as
held for sale and discontinued operations for all periods presented in the
accompanying condensed consolidated financial statements.
 
 On April
13, 2009, our board of directors declared a first quarter distribution of
$0.1025 per share of common stock for the quarter ended on March 31, 2009. The
distribution is payable on May 15, 2009 to stockholders of record at the close
of business on April 30, 2009.
  21
 
 Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
 
 (Dollars
in thousands, except selected property information and share data)
 
 The
following discussion should be read in conjunction with the financial statements
and notes thereto appearing elsewhere in this Quarterly Report and the audited
consolidated financial statements and  notes thereto and MD&A
contained in our annual report on form 10-K for the year-ended December 31,
2008. Certain statements contained in this filing are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, including but not limited to statements related to plans for future
acquisitions, our business and investment strategy, market trends and projected
capital expenditures. When used in this report, the words “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate, “would,” “could,”
“should,” and similar expressions are generally intended to identify
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which reflect our opinions only as of the date of
this Quarterly Report. We assume no obligation to update or supplement
forward-looking statements that become untrue because of subsequent events.
Forward-looking statements are subject to risks, uncertainties and other factors
that could cause actual results to differ materially from future results
expressed or implied by such forward-looking statements. For further information
about these and other factors that could affect our future results, please see
the “Item 1A. — Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2008.  Investors are cautioned that any
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those contemplated by such forward-looking statements.
 
 Overview
 
 We are a
self-managed and self-advised real estate investment trust (“REIT”) engaged in
the ownership, acquisition and management of high quality student housing
communities. We also provide student housing development consulting services to
universities, charitable foundations and other third parties. We believe that we
are one of the largest private owners, developers and managers of high quality
student housing communities in the United States in terms of both total beds
owned and under management.
 
 We earn
income from rental payments we receive as a result of our ownership of student
housing properties. We also earn income by performing property management
services and development consulting services for third parties through Allen
& O’Hara Education Services, Inc. (AOES) and Allen & O’Hara Development
Company, LLC (AODC), respectively. While we manage 100% of the properties we
own, we do not recognize any fee income from their management on a consolidated
basis. Furthermore, we do not recognize development fee income on a consolidated
basis for properties that are being developed for ownership by the
Trust.
 
 We have
elected to be taxed as a REIT for federal income tax purposes.
 
 Our
Business Segments
 
 We define
business segments by their distinct customer base and service provided.
Management has identified three reportable segments: student housing leasing,
management services and development consulting services. We evaluate each
segment’s performance based on pre-tax net operating income, which is defined as
income before depreciation, amortization, impairment losses, interest expense,
equity in earnings of unconsolidated entities, noncontrolling interests and
discontinued operations. The accounting policies of the reportable segments are
described in more detail in the summary of significant accounting policies in
the footnotes to the financial statements. Inter-company fees are reflected at
the contractually stipulated amounts.
 
 Student
Housing Leasing
 
 Student
housing leasing revenue represented approximately 88.1% of our revenue,
excluding operating expense reimbursements, for the three months ended March 31,
2009. Our revenue related to food service operations is included in this
segment. Additionally, for the first month of 2008, this segment included other
leasing revenue related to the Place lease which was terminated on February 1,
2008.
  22
 
 Unlike
multi-family housing where apartments are leased by the unit, student-housing
communities are typically leased by the bed on an individual lease liability
basis. Individual lease liability limits each resident’s liability to his or her
own rent without liability for a roommate’s rent. A parent or guardian is
required to execute each lease as a guarantor unless the resident provides
adequate proof of income. The number of lease contracts that we administer
is therefore equivalent to the number of beds occupied instead of the number of
apartment units.
 
 Due to
our predominantly private bedroom accommodations, the high level of
student-oriented amenities, the fact that units are furnished and in most cases
rent includes utilities, cable TV and internet service and because of the
individual lease liability, we believe our properties can typically command
higher per-unit and per-square foot rental rates than most multi-family
properties in the same geographic markets. We are also typically able to command
higher rental rates than on-campus student housing, which tends to offer fewer
amenities.
 
 The
majority of our leases commence mid-August and terminate the last day of July.
These dates generally coincide with the commencement of the universities’ fall
academic term and the completion of the subsequent summer school session. As
such, we are required to re-lease each property in its entirety each year,
resulting in significant turnover in our tenant population from year to year. In
2008 and 2007, approximately 69.3% and 68.5%, respectively, of our leased beds
were to students who were first-time residents at our properties. As a result,
we are highly dependent upon the effectiveness of our marketing and leasing
efforts during the annual leasing season that typically begins in November and
ends in August of each year. Our properties’ occupancy rates are therefore
typically stable during the August to July academic year but are susceptible to
fluctuation at the commencement of each new academic year.
 
 Prior to
the commencement of each new lease period, mostly during the first two weeks of
August but also during September at some communities, we prepare the units for
new incoming tenants. Other than revenue generated by in-place leases for
returning tenants, we do not generally recognize lease revenue during this
period referred to as “Turn” as we have no leases in place. In addition, we
incur significant expenses during Turn to make our units ready for occupancy.
These expenses are recognized immediately. This lease Turn period results in
seasonality in our operating results during the third quarter of each
year.
 
 In 2007,
we began developing projects for our ownership and plan to increase
self-development activity going forward. During 2008, we opened our first wholly
owned, self-developed property servicing Southern Illinois
University.
 
 Management
Services
 
 Revenue
from our management services, excluding operating expense reimbursements,
represented approximately 6.1% of our revenue for the three months ended March
31, 2009. These revenues are typically derived from multi-year management
agreements under which management fees are typically 3-5% of leasing revenue.
These agreements typically have an initial term of five to ten years with a
renewal option for an additional five years. As part of the management
agreements, there are certain payroll and related expenses we pay on behalf of
the property owners. These costs are included in reimbursable operating expenses
and are required to be reimbursed to us by the property owners. We recognize the
expense and revenue related to these reimbursements when incurred. These
operating expenses are wholly reimbursable and therefore not considered by
management when analyzing the operating performance of our management services
business.
 
 Development
Consulting Services
 
 Revenue
from our development consulting services, excluding operating expense
reimbursements, represented approximately 5.8% of our revenue for the three
months ended March 31, 2009. Fees for these services are typically 3-5% of the
total project cost and are payable over the life of the project, which is
typically one to two years in length. We incur expenses that are reimbursable by
a project when awarded. We recognize the expenses when incurred while the
reimbursement revenue is not recognized until the consulting contract is
awarded. These operating expenses are wholly reimbursable and therefore not
considered by our management when analyzing the operating performance of our
third-party development consulting services business. Also, at times, we will
pay pre-development project expenses such as architectural fees and permits if
such are required prior to the project’s financing being in place. We typically
obtain a guarantee from the owner for repayment of these project specific
costs.
  23


We periodically enter into joint venture
arrangements whereby we provide development consulting services to third-party
student housing owners in an agency capacity. We recognize our portion of the
earnings in each joint venture based on our ownership interest, which is
reflected as equity in earnings of unconsolidated entities after net operating
income in our statement of operations. Our revenue and operating expenses could
fluctuate from period to period based on the extent we utilize joint venture
arrangements to provide third-party development consulting
services.





The amount and timing of future revenues
from development consulting services will be contingent upon our ability to
successfully compete in public universities’ competitive procurement processes,
our ability to successfully structure financing of these projects and our
ability to ensure completion of construction within agreed construction
timelines and budgets. To date, all of our development projects have completed
construction in time for their targeted occupancy dates.





Trends and Outlook





Rents and Occupancy





We expect the general trendoflimited on-campus housingavailabilityto continue for the foreseeable future,
providing us with continued opportunities to maximize revenues through increased
occupancy and/or rental rates in our owned portfolio. We manage our properties
to maximize revenues, which are primarily determined by two components: rental
rates and occupancy rates.We customarily adjust rental rates in
order to maximize revenues, which in some cases results in a lower occupancy
rate, but in most cases results in stable or increasing revenues from the
property. As a result, a decrease in occupancymay be offset by an increase in rental
rates and may not be material to our operations.





For thethreemonths endedMarch 31, 2009, same-community revenue per available bedincreased to $411and same-community physical occupancydecreased to92.3% compared to revenue per available bed
of $409and physical occupancy of95.3% for thethreemonths endedMarch 31, 2008. The results represent averages for the
Trust’s portfolio which are not necessarily indicative of every property in the
portfolio.As would be expected, individual
properties can and do perform both above and below these averages, and,at times,an individual property may show a
decline in total revenue due to local university and economic
conditions.Our management focus is to assess these
situations and addressthemas quickly as possiblein an effortto minimize the Trust’s exposure and
reverse any negative trend.




