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 September 30, 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  ̈





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  ̈  No  ̈





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  ̈
              Accelerated
      filer xNon-accelerated
      filer  ̈
                (Do
      not check if a smaller reporting company)
              Smaller
      reporting company  ̈





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes  ̈ No x





As of
November 6, 2009, the latest practicable date, the Registrant had outstanding
56,697,966 shares of common stock, $.01 par value per share.







EDUCATION
REALTY TRUST, INC.


FORM
10-Q


QUARTER
ENDED SEPTEMBER 30, 2009


TABLE
OF CONTENTS





PagePART
      I—FINANCIAL INFORMATIONItem 1.
      Financial Statements
                    3Condensed
      Consolidated Balance Sheets of Education Realty Trust, Inc. and
      Subsidiaries as of September 30, 2009 and December 31,
      2008
                    3Condensed
      Consolidated Statements of Operations of Education Realty Trust, Inc. and
      Subsidiaries for the nine months ended September 30, 2009 and
      2008
                    4Condensed
      Consolidated Statements of Operations of Education Realty Trust, Inc. and
      Subsidiaries for the three months ended September 30, 2009 and
      2008
                    6Condensed
      Consolidated Statements of Changes in Equity of Education Realty Trust,
      Inc. and Subsidiaries for the nine months ended September 30, 2009 and
      2008
                    8Condensed
      Consolidated Statements of Cash Flows of Education Realty Trust, Inc. and
      Subsidiaries for the nine months ended September 30, 2009 and
      2008
                    9Notes
      to Condensed Consolidated Financial Statements
                    11Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations
                    27Item 3.
      Quantitative and Qualitative Disclosures About Market Risk
                    48Item 4.
      Controls and Procedures
                    49PART
      II — OTHER INFORMATIONItem 1.
      Legal Proceedings
                    49Item 1A.
      Risk Factors
                    49Item 2.
      Unregistered Sales of Equity Securities and Use of
Proceeds
                    49Item 3.
      Defaults Upon Senior Securities
                    50Item 4.
      Submission of Matters to a Vote of Security Holders
                    50Item 5.
      Other Information
                    50Item 6.
      Exhibits
                    51Signatures
                    52


2





Part
I — Financial Information





Item 1.
Financial Statements.





CONDENSED
CONSOLIDATED BALANCE SHEETS


(Amounts
in thousands, except share and per share data)


(Unaudited)





September30,2009
                
                
                December31,2008ASSETSAssets:Student
      housing properties, net
                
                $
                755,504
                
                
                $
                731,400Student
      housing properties – held for sale
                
                
                —
                
                
                
                2,107Assets
      under development
                
                
                —
                
                
                
                6,572Corporate
      office furniture and equipment, net
                
                
                1,117
                
                
                
                1,465Cash
      and cash equivalents
                
                
                83,940
                
                
                
                9,003Restricted
      cash
                
                
                7,942
                
                
                
                5,595Student
      contracts receivable, net
                
                
                411
                
                
                
                533Receivable
      from affiliate
                
                
                25
                
                
                
                25Management
      fee receivable from third party
                
                
                253
                
                
                
                401Goodwill
      and other intangibles, net
                
                
                3,082
                
                
                
                3,111Note
      receivable from unconsolidated joint venture
                
                
                824
                
                
                
                834Other
      assets
                
                
                12,596
                
                
                
                16,601Total
      assets
                
                $
                865,694
                
                
                $
                777,647LIABILITIES
      AND EQUITYLiabilities:Mortgage
      and construction loans, net of unamortized
premium/discount
                
                $
                457,608
                
                
                $
                442,259Revolving
      line of credit
                
                
                —
                
                
                
                32,900Accounts
      payable
                
                
                640
                
                
                
                303Accrued
      expenses
                
                
                13,383
                
                
                
                9,144Accrued
      interest
                
                
                2,011
                
                
                
                1,158Deferred
      revenue
                
                
                12,674
                
                
                
                9,954Total
      liabilities
                
                
                486,316
                
                
                
                495,718Commitments
      and contingencies (see Note 6)
                
                
                —
                
                
                
                —Redeemable
      noncontrolling interests
                
                
                11,042
                
                
                
                11,751Equity:Education
      Realty Trust, Inc. stockholders’ equity:Common
      stock, $0.01 par value, 200,000,000 shares authorized, 56,685,849 and
      28,475,855 shares issued and outstanding at September 30, 2009 and
      December 31, 2008, respectively
                
                
                567
                
                
                
                285Preferred
      shares, $0.01 par value, 50,000,000 shares authorized, no shares issued
      and outstanding
                
                
                —
                
                
                