On a same-community basis, the 2008-2009 lease year
hasan average rate growth
of4.9% and an occupancy decline of
approximately1.1%, excluding three communities in the
currently challenging markets of Kalamazoo, Michigan, Gainesville, Florida, and
Oxford, Mississippi.Thesethree properties have faced significant
new supply in their respective markets while enrollment at each school is flat
or declining. Combined,
these communities experienceda 13.5% decline in occupancyand a 3.4% declinein rate for the 2008-2009 lease term.
We will continue to focus
on improving occupancy at these properties, but it will take time for the
imbalance to reach a level of equilibrium.  In total,including these three
communities,same-community
average rates for the 2008-2009 lease year grew about3.3%and occupancy declinedapproximately 2.9%.




As of
April 26th,
leasing for the fall of 2009 on a same community basis reflected approximately
69.0% of beds applied for and 59.7% already leased compared to 69.9% and 62.3%,
respectively, at this time last year.   An application is defined
as a signed student lease without the receipt of an executed parental guarantee,
which can take time to obtain.  We currently view these leasing
results as in line with prior year and attribute some of the lag in leased
percentage to newly implemented credit processes and us seeking to ensure the
guarantor has acceptable credit before finalizing the lease. Leasing for the
three properties in the previously identified challenged markets shows 66.1% of
beds applied for and 52.1% leased compared to 57.3% applied for and 49.8% leased
one year ago.  The Place Portfolio, which we began managing in
February of 2008, has approximately 59.6% of the beds applied for and 49.4%
leased compared to 47.4% and 38.8%, respectively, at this time last
year.




24




Student Housing Operating
Costs




Same community operating expenses
increased to $192 per bed in fiscal 2008 compared to $185 per bed in fiscal
2007.  This increase is primarily attributable to a rise in payroll
related expenses, increased marketing expenses, higher utility costs, and a loss
on the sale of land and parking garage at our University Towers
community.  Excluding the impact of the land and parking garage sale,
we experienced operating expense growth of 3.4% in 2008 compared to 2.4% in
2007.  As a response to higher than desired expense growth in fiscal
2008 and due to significant declines in the economya targeted cost
reduction plan was commenced in the fourth quarter of 2008 which continues in
fiscal 2009.  Specifically, we have put in place selective staff
reductions, a hiring freeze and a moratorium on wage increases at both the
property and corporate levels.  Furthermore, we are curbing
discretionary spending as we work to improve our margins and strengthen our
communities during the current volatile and unsettled US economic
conditions.  For the three months ended March 31, 2009, same-community
operating expenses declined6.0%
year over year.  This decrease is primarily attributable to the loss
on the land and parking garage mentioned above; however, an improvement
in property general and administrative and maintenance expenses also contributed
to the expense improvement over the first quarter of 2008.





Termination of Lease with Place
Properties, Inc.





On February 1, 2008, the Trust
terminated the lease with Place Properties, Inc. (“Place”) for 13 properties
owned by the Trust but previously operated and managed by
Place.  Under theterminationagreement, the Trust received a lease
termination fee of $6,000. As a result of the lease
termination, the Trust began managing these properties and began recognizing the
results of operations forthese properties in itsconsolidated financial statements as of the lease termination date. Previously,
the Trust recognized base rental income of $13,740 annually for the leaseand had the right to receive “Additional Rent” annually if the properties
exceeded certain criteria defined in the lease agreement.In the near term, the
net operating income
generated bythese
propertiesis expected
tobe less than the rental
income received under the lease; thus,potentiallyreducing our net income from continuing
operations over the next 2 to 3 years.The Trust negotiated the
lease termination fee of $6,000 in part to offset the expected shortfall in
operating results of the communities.  Over time, we expect to be able
to improve the operating results of the Place Portfolio through revenue growth
driven by improved marketing and customer service strategies. However, as with
all its communities, management continually assesses each community and their
respective markets to determine if such growth is achievable or if other
alternatives should be pursued. The Place Portfolio opened the 2008-2009
lease year with an occupancyof 81.9% compared to 87.8% for the prior lease
year.





Critical Accounting
Policies





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States (“GAAP”) requires management to make
estimates and assumptions in certain circumstances that affect amounts reported
in our financial statements and related notes. In preparing these financial
statements, management has utilized all available information, including its
past history, industry standards and the current economic environment, among
other factors, in forming its estimates and judgments of certain amounts
included in the financial statements, giving due consideration to materiality.
The ultimate outcome anticipated by management in formulating its estimates may
not be realized. Application of the critical accounting policies below involves
the exercise of judgment and use of assumptions as to future uncertainties and,
as a result, actual results could differ from these estimates. In addition,
other companies in similar businesses may utilize different estimation policies
and methodologies, which may impact the comparability of our results of
operations and financial condition to those companies.





Student Housing Leasing Revenue
Recognition





Student
housing leasing revenue is comprised of all revenue related to the leasing
activities at our student housing properties and includes revenues from the
leasing of space, parking lot rentals and certain ancillary services. Revenue
from our food service operations is also included in this segment. Additionally,
this segment included other leasing revenue related to the Place Portfolio
lease, which was terminated February 1, 2008.  Additional information
is included below regarding revenue recognition for student housing food service
and other leasing revenue.





Students
are required to execute lease contracts with payment schedules that vary from
annual to monthly payments. Generally, a parental guarantee must accompany each
executed contract. Receivables are recorded when due. Leasing revenues and
related lease incentives and nonrefundable application and service fees are
recognized on a straight-line basis over the term of the contracts. Balances are
considered past due when payment is not received on the contractual due date.
Allowances for doubtful accounts are established by management when it is
determined that collection is doubtful.




25




Student Housing Food Service Revenue
Recognition


We
maintain a dining facility at University Towers, which offers meal plans to the
tenants as well as dining to other third-party customers. The meal plans
typically require upfront payment by the tenant covering the school semester and
the related revenue is recognized on a straight-line basis over the
corresponding semester.





Other Leasing Revenue
Recognition





Other
leasing revenue relates to our leasing of 13 properties we acquired from Place
on January 1, 2006. Simultaneous with the acquisition of the Place
Portfolio, the Trust leased the assets to Place and received base monthly rent
of $1,145 and had the right to receive “Additional Rent” annually if the
properties exceeded certain criteria defined in the lease agreement. Base rent
was recognized on a straight-line basis over the lease term and Additional Rent
was recognized only upon satisfaction of certain defined criteria. On February
1, 2008, the lease was terminated.  Under the termination agreement
the Trust received a lease termination fee totaling $6,000 in 2008, of which
$800 was recognized in the first quarter of 2008.





Revenue andCost Recognition ofDevelopment Consulting
Services





Costs
associated with the pursuit of third-party development consulting contracts are
expensed as incurred until such time as we have been notified of a contract
award or reimbursement has been otherwise guaranteed by the customer. At such
time, the reimbursable portion of such costs is recorded as a receivable.
Development consulting revenues are recognized using the percentage of
completion method as determined by construction costs incurred relative to the
total estimated construction costs. Occasionally, our development consulting
contracts include a provision whereby we can participate in project savings
resulting from our successful cost management efforts. We recognize these
revenues once all contractual terms have been satisfied and we have no future
performance requirements. This typically occurs after construction is complete.
Costs associated with development consulting services are expensed as incurred.
We generally receive a significant percentage of our fees for development
consulting services upon closing of the project financing, a portion of the fee
over the construction period and the balance upon substantial completion of
construction. Because revenue from these services is recognized for financial
reporting purposes utilizing the percentage of completion method, differences
occur between amounts received and revenues recognized. Differences also occur
between amounts recognized for tax purposes and those recognized for financial
reporting purposes. Because REITs are required to distribute 90% of taxable
income, our distribution requirement with respect to our income from third-party
services may exceed that reflected as net income for financial reporting
purposes from such activities.





We
periodically enter into joint venture arrangements whereby we provide
development consulting services to third-party student housing owners in an
agency capacity. We recognize our portion of the earnings in each joint venture
based on our ownership interest, which is reflected after net operating income
in our statement of operations as equity in earnings of unconsolidated entities.
Our revenue and operating expenses could fluctuate from period to period based
on the extent we utilize joint venture arrangements to provide third-party
development consulting services.





Student Housing Property Acquisitions
and Dispositions





Land,
land improvements, buildings and improvements and furniture, fixtures and
equipment are recorded at cost. Buildings and improvements are depreciated over
30 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.





Acquisitions of student housing
properties are accounted for utilizing the purchase method in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 141,Business
Combinations,and accordingly, the acquired student
housing properties’ results of operations are included in the Trust’s results of
operations from the respective dates of acquisition. Pre-acquisition costs,
which include legal and professional fees and other
third-party costs related
directly to the acquisition of the property, are accounted for as part of the
purchase price. Appraisals, estimates of cash flows and 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.On January 1, 2009 the Trust adopted
SFAS No. 141R, which changes the requirements for how an acquirer recognizes and
measures the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill
acquired.  SFAS No. 141R also enhances the disclosures to enable the
evaluation of the nature and financial effects of the business
combination.  The Trust will apply the provisions of SFAS No. 141R to
all future acquisitions.


26




Student
housing properties are classified as held for sale based on the criteria within
SFAS No. 144, Accounting
for the Impairment and Disposal of Long Lived Assets. When a student
housing property is identified as held for sale, fair value less cost to sell is
estimated. If fair value less cost to sell 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 student housing property has met the held
for sale criteria. The related carrying value of the property is recorded as
held for sale in the condensed consolidated balance sheet and operations of
student housing properties that are sold or classified as held for sale are
recorded as part of discontinued operations for all periods presented. For the
three months ended March 31, 2009 and 2008, no impairment losses on student
housing properties held for sale were recognized.





Repairs and
Maintenance





The costs
of ordinary repairs and maintenance are charged to operations when incurred.
Major improvements that extend the life of an asset beyond one year are
capitalized and depreciated over the remaining useful life of the asset. Planned
major repair, maintenance and improvement projects are capitalized when
performed. In some circumstances, the lenders require us to maintain a reserve
account for future repairs and capital expenditures. These amounts are not
available for current use and are recorded as restricted cash on our balance
sheet.





Long Lived Assets —
Impairment





In
accordance with SFAS No. 144, management is required to assess whether
there are any indicators that our real estate assets may be
impaired.  A property’s value is considered impaired if management’s
estimate of the aggregate future cash flows (undiscounted and without interest
charges) to be generated by the property, based on its intended use, is less
than the carrying value of the property. These estimates of cash flows are based
on factors such as expected future operating income, trends and prospects, as
well as the effects of demand, competition and other factors. To the extent
impairment has occurred, the loss will be measured as the excess of the carrying
amount of the property over the fair value of the property, thereby reducing our
net income.





Use
of Estimates





Significant
estimates and assumptions are used by management in determining the recognition
of third- party development consulting revenue under the percentage of
completion method, useful lives of student housing assets, the valuation of
goodwill, the initial valuations and underlying allocations of purchase price in
connection with student housing property acquisitions, the determination of fair
value for impairment assessments, and in recording the allowance for doubtful
accounts.  Actual results could differ from those
estimates.





We review
our assets, including our student housing properties, properties under
development, and goodwill for potential impairment indicators whenever events or
circumstances indicate that the carrying value might not be
recoverable.  Impairment indicators include, but are not limited to,
declines in our market capitalization, overall market factors, changes in cash
flows, significant decreases in net operating income and occupancies at our
operating properties, changes in projected completion dates of our development
projects, and sustainability of development projects.  Our tests for
impairment are based on the most current information available and if conditions
change or if our plans regarding our assets change, it could result in
additional impairment charges in the future.  However, based on our
plans with respect to our operating properties and those under development, we
believe the carrying amounts are recoverable.




27




Recently AdoptedAccounting
Pronouncements





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations(“SFAS
141R”). SFAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. SFAS 141R also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. SFAS 141R is effective for financial statements issued for fiscal
years beginning after December 15, 2008. The adoption of SFAS 141R did not have
a material impact on the Trust’s consolidated financial condition or results of
operations.




In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of Accounting Research Bulletin
No. 51(“SFAS 160”). SFAS 160 establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties otherthan the parent, the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent’s ownership interest andthe valuation of
retained noncontrolling equity investments when a subsidiary is deconsolidated.
SFAS 160 also establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS 160 is effective for financial statements issued for
fiscal years beginning after December 15, 2008. As a result of the adoption, the Trust
has reported noncontrolling interests as a component of equity in the condensed
consolidated balance sheets
and the net income or loss attributable to noncontrolling interests has
been separately identified
in the condensed consolidated statement of operations.  The prior periods
presented have also been reclassified to conform to the current classification required by SFAS160.





In June
2008, the FASB issued FSP No. Emerging Issues Task Force (“EITF”) 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating Securities
(“FSP 03-6-1”). FSP 03-6-1 clarifies that unvested share-based payment awards
that contain nonforfeitable rights to dividends or dividend equivalents (whether
paid or unpaid) are participating securities and are to be included in the
computation of earnings per share under the two-class method described in SFAS
No. 128, Earnings Per
Share.This FSP is effective for financial statements issued
for fiscal years beginning after December 15, 2008 and requires all presented
prior-period earnings per share data to be adjusted
retrospectively.  The adoption of FSP 03-6-1 did not have a material
impact on the Trust’s consolidated financial condition or results of
operations.


28




Results of Operations for theThreeMonths EndedMarch 31, 2009and 2008





The following table presents the results
of operations for Education Realty Trust, Inc. for thethreemonths endedMarch 31, 2009and 2008:




ThreeMonthsEndedMarch31,2009
                                
                                
                                ThreeMonthsEndedMarch31,2008Student
                                
                                
                                Development
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                Student
                                
                                
                                DevelopmentHousing
                                
                                
                                Consulting
                                
                                
                                Management
                                
                                
                                
                                
                                
                                
                                
                                
                                Housing
                                
                                
                                Consulting
                                
                                
                                ManagementLeasing
                                
                                
                                Services
                                
                                
                                Services
                                
                                
                                Adjustments
                                
                                
                                Total
                                
                                
                                Leasing
                                
                                
                                Services
                                
                                
                                Services
                                
                                
                                Adjustments
                                
                                
                                TotalRevenues:Student
      housing leasing revenue
                                
                                $
                                28,720
                                
                                
                                $
                                —
                                
                                
                                $
                                —
                                
                                
                                $
                                —
                                
                                
                                $
                                28,720
                                
                                
                                $
                                26,231
                                
                                
                                $
                                —
                                
                                
                                $
                                —
                                
                                
                                $
                                —
                                
                                
                                $
                                26,231Student
      housing food service revenue
                                
                                
                                593
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                593
                                
                                
                                
                                655
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                655Other
      leasing revenue
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                1,945
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                1,945Third-party
      development consulting
services
                                
                                
                                —
                                
                                
                                
                                1,457
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                1,457
                                
                                
                                
                                —
                                
                                
                                
                                1,787
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                1,787Third-party
      management services
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                909
                                
                                
                                
                                —
                                
                                
                                
                                909
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                975
                                
                                
                                
                                —
                                
                                
                                
                                975Intersegment
      revenues
                                
                                
                                —
                                
                                
                                
                                474
                                
                                
                                
                                1,125
                                
                                
                                
                                (1,599
                                )
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                1,037
                                
                                
                                
                                (1,037
                                )
                                
                                
                                —Operating
      expense reimbursements
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                2,190
                                
                                
                                
                                2,190
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                2,619
                                
                                
                                
                                2,619Total
      revenues
                                
                                
                                29,313
                                
                                
                                
                                1,931
                                
                                
                                
                                2,034
                                
                                
                                
                                591
                                
                                
                                
                                33,869
                                
                                
                                
                                28,831
                                
                                
                                
                                1,787
                                
                                
                                
                                2,012
                                
                                
                                
                                1,582
                                
                                
                                
                                34,212Operating
      expenses:Student
      housing leasing operations
                                
                                
                                12,598
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                12,598
                                
                                
                                
                                11,995
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                11,995Student
      housing food service
operations
                                
                                
                                572
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                572
                                
                                
                                
                                633
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                633General
      and administrative
                                
                                
                                —
                                
                                
                                
                                732
                                
                                
                                
                                1,968
                                
                                
                                
                                (37
                                )
                                
                                
                                2,663
                                
                                
                                
                                3
                                
                                
                                
                                731
                                
                                
                                
                                1,798
                                
                                
                                
                                —
                                
                                
                                
                                2,532Intersegment
      expenses
                                
                                
                                1,125
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                (1,125
                                )
                                
                                
                                —
                                
                                
                                
                                1,037
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                (1,037
                                )
                                
                                
                                —Reimbursable
      operating expenses
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                2,190
                                
                                
                                
                                2,190
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                2,619
                                
                                
                                
                                2,619Total
      operating expenses
                                
                                
                                14,295
                                
                                
                                
                                732
                                
                                
                                
                                1,968
                                
                                
                                
                                1,028
                                
                                
                                
                                18,023
                                
                                
                                
                                13,668
                                
                                
                                
                                731
                                
                                
                                
                                1,798
                                
                                
                                