                —Additional
      paid-in capital
                
                
                413,068
                
                
                
                308,356Accumulated
      deficit
                
                
                (48,101
                )
                
                
                (41,381
                )Total
      Education Realty Trust, Inc. stockholders’ equity
                
                
                365,534
                
                
                
                267,260Noncontrolling
      interest
                
                
                2,802
                
                
                
                2,918Total
      equity
                
                
                368,336
                
                
                
                270,178Total
      liabilities and equity
                
                $
                865,694
                
                
                $
                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)




Nine months
                
                
                Nine monthsended
                
                
                endedSeptember 30,
                
                
                September 30,2009
                
                
                2008Revenues:Student
      housing leasing revenue
                
                $
                81,326
                
                
                $
                77,531Student
      housing food service revenue
                
                
                1,636
                
                
                
                1,804Other
      leasing revenue
                
                
                —
                
                
                
                6,945Third-party
      development services
                
                
                5,275
                
                
                
                6,224Third-party
      management services
                
                
                2,370
                
                
                
                2,677Operating
      expense reimbursements
                
                
                7,749
                
                
                
                8,192Total
      revenues
                
                
                98,356
                
                
                
                103,373Operating
      expenses:Student
      housing leasing operations
                
                
                42,912
                
                
                
                42,726Student
      housing food service operations
                
                
                1,579
                
                
                
                1,728General
      and administrative
                
                
                11,738
                
                
                
                11,867Depreciation
      and amortization
                
                
                21,501
                
                
                
                21,823Reimbursable
      operating expenses
                
                
                7,749
                
                
                
                8,192Total
      operating expenses
                
                
                85,479
                
                
                
                86,336Operating
      income
                
                
                12,877
                
                
                
                17,037Nonoperating
      expenses:Interest
      expense
                
                
                18,825
                
                
                
                18,556Amortization
      of deferred financing costs
                
                
                749
                
                
                
                740Interest
      income
                
                
                (334
                )
                
                
                (267
                )Gain
      on extinguishment of debt
                
                
                (830
                )
                
                
                —Total
      nonoperating expenses
                
                
                18,410
                
                
                
                19,029Loss
      from continuing operations before equity in earnings (losses) of
      unconsolidated entities, income taxes, redeemable noncontrolling interests
      and discontinued operations
                
                
                (5,533
                )
                
                
                (1,992
                )Equity
      in earnings (losses) of unconsolidated entities
                
                
                (6
                )
                
                
                (223
                )Loss
      from continuing operations before income taxes, redeemable noncontrolling
      interests and discontinued operations
                
                
                (5,539
                )
                
                
                (2,215
                )Income
      tax expense
                
                
                1,203
                
                
                
                882Loss
      from continuing operations before redeemable noncontrolling
      interests
                
                
                (6,742
                )
                
                
                (3,097
                )Loss
      attributable to redeemable noncontrolling interests
                
                
                (29
                )
                
                
                (147
                )Loss
      from continuing operations
                
                
                (6,713
                )
                
                
                (2,950
                )Loss
      from discontinued operations
                
                
                (21
                )
                
                
                (113
                )Net
      loss
                
                
                (6,734
                )
                
                
                (3,063
                )Less:
      Net loss attributable to the noncontrolling interest
                
                
                (14
                )
                
                
                (11
                )Net
      loss attributable to Education Realty Trust, Inc.
                
                $
                (6,720
                )
                
                $
                (3,052
                )


4





Nine months
                
                
                Nine monthsended
                
                
                endedSeptember 30,
                
                
                September 30,2009
                
                
                2008Earnings
      per share information:Loss
      attributable to Education Realty Trust, Inc. common stockholders per share
      — basic & diluted:Continuing
      operations
                
                $
                (0.19
                )
                
                $
                (0.10
                )Discontinued
      operations
                
                
                —
                
                
                
                (0.01
                )Net
      loss attributable to Education Realty Trust, Inc. common stockholders per
      share
                
                $
                (0.19
                )
                
                $
                (0.11
                )Weighted
      average common shares outstanding – basic & diluted
                
                
                35,013,814
                
                
                
                28,512,037Amounts
      attributable to Education Realty Trust, Inc. – common
      stockholders:Loss
      from continuing operations, net of tax
                
                $
                (6,700
                )
                
                $
                (2,943
                )Loss
      from discontinued operations, net of tax
                
                
                (20
                )
                
                
                (109
                )Net
      loss
                
                $
                (6,720
                )
                
                $
                (3,052
                )Distributions
      per common share
                
                $
                0.3075
                
                
                $
                0.6150


See
accompanying notes to the condensed consolidated financial
statements.


5





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Amounts
in thousands, except share and per share data)


(Unaudited)




Three months
                
                
                Three monthsended
                
                
                endedSeptember 30,
                
                
                September 30,2009
                
                
                2008Revenues:Student
      housing leasing revenue
                
                $
                25,105
                
                
                $
                24,587Student
      housing food service revenue
                
                
                577
                
                
                
                608Other
      leasing revenue
                
                
                —
                
                
                
                —Third-party
      development services
                
                
                2,559
                
                
                
                3,216Third-party
      management services
                
                
                738
                
                
                
                870Operating
      expense reimbursements
                
                
                3,523
                
                
                
                3,052Total
      revenues
                
                
                32,502
                
                
                
                32,333Operating
      expenses:Student
      housing leasing operations
                
                
                17,826
                
                
                
                17,695Student
      housing food service operations
                
                
                566
                
                
                
                600General
      and administrative
                
                
                3,903
                
                
                
                4,017Depreciation
      and amortization
                
                
                7,227
                
                
                
                7,054Reimbursable
      operating expenses
                
                
                3,523
                
                
                
                3,052Total
      operating expenses
                
                
                33,045
                
                
                
                32,418Operating
      loss
                
                
                (543
                )
                
                
                (85
                )Nonoperating
      expenses:Interest
      expense
                
                
                6,323
                
                
                
                6,343Amortization
      of deferred financing costs
                
                
                230
                
                
                
                253Interest
      income
                
                
                (180
                )
                
                
                (77
                )Total
      nonoperating expenses
                
                
                6,373
                
                
                
                6,519Loss
      from continuing operations before equity in earnings (losses) of
      unconsolidated entities, income taxes, redeemable noncontrolling interests
      and discontinued operations
                
                
                (6,916
                )
                
                
                (6,604
                )Equity
      in earnings (losses) of unconsolidated entities
                
                
                (152
                )
                
                
                (196
                )Loss
      from continuing operations before income taxes, redeemable noncontrolling
      interests and discontinued operations
                
                
                (7,068
                )
                
                
                (6,800
                )Income
      tax expense
                
                
                513
                
                
                
                709Loss
      from continuing operations before redeemable noncontrolling
      interests
                
                
                (7,581
                )
                
                
                (7,509
                )Loss
      attributable to redeemable noncontrolling interests
                
                
                (167
                )
                
                
                (268
                )Loss
      from continuing operations
                
                
                (7,414
                )
                
                
                (7,241
                )Loss
      from discontinued operations
                
                
                (3
                )
                
                
                (79
                )Net
      loss
                
                
                (7,417
                )
                
                
                (7,320
                )Less:
      Net loss attributable to the noncontrolling interest
                
                
                (33
                )
                
                
                (61
                )Net
      loss attributable to Education Realty Trust, Inc.
                
                $
                (7,384
                )
                
                $
                (7,259
                )


6





Three months
                  
                  
                  Three monthsended
                  
                  
                  endedSeptember 30,
                  
                  
                  September 30,2009
                  
                  
                  2008Earnings
      per share information:Loss
      attributable to Education Realty Trust, Inc. common stockholders per share
      — basic & diluted:Continuing
      operations
                  
                  $
                  (0.15
                  )
                  
                  $
                  (0.25
                  )Discontinued
      operations
                  
                  
                  —
                  
                  
                  
                  —Net
      loss attributable to Education Realty Trust, Inc. common stockholders per
      share
                  
                  $
                  (0.15
                  )
                  
                  $
                  (0.25
                  )Weighted
      average common shares outstanding – basic & diluted
                  
                  
                  47,932,410
                  
                  
                  
                  28,514,966Amounts
      attributable to Education Realty Trust, Inc. – common
      stockholders:Loss
      from continuing operations, net of tax
                  
                  $
                  (7,381
                  )
                  
                  $
                  (7,183
                  )Loss
      from discontinued operations, net of tax
                  
                  
                  (3
                  )
                  
                  
                  (76
                  )Net
      loss
                  
                  $
                  (7,384
                  )
                  
                  $
                  (7,259
                  )Distributions
      per common share
                  
                  $
                  0.1025
                  
                  
                  $
                  0.2050


See
accompanying notes to the condensed consolidated financial
statements.