                                1,582
                                
                                
                                
                                17,779Net
      operating income
                                
                                
                                15,018
                                
                                
                                
                                1,199
                                
                                
                                
                                66
                                
                                
                                
                                (437
                                )
                                
                                
                                15,846
                                
                                
                                
                                15,163
                                
                                
                                
                                1,056
                                
                                
                                
                                214
                                
                                
                                
                                —
                                
                                
                                
                                16,433Nonoperating
      expenses(1)
                                
                                
                                13,429
                                
                                
                                
                                (11
                                )
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                13,418
                                
                                
                                
                                13,620
                                
                                
                                
                                (31
                                )
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                13,589Income
      before equity in earnings (losses) of unconsolidated entities, income
      taxes, noncontrolling interests and discontinued
      operations
                                
                                
                                1,589
                                
                                
                                
                                1,210
                                
                                
                                
                                66
                                
                                
                                
                                (437
                                )
                                
                                
                                2,428
                                
                                
                                
                                1,543
                                
                                
                                
                                1,087
                                
                                
                                
                                214
                                
                                
                                
                                —
                                
                                
                                
                                2,844Equity
      in earnings (losses) of unconsolidated
      entities
                                
                                
                                100
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                100
                                
                                
                                
                                —
                                
                                
                                
                                (1
                                )
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                (1
                                )Income
      before income taxes, noncontrolling interests and discontinued
      operations(2)
                                
                                $
                                1,689
                                
                                
                                $
                                1,210
                                
                                
                                $
                                66
                                
                                
                                $
                                (437
                                )
                                
                                $
                                2,528
                                
                                
                                $
                                1,543
                                
                                
                                $
                                1,086
                                
                                
                                $
                                214
                                
                                
                                $
                                —
                                
                                
                                $
                                2,843




29




(1)
            Nonoperating expenses include
      interest expense, interest income, amortization of deferred financing
      costs, depreciation, and amortization of
    intangibles.





(2)
            The following is a reconciliation
      of the reportable segments’ net incomebefore income taxes,
      noncontrolling interests anddiscontinued operations to the
      Trust’s consolidated
      net income before income taxes, noncontrolling interests anddiscontinued
      operationsfor the
      three months ended March 31:




2009
                              
                              
                              2008Net income before income taxes and
      discontinued operations for reportable segments
                              
                              $
                              2,528
                              
                              
                              $
                              2,843Other unallocated corporate
      expenses
                              
                              
                              (1,681
                              )
                              
                              
                              (1,674
                              )Net income before income taxes and
      discontinued operations
                              
                              $
                              847
                              
                              
                              $
                              1,169





Student housing
leasing





Student housing operating statistics for
all owned and operated properties for thethreemonths endedMarch 31, 2009and 2008were as follows:





Threemonths
                
                
                Threemonthsended
                
                
                endedMarch31,
                
                
                March31,
                
                
                Favorable2009
                
                
                2008
                
                
                (Unfavorable)OccupancyPhysical
(1)
                
                
                89.4
                %
                
                
                93.7
                %
                
                
                (4.3
                )%Economic
(2)
                
                
                89.4
                %
                
                
                94.1
                %
                
                
                (4.7
                )%NARPAB (3)
                
                $
                365
                
                
                $
                373
                
                
                $
                (8
                )Other income per avail. bed
      (4)
                
                $
                21
                
                
                $
                19
                
                
                $
                2RevPAB (5)
                
                $
                386
                
                
                $
                392
                
                
                $
                (6
                )Operating expense per bed (6)
      (7)
                
                $
                169
                
                
                $
                172
                
                
                $
                3Operating margin
      (7)
                
                
                56.2
                %
                
                
                56.2
                %
                
                
                —
                %Design Beds
    (8)
                
                
                74,364
                
                
                
                66,892
                
                
                
                7,472


(1)
            Physical occupancy represents a
      weighted average of the month-end occupancies for the respective
      period.





(2)
            Economic occupancy represents the
      effective occupancy calculated by taking net apartment rent accounted for
      on a GAAP basis for the respective period divided by market rent for the
      respective period.





(3)
            NarPAB represents GAAP net
      apartment rent for the respective period divided by the sum of the design
      beds in the portfolio for each of the included months. Does not include
      food service revenue or other leasing
  revenue.





(4)
            Represents other GAAP-based income
      for the respective period divided by the sum of the design beds in the
      portfolio for each of the included months. Other income includes
      service/app fees, late fees, termination fees, parking fees, transfer
      fees, damage recovery, utility recovery, and other
      misc.





(5)
            Represents total revenue (net
      apartment rent plus other income) for the respective period divided by the
      sum of the design beds in the portfolio for each of the included
      months.





(6)
            Represents property-level
      operating expense excluding management fees, depreciation and amortization
      divided by the sum of the design beds for each of the included
      months.





(7)
            For the three months ended March
      31, 2008, approximately $8 per bed related to the loss on the sale of land
      and the parking garage at University Towers (see Note 8 in the condensed
      consolidated financial statements) is
  excluded.





(8)
            Represents the sum of the monthly
      design beds in the portfolio during the period. As of February 1, 2008,
      the design beds related to the Place Portfolio were included in the total
      for the three months ended March 31, 2009 due to the termination of the
      lease with Place.




The
community statistics shown above on a consolidated basis reflect a decline in
physical occupancy of 4.3% and a decline in RevPAB of 1.5%. These results are
not indicative of the year over year performance of our existing portfolio as
they include the impact of assuming management of the Place Portfolio in
February of 2008, whose underlying economics are currently different from our
existing communities. For the three months ended March 31, 2009, the Place
Portfolio had an average physical occupancy of 79.7%, RevPAB of $300, and
operating margins of 48.3% compared to 92.3%, $411, and 58.2%, respectively, on
a same community basis.




30




Student housing operating statistics on asame-community basisfor thethreemonths endedMarch 31, 2009and 2008were as follows:





Threemonths
                
                
                Threemonthsended
                
                
                endedMarch31,
                
                
                March31,
                
                
                Favorable2009
                
                
                2008
                
                
                (Unfavorable)OccupancyPhysical
                
                
                92.3
                %
                
                
                95.3
                %
                
                
                (3.0
                )%Economic
                
                
                92.7
                %
                
                
                96.0
                %
                
                
                (3.3
                )%NARPAB
                
                $
                389
                
                
                $
                387
                
                
                $
                2Other income per avail.
      bed
                
                $
                22
                
                
                $
                22
                
                
                $
                —RevPAB
                
                $
                411
                
                
                $
                409
                
                
                $
                2Operating expense per bed
      (1)
                
                $
                172
                
                
                $
                174
                
                
                $
                2Operating margin
      (1)
                
                
                58.2
                %
                
                
                57.5
                %
                
                
                0.7
                %Design Beds
                
                
                55,098
                
                
                
                55,104
                
                
                
                (6
                )




(1)
              For thethree monthsendedMarch31, 2008, approximately $9per bed related to the loss on
      the sale of land and the parking garage at University Towers (seeNote8in thecondensedconsolidated financial statements)
      is excluded.




Total revenue in the student housing
leasing segment was $29,313 for thethreemonths ended March 31, 2009. This represents an increase of
$482, or 1.7%, from the same period in
2008. Student housing leasing revenue
increased 9.5%,
or$2,489.  This increase was offset by
a decline in other leasing revenue of $1,945 as a result of the Place lease
terminationand a $62
decline in food service revenue.The student housing
leasing revenue increase included $1,590 related to operating the Place
Portfolio properties, $766 related to The Reserve at Saluki Point community,
which opened in the fall of 2008, and $133 related to an approximate 0.6%
increase in same-community revenue.The same-community revenue growth of .6%was driven by a 3.4%
improvement in rental rates
and 0.2% increase in other incomethat was offset by an approximate 3.0%decline in occupancies.





Operating expenses in the student
housing leasing segment increased $627, or 4.6%, to $14,295 for the three
months ended March 31, 2009as compared to the same period in 2008. Student housing leasing operations
increased a total of $603, or 5.0%, over the prior year, with an increase of
$878, attributable to operating expenses associated with taking over the Place
Portfolio as discussed
above,$254related to the Reserve at Saluki Point
community that opened in August of 2008and $72 of pre-opening costs associated
with the Syracuse University community currently under development.These increases were offset
by a decline of $600, or 6.0%, in same-community operating expenses year over
year.  This decrease is primarily attributable to the loss of $512 on
the sale of the University Towers land and parking garage in the prior
year.However, a $362 improvement in property general and
administrative and maintenance expenses partially offset by higher marketing,
utility and life safety costs also contributed to the expense improvement over
2008.