7


CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


(Amounts
in thousands, except share data)


(Unaudited)





CommonStock
                  
                  
                  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
                  
                  
                  26,994
                  
                  
                  
                  1
                  
                  
                  
                  453
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  454Cash
      dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (17,533
                  )
                  
                  
                  —
                  
                  
                  
                  (174
                  )
                  
                  
                  (17,707
                  )PIU’s
      forfeited
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  16
                  
                  
                  
                  —
                  
                  
                  
                  (16
                  )
                  
                  
                  —PIU’s
      issued
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  49
                  
                  
                  
                  49Net
      loss
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (3,052
                  )
                  
                  
                  (11
                  )
                  
                  
                  (3,063
                  )Balance,
      September 30, 2008
                  
                  
                  28,466,849
                  
                  
                  $
                  285
                  
                  
                  $
                  314,006
                  
                  
                  $
                  (36,486
                  )
                  
                  $
                  3,090
                  
                  
                  $
                  280,895Balance,
      December 31, 2008
                  
                  
                  28,475,855
                  
                  
                  $
                  285
                  
                  
                  $
                  308,356
                  
                  
                  $
                  (41,381
                  )
                  
                  $
                  2,918
                  
                  
                  $
                  270,178Common
      stock issued to officers and directors
                  
                  
                  8,000
                  
                  
                  
                  —
                  
                  
                  
                  34
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  34Amortization
      of restricted stock
                  
                  
                  26,994
                  
                  
                  
                  —
                  
                  
                  
                  453
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  453Issuance
      of common stock from follow-on offering, net of offering
    costs
                  
                  
                  28,175,000
                  
                  
                  
                  282
                  
                  
                  
                  115,851
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  116,133Cash
      dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (11,656
                  )
                  
                  
                  —
                  
                  
                  
                  (85
                  )
                  
                  
                  (11,741
                  )PIU’s
      forfeited
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  30
                  
                  
                  
                  —
                  
                  
                  
                  (30
                  )
                  
                  
                  —PIU’s
      issued
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  13
                  
                  
                  
                  13Net
      loss
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (6,720
                  )
                  
                  
                  (14
                  )
                  
                  
                  (6,734
                  )Balance,
      September 30, 2009
                  
                  
                  56,685,849
                  
                  
                  $
                  567
                  
                  
                  $
                  413,068
                  
                  
                  $
                  (48,101
                  )
                  
                  $
                  2,802
                  
                  
                  $
                  368,336





See
accompanying notes to the condensed consolidated financial
statements.


8





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts
in thousands)


(Unaudited)





Nine months
                                                          
                                                          
                                                          Nine monthsended
                                                          
                                                          
                                                          endedSeptember 30,
                                                          
                                                          
                                                          September 30,2009
                                                          
                                                          
                                                          2008Operating
      activities:Net
      loss
                                                          
                                                          $
                                                          (6,734
                                                          )
                                                          
                                                          $
                                                          (3,063
                                                          )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          —Depreciation
      and amortization
                                                          
                                                          
                                                          21,501
                                                          
                                                          
                                                          
                                                          21,823Depreciation
      included in discontinued operations
                                                          
                                                          
                                                          25
                                                          
                                                          
                                                          
                                                          73Deferred
      tax expense/(benefit)
                                                          
                                                          
                                                          143
                                                          
                                                          
                                                          
                                                          (439
                                                          )(Gain)/loss
      on disposal of assets
                                                          
                                                          
                                                          (3
                                                          )
                                                          
                                                          
                                                          519Gain
      on extinguishment of debt
                                                          
                                                          
                                                          (830
                                                          )
                                                          
                                                          
                                                          —Amortization
      of deferred financing costs
                                                          
                                                          
                                                          749
                                                          
                                                          
                                                          
                                                          740Gain
      on interest rate cap
                                                          
                                                          
                                                          (237
                                                          )
                                                          
                                                          
                                                          —Amortization
      of unamortized debt premiums/discounts
                                                          
                                                          
                                                          (304
                                                          )
                                                          
                                                          
                                                          (366
                                                          )Distributions
      of earnings from unconsolidated entities
                                                          
                                                          
                                                          294
                                                          
                                                          
                                                          
                                                          192Noncash
      compensation expense related to PIUs and restricted stock
                                                          
                                                          
                                                          509
                                                          
                                                          
                                                          
                                                          597Equity
      in (earnings) losses of unconsolidated entities
                                                          
                                                          
                                                          6
                                                          
                                                          
                                                          
                                                          223Redeemable
      noncontrolling interest in continuing operations
                                                          
                                                          
                                                          (28
                                                          )
                                                          
                                                          
                                                          (143
                                                          )Redeemable
      noncontrolling interest in discontinued operations
                                                          
                                                          
                                                          (1
                                                          )
                                                          
                                                          
                                                          (4
                                                          )Change
      in operating assets and liabilities
                                                          
                                                          
                                                          14,355
                                                          
                                                          
                                                          
                                                          9,747Net
      cash provided by operating activities
                                                          
                                                          
                                                          29,445
                                                          
                                                          
                                                          