Non-operating expenses decreased $191 to
$13,429 for the three months ended March 31, 2009, as compared to the same period in
2008.This decrease was primarily driven by a
$418 decline in depreciation expense due to fully depreciated assets that remain in
service.  The decrease was partially offset by a $132 increase ininterest expenserelated to debt on the new community in
Carbondale, IL (The Reserve at Saluki Point) and slightly higher debt and
interest rates related to the debt refinancing in December
2008.





Equity in earnings of unconsolidated
entities represents our share of the net income or loss related to four
investments in unconsolidated entities that own student housing communities.
These communities are also managed by the Trust.For the three months ended March 31,
2009, equity in earnings was $100 compared to noequity inearnings in the prior
year.  The improvement comes as a result of betteroperating results fromthoseproperties.




31




Development consulting
services





The following table represents the
development consulting projects that were active during thethreemonths endedMarch 31, 2009and 2008:





RecognizedEarningsProject
                                    
                                    Beds
                                    
                                    FeeType
                                    
                                    2009
                                    
                                    
                                    2008
                                    
                                    
                                    DifferenceUniversity of
      Michigan
                                    
                                    
                                    896
                                    
                                    Development
    fee
                                    
                                    $
                                    34
                                    
                                    
                                    $
                                    100
                                    
                                    
                                    $
                                    (66
                                    )University of Alabama —
      Tuscaloosa
                                    
                                    
                                    631
                                    
                                    Development
    fee
                                    
                                    
                                    —
                                    
                                    
                                    
                                    670
                                    
                                    
                                    
                                    (670
                                    )Slippery Rock University — Phase
      II
                                    
                                    
                                    746
                                    
                                    Development
    fee
                                    
                                    
                                    —
                                    
                                    
                                    
                                    161
                                    
                                    
                                    
                                    (161
                                    )Indiana University of Pennsylvania
      — Phase II
                                    
                                    
                                    1,102
                                    
                                    Development
    fee
                                    
                                    
                                    —
                                    
                                    
                                    
                                    648
                                    
                                    
                                    
                                    (648
                                    )Fontainebleu Renovation
      Project
                                    
                                    
                                    435
                                    
                                    Development
    fee
                                    
                                    
                                    46
                                    
                                    
                                    
                                    13
                                    
                                    
                                    
                                    33West Chester— Phase
      I
                                    
                                    
                                    1,197
                                    
                                    Development
    fee
                                    
                                    
                                    518
                                    
                                    
                                    
                                    195
                                    
                                    
                                    
                                    323Indiana University of Pennsylvania
      — Phase III
                                    
                                    
                                    1,084
                                    
                                    Development
    fee
                                    
                                    
                                    473
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    473Colorado State University — Pueblo
      I
                                    
                                    
                                    253
                                    
                                    Development
    fee
                                    
                                    
                                    195
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    195Colorado State University — Pueblo
      II
                                    
                                    
                                    500
                                    
                                    Development
    fee
                                    
                                    
                                    9
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    9Auraria Higher Education
      System
                                    
                                    
                                    685
                                    
                                    Development
    fee
                                    
                                    
                                    182
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    182Southern Illinois University—
      Carbondale
                                    
                                    
                                    528
                                    
                                    Construction oversight
      fee
                                    
                                    
                                    35
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    35Syracuse
      University
                                    
                                    
                                    432
                                    
                                    Development
    fee
                                    
                                    
                                    439
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    439Development consulting
      services
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    1,931
                                    
                                    
                                    $
                                    1,787
                                    
                                    
                                    $
                                    144California University of
      Pennsylvania — Phase V
                                    
                                    
                                    356
                                    
                                    Development
    fee
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    1Equity in earnings of
      unconsolidated entities
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    (1
                                    )
                                    
                                    $
                                    1





Development consulting services revenue
increased $144, or 8.1%, to $1,931 for the three months ended March 31,
2009as compared to the
same period in 2008.The increase in
revenue is indicative of an increase in the number and size of
projects.  As reflected in the table above, there were six main
projects representing 4,890 beds and a renovation project active in the first
quarter of 2009 as well as contingent fees of $182 recognized for the Auraria
Higher Education System project.  This is compared to four active
projects representing 3,941 beds, a renovation project and final fees received
on the previously closed project at the University of Alabama in 2008. The
construction oversight fee recognized for Southern Illinois University –
Carbondale and Syracuse University are for internally developed projects;
therefore, they are eliminated in the accompanying condensed consolidated
financial statements.





General
and administrative expenses remained relatively flat for the
quarter.





Management services





Total management services revenue
increased by $22, or 1.1%, to $2,034 for the three months ended March 31,
2009as compared to the
same period in 2008.Growth
in our owned portfolio period over period as discussed under “Student housing
leasing” above contributed to $88 of the increase by way of intersegment
revenueprimarily related
to three full months of managing the Place Portfolio in 2009 compared to 2
months in 2008 and the opening of the Reserve at Saluki Pointe in August of
2008.  Third-party management fee revenue
decreased $66, or 6.8%, to $909 for the three months ended March 31,
2009as compared to the
same period in 2008.The
cancellation of a contract related to a five property portfolio in Michigan, for
which the owner chose to take management in-house, contributed to $105 of the
decrease and $76 came from the cancellation of a contract in
Illinois.  These decreases were partially offset by $66 related to
three new contracts and a net increase in fees from existing
contracts.





General and administrative costs for our
third-party management services segment increased $170 to $1,968 for the three
months ended March 31, 2009, as compared to the same period in 2008. This
increase is due to increases in staffingandcostsrelated to three full months of managing
the Place Portfolio in 2009 compared to 2 months in 2008.




32




Funds from Operations
(FFO)





As defined by the National Association
of Real Estate Investment Trusts (“NAREIT”), Funds from Operations, FFO,
represents net income (loss) (computed in accordance with GAAP), excluding gains
(or losses) from sales of property, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect funds from operations on the same basis. We present FFO available to all
stockholders and
unitholders because we consider it an important supplemental measure of our
operating performance and believe it is frequently used by securities analysts,
investors and other interested parties in the evaluation of REITs, many of which
present FFO when reporting their results. As such, we also exclude the impact of noncontrolling
interestin our
calculation. FFO is intended to exclude GAAP historical cost depreciation and
amortization of real estate and related assets, which assumes that the value of
real estate diminishes ratably over time. Historically, however, real estate
values have risen or fallen with market conditions. Because FFO excludes
depreciation and amortization unique to real estate, gains and losses from
property dispositions and extraordinary items, it provides a performance measure
that, when compared year over year, reflects the impact to operations from
trends in occupancy rates, rental rates, operating costs, development activities
and interest costs, providing perspective not immediately apparent from net
income.




We compute FFO in accordance with
standards established by the Board of Governors of NAREIT in its March 1995
White Paper (as amended in November 1999 and April 2002), which may
differ from the methodology for calculating FFO utilized by other equity REITs
and, accordingly, may not be comparable to such other REITs. Further, FFO does
not represent amounts available for management’s discretionary use because of
needed capital replacement or expansion, debt service obligations or other
commitments and uncertainties. FFO should not be considered as an alternative to
net income (loss) (computed in accordance with GAAP) as an indicator of our
financial performance or to cash flow from operating activities (computed in
accordance with GAAP) as an indicator of our liquidity, nor is it indicative of
funds available to fund our cash needs, including our ability to make
distributions.





The following table presents a
reconciliation of our FFO
available to our stockholders and unitholders to ournetincomefor thethreemonths endedMarch 31, 2009and 2008:





ThreeMonthsEndedMarch31,2009
                      
                      
                      2008Net income attributable to
      Education Realty Trust, Inc.
                      
                      $
                      433
                      
                      
                      $
                      889Less gain on sale of student
      housing property, net of minority interest
                      
                      
                      —
                      
                      
                      
                      512Plus student housing property
      depreciation and amortization of lease intangibles
                      
                      
                      7,005
                      
                      
                      
                      7,427Plus equity portion of real estate
      depreciation and amortization on equity investees
                      
                      
                      122
                      
                      
                      
                      125Plus depreciation and amortization
      of discontinued operations
                      
                      
                      25
                      
                      
                      
                      24Plus noncontrolling
      interest
                      
                      
                      210
                      
                      
                      
                      97Funds from
      operations
                      
                      $
                      7,795
                      
                      
                      $
                      9,074





Liquidity and Capital
Resources





Amended revolverand other
indebtedness





The Trust
serves as the guarantor for any funds borrowed by the Operating Partnership
under the Amended Revolver. Additionally, the Amended Revolver is secured by a
cross-collateralized, first mortgage lien on six otherwise unmortgaged
properties.  The Amended Revolver had a term of three years and
matured on March 31, 2009.  However, the Operating Partnership
exercised its option to extend the maturity date until March 30, 2010, under
existing terms. The interest rate per annum applicable to the Amended Revolver
is, at the Operating Partnership’s option, equal to a base rate or LIBOR plus an
applicable margin based upon our leverage (3.50% at March 31,
2009).




33




The
maximum availability under the Amended Revolver is $100,000; however,
availability under the Amended Revolver is limited to a “borrowing base
availability” equal to the lesser of (i) 65% of the property asset value
(as defined in the amended agreement) of the properties securing the facility
and (ii) the loan amount which would produce a debt service coverage ratio
of no less than 1.30, with debt service based on the greater of two different
sets of conditions specified in the amended agreement. As of March 31,
2009, our borrowing base was $47,822, we had $32,900 outstanding and we had
letters of credit outstanding of $2,000; thus, our remaining availability was
$12,922. We do, however, have additional unmortgaged properties that can be
pledged against the line to increase total availability.





The
Amended Revolver contains customary affirmative and negative covenants and
contains financial covenants that, among other things, require the Trust and its
subsidiaries to maintain certain minimum ratios of “EBITDA” (earnings before
payment or charges of interest, taxes, depreciation, amortization or
extraordinary items) as compared to interest expense and total fixed charges.
The financial covenants also include consolidated net worth and leverage ratio
tests.





The Trust
is prohibited from making distributions that exceed $1.20 per share unless prior
to and after giving effect to such action the total leverage ratio is less than
or equal to 60%. The amount of restricted payments permitted may be increased as
long as either of the following conditions is met: (a) after giving effect
to the increased restricted payment, the total leverage ratio shall remain less
than or equal to 60%; or (b) the increased restricted payment, when
considered along with all other restricted payments for the last 3 quarters,
does not exceed 95% of funds from operations for the applicable
period.





On
March 3, 2008, mortgage debt in the amount of $22,977, secured by the
student housing community referred to as University Towers, bearing interest at
an effective rate of 5.48%, matured and was repaid by the Trust with additional
borrowings on the Amended Revolver. On June 27, 2008, the Trust refinanced
the debt with a $25,000, interest only, fixed rate mortgage bearing interest at
5.99% through June 30, 2013. After the initial maturity, the Trust has the
option to extend the loan for 12 months with principal and interest equal
to LIBOR plus a 250 basis point margin per annum being repaid on a monthly
basis. The Trust used the proceeds from the refinancing to pay down the Amended
Revolver.




At
March 31, 2009, the Trust had $10,657 and $3,512 outstanding on
construction loans of $11,000 and $12,285, respectively, related to the
development of a wholly-owned student apartment community near Southern Illinois
University. The loans bear interest equal to LIBOR plus a 110 and 200 basis
point margins, respectively, and are interest only through June 14, 2010.
Commencing on June 14, 2010, and annually thereafter, a debt service
coverage ratio calculated on a rolling 12 month basis, of not less than
1.25 to 1, must be maintained in order to extend the loans until June 28,
2012, with principal and interest being repaid on a monthly basis. The Trust
incurred $81 in deferred financing costs in connection with the construction
loans.





At March
31, 2009, the Trust had $191 outstanding on a $14,300 construction loan related
to the development of a wholly owned student apartment community at Syracuse
University. The loan bears interest equal to LIBOR plus a 110 basis point margin
and is interest only through September 29, 2011. Commencing with the
quarter ended June 30, 2011, and annually thereafter, a debt service
coverage ratio calculated on a rolling 12 month basis, of not less than
1.25 to 1, must be maintained in order to extend the loan until
September 29, 2013, with principal and interest being repaid on a monthly
basis.





On
December 31, 2008, the Trust entered into a $222,000 secured credit facility and
used initial proceeds of approximately $197,735 to prepay approximately $185,557
of mortgage debt that was due to mature in July of 2009.  The
remaining proceeds were used to pay $4,295 in defeasance costs and other costs
related to the early repayment of the debt, to pay $2,052 in deferred financing
costs, to pay down the Amended Revolver and to pay for other corporate working
capital needs.  The Trust recognized a loss of $4,360 on the early
retirement of debt.  The
initial borrowings under the secured credit facility consistedof fixed rate loans of approximately
$15,492, $72,106 and $60,263 with maturities of five, seven and ten-year terms,
respectively. The annual fixed interest rates are 5.99%, 6.02% and 6.02%,
respectively. The facility also provided five-year variable interest rate loans
based on 30-day LIBOR totaling approximately $49,874. The variable rate loans
are currently priced at a weightedaverage interest rateof 3.90% per annum.





In order to hedge the interest rate risk
associated with the variable rate loans under the secured credit facility, the
Operating Partnershippurchased an interest rate cap from the Royal Bank
of Canada on December 22, 2008 for $120.  The notional amount of the
cap is $49,874, the cap will terminate on December 31, 2013 and the cap rate is
7.0% per annum.  The Operating Partnership has chosen not to designate
the cap as a hedge and will recognize all gains or losses associated with this
derivative instrument in earnings.




34




The Trust
has approximately $98,660 of mortgage debt due to mature in December of 2009.
Management is currently engaged in negotiating replacement financing for this
debt maturity. The ability to find other replacement financing is not guaranteed
and the cost of any such financing could be substantially higher than current
debt costs.  At March 31, 2009, the Trust had ten properties
unencumbered by mortgage debt. Six of those ten properties have, however, been
pledged as collateral against any borrowing under our Amended
Revolver.





Liquidity outlook and capital
requirements





At
March 31, 2009, we had $8,889 of cash, a decrease of $114 from
December 31, 2008. During the three months ended March 31, 2009, we
generated $12,409 of cash from operations, and drew $3,268 on the construction
loan related to the company owned development in Carbondale,
Illinois.  This allowed us to invest $9,338 in new developments and
distribute $3,066 to our stockholders and unitholders.





Our
current liquidity needs include funds for distributions to our stockholders and
unitholders, including those required to maintain our REIT status and satisfy
our current annual distribution target of $0.41 per share/unit, funds for
capital expenditures, funds for debt repayment and, potentially, funds for new
property acquisition and development. We generally expect to meet our short-term
liquidity requirements through net cash provided by
operations.  Distributions for the three months ended March 31, 2009
totaled $3,066 or $0.10 per weighted average share/unit, compared to cash
provided by operations of $12,409, or $.42 per weighted average share/unit for
the same period in 2008. The Trust’s Board of Directors lowered the annual
dividend from $0.82 to $0.41 per share/unit beginning in 2009.  The newdividend policy is expected to result in
the Trust retaining approximately $12,000 ofadditionalcashin 2009, which will further strengthen
liquidity.




We expect
our long-term liquidity requirements to be satisfied through growth in cash
generated by operations and external sources of debt and equity capital,
including our secured credit facility and public capital markets as well as
private sources of capital. To the extent that we are unable to maintain our
Amended Revolver or an equivalent source of debt financing, we will be more
reliant upon the public and private capital markets to meet our long-term
liquidity needs. The stock market has recently experienced extreme price and
volume fluctuations.  These broad market fluctuations could adversely
impact our ability to utilize the capital markets.





Based on
our closing share price of $3.49 on March 31, 2009, our total enterprise value
was $580,028.  With total debt outstanding on March 31, 2009 of
$476,585, our current debt to enterprise value was 82.2%.  With gross
assets outstanding on March 31, 2009 of $898,396, which excludes accumulated
depreciation of $120,863, our current debt to gross assets was
53.1%.  We believe our capital structure, current FFO targets and
availability under our Amended Revolver leaves us with sufficient liquidity and
access to financing to fund current working capital needs and limited future
student housing investments.  Additional external capital resources
would be necessary to fund significant future investments.





As noted
earlier, we have $98,660 of mortgage debt due to mature in December of
2009.  If capital and equity markets continue to erode significantly
(or do not recover) and we can not find replacement financing, we will not have
enough existing liquidity (from operations or the Amended Revolver) to repay the
debt.  If that were to happen, management would pursue and expect to
obtain an extension from the current lender in order to provide additional time
to obtain replacement financing.  If we are unable to find replacement
financing, the nine encumbered communities could be turned over to the lender
and as a result we could cross default our Amended Revolver.  If this
were to occur, management has reviewed its cash flows and has identified plans
that could be implemented in an effort to repay the outstanding balance on the
Amended Revolver.  These plans could include elimination of or the
payment in kind of our dividends, suspension of capital spend, cost reductions,
and subject to appropriate market conditions, possible asset dispositions and/or
a potential capital event.  However, there can be no assurance that
these efforts would be successful.  Additionally, management has
assessed the remaining student housing assets that would remain in the portfolio
and currently believe they should be able to produce sufficient cash flows to
fund operations and service the remaining debt requirements in the near
future.