                                                          29,899Investing
      activities:Purchase
      of corporate furniture and equipment
                                                          
                                                          
                                                          (85
                                                          )
                                                          
                                                          
                                                          (177
                                                          )Restricted
      cash
                                                          
                                                          
                                                          (2,347
                                                          )
                                                          
                                                          
                                                          (2,138
                                                          )Investment
      in student housing properties
                                                          
                                                          
                                                          (16,102
                                                          )
                                                          
                                                          
                                                          (14,032
                                                          )Proceeds
      from sale of assets
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          2,578Proceeds
      from sale of student housing properties
                                                          
                                                          
                                                          154
                                                          
                                                          
                                                          
                                                          —Insurance
      proceeds received for property damage
                                                          
                                                          
                                                          224
                                                          
                                                          
                                                          
                                                          387Investment
      in assets under development
                                                          
                                                          
                                                          (22,676
                                                          )
                                                          
                                                          
                                                          (13,095
                                                          )Investment
      in unconsolidated entities
                                                          
                                                          
                                                          (384
                                                          )
                                                          
                                                          
                                                          (374
                                                          )Net
      cash used in investing activities
                                                          
                                                          
                                                          (41,216
                                                          )
                                                          
                                                          
                                                          (26,851
                                                          )Financing
      activities:Payment
      of mortgage notes
                                                          
                                                          
                                                          (2,162
                                                          )
                                                          
                                                          
                                                          (25,599
                                                          )Borrowings
      under mortgage notes and construction loans
                                                          
                                                          
                                                          17,815
                                                          
                                                          
                                                          
                                                          34,039Borrowings
      (repayments) under line of credit, net
                                                          
                                                          
                                                          (32,900
                                                          )
                                                          
                                                          
                                                          7,100Debt
      issuance costs
                                                          
                                                          
                                                          (588
                                                          )
                                                          
                                                          
                                                          (230
                                                          )Proceeds
      from refund of defeasance costs
                                                          
                                                          
                                                          830
                                                          
                                                          
                                                          
                                                          —Proceeds
      from common stock offering
                                                          
                                                          
                                                          122,561
                                                          
                                                          
                                                          
                                                          —Payment
      of offering costs
                                                          
                                                          
                                                          (6,428
                                                          )
                                                          
                                                          
                                                          —Dividends
      and distributions paid to common and restricted
    stockholders
                                                          
                                                          
                                                          (11,656
                                                          )
                                                          
                                                          
                                                          (17,533
                                                          )Dividends
      and distributions paid to noncontrolling interests
                                                          
                                                          
                                                          (764
                                                          )
                                                          
                                                          
                                                          (2,103
                                                          )Net
      cash (used in) provided by financing activities
                                                          
                                                          
                                                          86,708
                                                          
                                                          
                                                          
                                                          (4,326
                                                          )Net
      (decrease) increase in cash and cash equivalents
                                                          
                                                          
                                                          74,937
                                                          
                                                          
                                                          
                                                          (1,278
                                                          )Cash
      and cash equivalents, beginning of period
                                                          
                                                          
                                                          9,003
                                                          
                                                          
                                                          
                                                          4,034Cash
      and cash equivalents, end of period
                                                          
                                                          $
                                                          83,940
                                                          
                                                          
                                                          $
                                                          2,756


See
accompanying notes to the condensed consolidated financial
statements.


9





Nine months
                
                
                Nine monthsended
                
                
                endedSeptember 30,
                
                
                September 30,2009
                
                
                2008Supplemental
      disclosure of cash flow information:Interest
      paid
                
                $
                18,989
                
                
                $
                19,379Income
      taxes paid
                
                $
                695
                
                
                $
                177Supplemental
      disclosure of noncash activities:Redemption
      of noncontrolling interests from unit holder
                
                $
                —
                
                
                $
                893Note
      receivable received in connection with sale of student housing
      property
                
                $
                2,300
                
                
                $
                —


See
accompanying notes to the condensed consolidated financial
statements.


10





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 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;
  and





•
            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”).


11





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 September 30, 2009, the Trust
had $74,876 of 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.





Acquired
student housing properties’ results of operations are included in the Trust’s
results of operations from the respective dates of acquisition. 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 the authoritative guidance issued by the Financial Accounting Standards
Board (“FASB”), which prospectively changed 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.  The guidance also enhanced the disclosures to enable the
evaluation of the nature and financial effects of the business combination and
requires that pre-acquisition costs be expensed as incurred. 
Pre-acquisition costs, which include legal and professional fees and other
third-party costs related directly to the acquisition of a property, were
accounted for as part of the purchase price prior to the adoption of the
guidance issued by the FASB.