35


We intend
to invest in additional properties only as suitable opportunities arise. We also
plan to develop properties for our ownership and management. In the short term,
we intend to fund any acquisitions or developments with working capital,
borrowings under first mortgage, property secured debt, construction loans or
our Amended Revolver. We intend to finance property acquisitions and self
development projects over the longer term with the proceeds from additional
issuances of common or preferred stock, private capital in the form of joint
ventures, debt financing and issuances of units of our Operating Partnership.
There can be no assurance, however, that such financing will be obtained on
reasonable terms, or at all, particularly in light of current capital market
conditions.





An
additional source of capital, subject to appropriate market conditions, is the
possible disposition of non-strategic properties. We continually assess all of
our properties, the markets they are in and the universities they serve to
determine if any dispositions are necessary or appropriate. The sale of any
unencumbered asset would provide additional capital which would most likely be
used to pay down debt or possibly finance acquisition/development growth or
other operational needs.





Predevelopment
expenditures





Our
third-party development consulting activities have historically required us to
fund predevelopment expenditures such as architectural fees, permits and
deposits. Because the closing of a development project’s financing is often
subject to third-party delay, we cannot always predict accurately the liquidity
needs of these activities. We frequently incur these predevelopment expenditures
before a financing commitment has been obtained and, accordingly, bear the risk
of the loss of these predevelopment expenditures if financing cannot ultimately
be arranged on acceptable terms. However, we typically obtain a guarantee of
repayment of these predevelopment expenditures from the project owner, but no
assurance can be given that we would be successful in collecting the amount
guaranteed in the event that project financing is not obtained.





In 2007,
we began developing projects for the Trust’s ownership and plan to increase
self-development activity going forward. We opened the Trust’s first wholly
owned, self-developed property in August of 2008 which serves Southern Illinois
University. At March 31, 2009, costs totaling $15,910 have been capitalized
related to the ongoing developments at Syracuse University and a second phase at
Southern Illinois University. As opposed to our third-party development
services, all risk, exposure and capital requirements for these developments
remain with the Trust.





Long-term
liquidity requirements





Our
long-term liquidity requirements consist primarily of funds necessary for
scheduled debt maturities, renovations, expansion and other non-recurring
capital expenditures that need to be made periodically to our properties. We
expect to meet these needs through existing working capital, cash provided by
operations, additional borrowings under our Amended Revolver, the issuance of
equity instruments, including common or preferred stock, partnership units or
additional debt, if market conditions permit. We believe these sources of
capital will be sufficient to provide for our long-term capital needs. Current
market conditions (or a continuing deterioration in such conditions), however,
may make additional capital more expensive for us and could impact our access to
the capital markets. There can be no assurance that we will be able to obtain
additional financing under satisfactory conditions or at all or that we will
make any investments in additional properties.  Our Amended Revolver
is a material source to satisfy our long-term liquidity requirements. As such,
compliance with the financial and operating debt covenants is material to our
liquidity.  Non-compliance with the current covenants or the inability
to obtain a replacement facility before our current facility expires would have
a material adverse effect on our financial condition and liquidity.





Commitments





The
following table summarizes our contractual obligations as of March 31,
2009:





Payment
      due by PeriodLess
      than
                
                
                1-3
                
                
                3-5
                
                
                More
      than 51
      Year
                
                
                Years
                
                
                Years
                
                
                Years
                
                
                TotalCommitments
      and Contractual Obligations:Long-Term
      Debt Obligations(1)
                
                $
                100,992
                
                
                $
                40,198
                
                
                $
                114,088
                
                
                $
                221,307
                
                
                $
                476,585Contractual
      Interest Obligations(2)
                
                
                18,937
                
                
                
                38,215
                
                
                
                29,055
                
                
                
                25,312
                
                
                
                111,519Operating
      Lease and Future Purchase Obligations (3)
                
                
                3,305
                
                
                
                7,181
                
                
                
                6,059
                
                
                
                952
                
                
                
                17,497Capital
      Reserve Obligations(4)
                
                
                1,584
                
                
                
                2,736
                
                
                
                2,560
                
                
                
                2,582
                
                
                
                9,462Total
                
                $
                124,818
                
                
                $
                88,330
                
                
                $
                151,762
                
                
                $
                250,153
                
                
                $
                615,063


36





(1)
            Includes
      required monthly principal amortization and amounts due at maturity on
      first mortgage debt secured by student housing properties and amounts due
      under Amended Revolver and Term Loan agreements. The first mortgage debt
      does not include $1,102 of unamortized debt
  premium.





(2)
            Includes
      contractual fixed-rate interest
payments.





(3)
            Includes
      future minimum lease commitments under operating lease obligations and
      future purchase obligations for
advertising.





(4)
            Includes
      future annual contributions to the capital reserve as required by certain
      mortgage debt.





Distributions





We are
required to distribute 90% of our REIT taxable income (excluding capital gains)
on an annual basis in order to qualify as a REIT for federal income tax
purposes. Accordingly, we intend to make, but are not contractually bound to
make, regular quarterly distributions to holders of our common stock. All such
distributions are authorized at the discretion of our board of directors. We may
be required to use borrowings under our revolving credit facility, if necessary,
to meet REIT distribution requirements and maintain our REIT
status.   Additionally, we may make certain distributions
consisting of both cash and shares to meet REIT distribution requirements. We
consider market factors and our performance in addition to REIT requirements in
determining distribution levels.





The
Trust’s Board of Directors lowered the annual dividend target from $0.82 to
$0.41 per share/unit beginning in 2009.  The 2009 dividend policy is
expected to result in the Trust retaining approximately $12.0 million of cash,
which will further strengthen liquidity.





On April
13, 2009, our board of directors declared a first quarter distribution of
$0.1025 per share of common stock for the quarter ending on March 31, 2009. The
distribution is payable on May 15, 2009 to stockholders of record at the close
of business on April 30, 2009.





Off-Balance
Sheet Arrangements





On
May 10, 2006, the Operating Partnership guaranteed $23,200 of construction
debt held by University Village-Greensboro LLC in order to receive a 25%
ownership stake in the venture with College Park Apartments. Construction was
completed and the student housing community was occupied in August 2007.
The Operating Partnership has determined that it will not guarantee the debt
after the construction loan is refinanced which is expected to occur in December
of 2009. On October 30, 2008, the LLC borrowed an additional $1,200 which
matures on August 10, 2009 and has also been guaranteed by the Operating
Partnership.





Additionally,
as discussed in note 3 to the consolidated financial statements, we hold
investments in unconsolidated entities. These unconsolidated entities have
third-party mortgage and construction indebtedness totaling $88,121 at
March 31, 2009 which is not guaranteed by the Operating
Partnership.





Inflation





Our
student housing leases typically do not have terms that extend beyond twelve
months. Accordingly, although on a short-term basis we would be required to bear
the impact of rising costs resulting from inflation, we have the opportunity to
raise rental rates at least annually to offset such rising costs. However, our
ability to raise rental rates may be limited by a weak economic environment,
increased competition from new student housing in our primary markets or a
reduction in student enrollment at our principal universities.





Item 3.
Quantitative and Qualitative Disclosures about Market Risk.





Our
future income, cash flows and fair values relevant to financial instruments are
dependent upon prevailing market interest rates. Market risk refers to the risk
of loss from adverse changes in market prices and interest rates. The Trust’s
interest rate risk objective is to limit the impact of interest rate
fluctuations on earnings and cash flows and to lower its overall borrowing
costs. To achieve this objective, the Trust manages its exposure to fluctuations
in market interest rates for its borrowings through the use of fixed rate debt
instruments to the extent that reasonably favorable rates are
obtainable.


37





For fixed
rate debt, interest rate changes affect the fair market value but do not impact
net income to common stockholders or cash flows. Conversely, for floating rate
debt, interest changes generally do not affect the fair market value but do
impact net income to common stockholders and cash flows, assuming other factors
are held constant. At March 31, 2009, we had fixed rate debt of $379,557.
Holding other variables constant a 100 basis point increase in interest rates
would cause a $13,539 decline in the fair value for our fixed rate debt.
Conversely, a 100 basis point decrease in interest rates would cause a $14,464
increase in the fair value of our fixed rate debt. At March 31, 2009, 79.6%
of the outstanding principal amounts of our mortgage notes payable on the
properties we own have fixed interest rates with a weighted average rate of
6.11% and an average term to maturity of 4.57 years.





At
March 31, 2009, we also had $32,900 outstanding on the Amended Revolver.
The interest rate per annum applicable to the Amended Revolver is, at the
Operating Partnership’s option, equal to a base rate or LIBOR plus an applicable
margin based upon our leverage.





At
March 31, 2009, we had $10,657 and $3,512 outstanding on construction loans
in the amount of $11,000 and $12,285, respectively, related to the development
of a wholly owned student apartment community near Southern Illinois University.
The loans bear interest equal to LIBOR plus a 110 and 200 basis point margins,
respectively, and are interest only through June 14, 2010. Commencing on
June 14, 2010, and annually thereafter, a debt service coverage ratio
calculated on a rolling 12 months basis, of not less than 1.25 to 1, must
be maintained in order to extend the loans until June 28, 2012, with
principal and interest being repaid on a monthly basis. We incurred $81 in
deferred financing costs in connection with the construction loans.





We
borrowed $191, out of an available $14,300, related to the development of a
wholly owned student apartment community at Syracuse University. The
construction loan bears interest equal to LIBOR plus a 110 basis point margin
and is interest only through September 29, 2011. Commencing with the
quarter ended June 30, 2011, and annually thereafter, a debt service
coverage ratio calculated on a rolling 12 months basis, of not less than
1.25 to 1, must be maintained in order to extend the loan until
September 29, 2013, with principal and interest being repaid on a monthly
basis.





Additionally,
in 2008, we borrowed $49,874 in variable rate debt to refinance mortgage
debt.   The loans bear interest at 30-day LIBOR plus an
applicable margin and mature on January 1, 2014.  In order to hedge
the interest rate risk associated with these loans, the Operating Partnership
purchased an interest rate cap from the Royal Bank of Canada on December 22,
2008 for $120.  The interest rate cap effectively limits the interest
rate on the $49,874 of refinanced mortgage debt at 7.0% per annum through
December 31, 2013. The Operating Partnership has chosen not to designate the cap
as a hedge and will recognize all gains or losses associated with this
derivative instrument in earnings.





We do
not, and do not expect to, use derivatives for trading or speculative purposes,
and we expect to enter into contracts only with major financial
institutions.





Item 4.
Controls and Procedures.





Management’s
Evaluation of Disclosure Controls and Procedures





The Trust
maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Trust’s filings under the Securities
Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and to
ensure that such information is accumulated and communicated to the Trust’s
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. The
Trust also has investments in unconsolidated entities which are not under its
control. Consequently, the Trust’s disclosure controls and procedures with
respect to these entities are necessarily more limited than those it maintains
with respect to its consolidated subsidiaries.


38


Our
management, with the participation of our principal executive officer and
principal financial officers, has evaluated the effectiveness of the design and
operation of the Trust’s disclosure controls and procedures pursuant to
Rule 13a-15(e) and 15d-15(e) of the Exchange Act. Based on their evaluation
as of March 31, 2009, our Chief Executive Officer and Chief Financial Officer
have concluded that the Trust’s disclosure controls and procedures were
effective to ensure that information required to be disclosed by the Trust in
the Trust’s Exchange Act filings is recorded, processed, summarized and reported
within the time periods specified in the applicable SEC rules and
forms.





Changes
in Internal Control Over Financial Reporting





During
the three months ended March 31, 2009, the Trust continued with the
implementation of a financial reporting analyses package. There were no other
changes in the Trust’s internal control over financial reporting that materially
affected, or are reasonably likely to materially affect, the Trust’s internal
control over financial reporting (as defined in Rule 13a-15(f) and
15d-15(f) of the Exchange Act).





PART
II





OTHER
INFORMATION





Item 1.
Legal Proceedings





In the
normal course of business, we are subject to claims, lawsuits and legal
proceedings. While it is not possible to ascertain the ultimate outcome of such
matters, in management’s opinion, the liabilities, if any, in excess of amounts
provided or covered by insurance, are not expected to have a material adverse
effect on our financial position, results of operations or
liquidity.





Item 1A.
Risk factors





The
discussion of the Trust’s business and operations should be read together with
the risk factors contained below and in Item 1A of our Annual Report on
Form 10-K for the year ended December 31, 2008 which describes various
risks and uncertainties to which we are or may be subject. These risks and
uncertainties have the potential to affect the Trust’s business, financial
condition, results of operations, cash flows and prospects in a material adverse
manner. As of March 31, 2009, there have been no material changes to the
risk factors set forth in the Trust’s annual report for the year ended
December 31, 2008.





Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds





Issuer Purchases of Equity
Securities





During
the three months ended March 31, 2009, in connection with our Amended and
Restated Dividend Reinvestment and Stock Purchase Plan for our common
stockholders, we directed the plan administrator to purchase 1,049 shares of our
common stock for $5 in the open market pursuant to the dividend reinvestment
component of the plan with respect to our dividend for the first quarter of
2009.  We also directed the plan administrator to purchase 3,084
shares of our common stock for $13 in the open market for investors pursuant to
the direct stock purchase component of the plan.  The following chart
summarizes these purchases of our common stock for the three months ended March
31, 2009.




Period
                        
                        Total Number
                          of Shares
                          Purchased(1)
                        
                        
                        Average Price Paid per
                          Share
                        
                        
                        Total Number of
                          Shares Purchased as
                          Part of Publicly
                          Announced Plans or
                          Programs
                        
                        
                        Maximum
                          Number (or
                          Approximate
                          Dollar Value) of
                          Shares that May
                          Yet Be
                          Purchased
                          Under the Plans
                          or ProgramsJanuary
      1-31, 2009
                        
                        
                        1,008
                        
                        
                        $
                        4.46
                        
                        
                        
                        ―
                        
                        
                        
                        ―February
      1-28, 2009
                        
                        
                        2,164
                        
                        
                        
                        4.38
                        
                        
                        
                        ―
                        
                        
                        
                        ―March
      1-31, 2009
                        
                        
                        961
                        
                        
                        
                        3.24
                        
                        
                        
                        ―
                        
                        
                        
                        ―Total
                        
                        
                        4,133
                        
                        
                        $
                        4.24
                        
                        
                        
                        ―
                        
                        
                        
                        ―





(1)
            All
      shares purchased in the open market pursuant to the terms of our Amended
      and Restated Dividend Reinvestment and Stock Purchase
  Plan.


39





Item 3.
Defaults upon Senior Securities.





None.





Item 4.
Submission of Matters to a Vote of Security Holders.





None.





Item 5. Other Information.





None.




Item 6.
Exhibits.





The exhibits listed on the accompanying
Exhibit Index are filed or incorporated by reference (as stated therein) as
part of this Quarterly Report on Form 10-Q.




40




SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





EDUCATION
      REALTY TRUST, INC.Date:
      May 8, 2009
                
                By
      /s/ Paul O. BowerPaul O.
      BowerPresident,
      Chief Executive Officer andChairman
      of the Board of Directors(Principal
      Executive Officer)Date:
      May 8, 2009
                
                By
      /s/ Randall H. BrownRandall H.
      BrownExecutive
      Vice President, Chief FinancialOfficer,
      Treasurer and Secretary(Principal
      Financial Officer)Date:
      May 8, 2009
                
                By
      /s/ J. Drew KoesterJ. Drew
      KoesterVice
      President, Assistant Secretary and Chief Accounting
Officer(Principal
      Accounting Officer)


41




EXHIBIT INDEX




3.1
                                          Second
      Articles of Amendment and Restatement of Education Realty Trust, Inc.
      (Incorporated by reference to Exhibit 3.1 to the Trust’s Amendment No. 2
      to its Registration Statement on Form S-11 (File No. 333-119264), filed on
      December 10, 2004.)3.2
                                          Amended
      and Restated Bylaws of Education Realty Trust, Inc. (Incorporated by
      reference to Exhibit 3.2 to the Trust’s Current Report on Form 8-K, filed
      on February 20, 2009)4.1
                                          Form
      of Certificate for Common Stock of Education Realty Trust, Inc.
      (Incorporated by reference to Exhibit 4.1 to the Trust’s Amendment No. 5
      to its Registration Statement on Form S-11 (File No. 333-119264), filed on
      January 24, 2005.)31.1
                                          Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
      Exchange Act, as amended.31.2
                                          Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
      Exchange Act, as amended.32.1*
                                          Section
      906 Certification of Chief Executive Officer.32.2*
                                          Section
      906 Certification of Chief Financial
Officer.




*
            In
      accordance with Release No. 34-47986, this Exhibit is hereby furnished to
      the SEC as an accompanying document and is not deemed “filed” for purposes
      of Section 18 of the Securities Exchange Act of 1934 or otherwise subject
      to the liabilities of that Section, nor shall it be deemed incorporated by
      reference into any filing under the Securities Act of
  1933.


42