12





Management
assesses impairment of long-lived assets to be held and used whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Management uses an estimate of future undiscounted cash flows of
the related asset over the remaining life in measuring whether the assets are
recoverable.





When a
student housing property has met the criteria to be classified as held for sale,
the fair value less cost to sell such asset is estimated. If the fair value less
cost to sell the asset is less than the carrying amount of the asset, an
impairment charge is recorded for the estimated loss. Depreciation expense is no
longer recorded once a 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 statements 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.





Common
stock issuances and 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 in the accompanying condensed consolidated statement of changes in
equity.





On July
28, 2009, the Trust completed a follow-on common stock offering, selling
28,175,000 shares of the Trust’s common stock, including 3,675,000 shares
issued as a result of the exercise of the underwriters’ overallotment option in
full at closing, at a price of $4.35 per share to the public.  The offering
generated gross proceeds of $122,561.  The net proceeds to the Trust, after
the underwriting discount and other expenses of the offering were
approximately $116,133.





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.


13





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. Deferred tax
assets and liabilities are recognized based on the difference between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates in effect in the years in which those temporary
differences are expected to reverse.





The Trust
had no unrecognized tax benefits as of September 30, 2009 and 2008.  As of
September 30, 2009, the Trust does not expect to record any unrecognized tax
benefits.  The Trust, or its subsidiaries, files federal and state income
tax returns. As of September 30, 2009, open tax years generally include tax
years 2005-2008. The Trust’s policy is to include interest and penalties related
to unrecognized tax benefits in general and administrative expenses.  At
September 30, 2009, the Trust had no interest or penalties recorded related to
unrecognized tax benefits.





Noncontrolling
interests




On
January 1, 2009, the Trust adopted the authoritative guidance issued by the FASB
that changes the accounting and reporting for noncontrolling interests. The
guidance 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.  The guidance also establishes disclosure requirements to
clearly distinguish between the interests of the parent and the interests of the
noncontrolling owners. 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 issued by
the FASB regarding the 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 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 statements of
operations as net income attributable to noncontrolling interests.





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. Beginning January 1, 2009,
the Trust adopted the authoritative guidance on determining whether certain
instruments are participating securities.  All unvested share-based payment
awards that contain nonforfeitable rights to dividends or dividend equivalents
are to be included in the computation of earnings per share under the two-class
method.  This resulted in shares of unvested restricted stock being
included in the computation of basic earnings per share for all periods
presented.


14





As of
September 30, 2009 and 2008, the following potentially dilutive securities
were outstanding but were not included in the computation of diluted earnings
per share because the effects of their inclusion would be
anti-dilutive:





2009
                
                
                2008Operating
      Partnership units
                
                
                913,738
                
                
                
                913,738University
      Towers Operating Partnership units
                
                
                207,257
                
                
                
                207,257Profits
      Interest Units
                
                
                277,500
                
                
                
                282,500Total
      potentially dilutive securities
                
                
                1,398,495
                
                
                
                1,403,495





A
reconciliation of the numerators and denominators for the basic and diluted
earnings per share computation is not presented, as the Trust reported a loss
from continuing operations for all periods presented, and therefore the effect
of the inclusion of all potentially dilutive securities would be anti-dilutive
when computing diluted earnings per share; thus, the computation for both basic
and diluted earnings per share is the same.





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 September
30, 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 $12 and $41 at
September 30, 2009 and December 31, 2008, respectively.





Comprehensive
Income





The Trust
follows the authoritative guidance issued by the FASB relating to the reporting
and display of 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.


15





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 $5,800 was
recognized during the nine months ended September 30, 2008.





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 both the nine months and three months ended
September 30, 2009 and 2008, there was $1,224 and $1,944 revenue recognized
related to cost savings, respectively.





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.





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.





Recently
issued accounting pronouncements





In
May 2009, theFASB
issued new authoritative guidance on subsequent events.  The new
guidance is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. Specifically,
this standard sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date.  This guidance is effective for
financial statements issued for fiscal years and interim periods beginning after
June 15, 2009 and is applied prospectively. The Trust adopted this
authoritative guidance during the three months ended September 30,
2009.





In
June 2009, the FASB issued guidance to improve financial reporting by
enterprises involved with variable interest entities. The new guidance is
effective for financial statements issued for fiscal years beginning after
November 15, 2009, with earlier adoption prohibited. The Trust is currently
evaluating the impact of adoption on its consolidated financial
statements.


16


In
June 2009, the FASB issued guidance to establish only two levels of GAAP,
authoritative and nonauthoritative. The FASB Accounting Standards Codification
(the “Codification”) is the source of authoritative, nongovernmental GAAP,
except for rules and interpretive releases of the SEC, which are sources of
authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC
accounting literature not included in the Codification is nonauthoritative. This
standard is effective for financial statements issued for fiscal years and
interim periods ending after September 15, 2009.   As the
Codification was not intended to change or alter existing GAAP, it did not have
any impact on the Trust’s consolidated financial statements.





3.
Investments in unconsolidated entities





As of
September 30, 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
nine months ended September 30, 2009 and 2008:





2009
                      
                      
                      2008Results
      of Operations:Revenues
                      
                      $
                      11,718
                      
                      
                      $
                      11,744Net
      loss
                      
                      
                      (753
                      )
                      
                      
                      (2,107
                      )Equity
      in earnings (losses) of unconsolidated entities
                      
                      $
                      (6
                      )
                      
                      $
                      (223
                      )





These
entities primarily own student housing communities which are managed by the
Trust.  As of September 30, 2009 and December 31, 2008, the Trust’s
investment in unconsolidated entities totaled $2,843 and $2,759,
respectively.





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 September 30, 2009,
our borrowing base was $47,055, we had no amounts outstanding and we had letters
of credit outstanding of $2,000 (see Note 6); thus, our remaining availability
was $45,055. We do, however, have additional unmortgaged properties that can be
pledged against the Amended Revolver to increase total borrowing
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 five 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.


17





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.





During
the three months ended September 30, 2009, the Trust used $30,600 of the
proceeds received in connection with the follow-on common stock offering (see
Note 2) to repay the Amended Revolver.





As the
Amended Revolver matures on March 30, 2010, the Operating Partnership intends to
replace the Amended Revolver prior to the maturity of the existing
facility.





Mortgage
and construction debt





At
September 30, 2009, the Trust had outstanding mortgage and construction
indebtedness of $456,710 (excluding unamortized debt premium of
$898). $28,908 relates to construction debt that is disclosed below and
$231,612 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 $196,190 of the outstanding mortgage
indebtedness relates to the $222,000 Master Secured Credit Facility the Trust
entered into on December 31, 2008.  $49,451of the outstanding amount under
the Master Secured Credit Facility bears interest at variable rates based on the
30-day LIBOR plus an applicable margin. The remaining outstanding balance of
$146,739 bears interest at a weighted average fixed rate of
6.01%.  The Trust accounted for the prepayment of mortgage debt
mentioned above as a legal defeasance and recognized a loss on the
extinguishment during 2008. During the nine months ended September 30, 2009, the
Trust received a refund of defeasance costs resulting in an $830 gain on the
extinguishment.





In order
to hedge the interest rate risk associated with the variable rate loans under
the Master 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 September 30, 2009 and December
31, 2008, the cap had a value of $319 and $82, respectively, and is classified
in other assets in the accompanying condensed consolidated balance
sheets.





At
September 30, 2009, we had borrowed $10,759 and $9,323 on construction loans
with availability of $11,000 and $12,285, respectively, related to the
development of a wholly owned student apartment community near Southern Illinois
University (Carbondale). The loans bear interest equal to LIBOR plus 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. The Trust
incurred $81 in deferred financing costs in connection with the construction
loans in 2008.





At
September 30, 2009, the Trust had $8,826 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.


18




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
September 30, 2009 are as follows:





Fiscal
      Year Ending2009
      (3 months ending December 31, 2009)
                                
                                $
                                99,4692010
                                
                                
                                23,3882011
                                
                                
                                12,3032012
                                
                                
                                67,9392013
                                
                                
                                32,304Thereafter
                                
                                
                                221,307Total
                                
                                
                                456,710Unamortized
      debt premium/discounts
                                
                                
                                898Outstanding
      at September 30, 2009, net of unamortized
    premiums/discounts
                                
                                $
                                457,608





At
September 30, 2009, the outstanding mortgage and construction debt had a
weighted average interest rate of 5.56% and carried a weighted average term to
maturity of 3.9 years.





On
November 6, 2009, the Trust utilized $76,000 of cash from the follow-on common
stock offering (see Note 2) and borrowed $22,660 on its Amended Revolver to
repay $98,660 of mortgage debt that was scheduled to mature in December 2009
(see Note 10).





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 (income), gains (losses) on extinguishment of debt, 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 nine
months ended September 30, 2009 and 2008:





Nine
      Months Ended September 30, 2009
                    
                    
                    Nine
      Months Ended September 30, 2008Student
                    
                    
                    Development
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    Student
                    
                    
                    DevelopmentHousing
                    
                    
                    Consulting
                    
                    
                    Management
                    
                    
                    
                    
                    
                    
                    
                    
                    Housing
                    
                    
                    Consulting
                    
                    
                    ManagementLeasing
                    
                    
                    Services
                    
                    
                    Services
                    
                    
                    Adjustments
                    
                    
                    Total
                    
                    
                    Leasing
                    
                    
                    Services
                    
                    
                    Services
                    
                    
                    Adjustments
                    
                    
                    TotalRevenues:Student
      housing leasing revenue
                    
                    $
                    81,326
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    81,326
                    
                    
                    $
                    77,531
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    77,531Student
      housing food service revenue
                    
                    
                    1,636
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    1,636
                    
                    
                    
                    1,804
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    1,804Other
      leasing revenue
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    6,945
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    6,945Third-party
      development consulting services
                    
                    
                    —
                    
                    
                    
                    5,275
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    5,275
                    
                    
                    
                    —
                    
                    
                    
                    6,224
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    6,224Third-party
      management services
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    2,370
                    
                    
                    
                    —
                    
                    
                    
                    2,370
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    2,677
                    
                    
                    
                    —
                    
                    
                    
                    2,677


19





Nine
      Months Ended September 30, 2009
                                    
                                    
                                    Nine
      Months Ended September 30, 2008Student
                                    
                                    
                                    Development
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    Student
                                    
                                    
                                    DevelopmentHousing
                                    
                                    
                                    Consulting
                                    
                                    
                                    Management
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    Housing
                                    
                                    
                                    Consulting
                                    
                                    
                                    ManagementLeasing
                                    
                                    
                                    Services
                                    
                                    
                                    Services
                                    
                                    
                                    Adjustments
                                    
                                    
                                    Total
                                    
                                    
                                    Leasing
                                    
                                    
                                    Services
                                    
                                    
                                    Services
                                    
                                    
                                    Adjustments
                                    
                                    
                                    TotalIntersegment
      revenues
                                    
                                    
                                    —
                                    
                                    
                                    
                                    1,128
                                    
                                    
                                    
                                    3,289
                                    
                                    
                                    
                                    (4,417
                                    )
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    187
                                    
                                    
                                    
                                    3,157
                                    
                                    
                                    
                                    (3,344
                                    )
                                    
                                    
                                    —Operating
      expense reimbursements
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    7,749
                                    
                                    
                                    
                                    7,749
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    8,192
                                    
                                    
                                    
                                    8,192Total
      revenues
                                    
                                    
                                    82,962
                                    
                                    
                                    
                                    6,403
                                    
                                    
                                    
                                    5,659
                                    
                                    
                                    
                                    3,332
                                    
                                    
                                    
                                    98,356
                                    
                                    
                                    
                                    86,280
                                    
                                    
                                    
                                    6,411
                                    
                                    
                                    
                                    5,834
                                    
                                    
                                    
                                    4,848
                                    
                                    
                                    
                                    103,373Operating
      expenses:Student
      housing leasing operations
                                    
                                    
                                    42,912
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    42,912
                                    
                                    
                                    
                                    42,726
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    42,726Student
      housing food service operations
                                    
                                    
                                    1,579
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    1,579
                                    
                                    
                                    
                                    1,728
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    1,728General
      and administrative
                                    
                                    
                                    —
                                    
                                    
                                    
                                    2,402
                                    
                                    
                                    
                                    5,488
                                    
                                    
                                    
                                    (96
                                    )
                                    
                                    
                                    7,794
                                    
                                    
                                    
                                    3
                                    
                                    
                                    
                                    2,521
                                    
                                    
                                    
                                    5,476
                                    
                                    
                                    
                                    (277
                                    )
                                    
                                    
                                    7,723Intersegment
      expenses
                                    
                                    
                                    3,289
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (3,289
                                    )
                                    
                                    
                                    —
                                    
                                    
                                    
                                    3,157
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (3,157
                                    )
                                    
                                    
                                    —Reimbursable
      operating expenses
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    7,749
                                    
                                    
                                    
                                    7,749
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    8,192
                                    
                                    
                                    
                                    8,192Total
      operating expenses
                                    
                                    
                                    47,780
                                    
                                    
                                    
                                    2,402
                                    
                                    
                                    
                                    5,488
                                    
                                    
                                    
                                    4,364
                                    
                                    
                                    
                                    60,034
                                    
                                    
                                    
                                    47,614
                                    
                                    
                                    
                                    2,521
                                    
                                    
                                    
                                    5,476
                                    
                                    
                                    
                                    4,758
                                    
                                    
                                    
                                    60,369Net
      operating income
                                    
                                    
                                    35,182
                                    
                                    
                                    
                                    4,001
                                    
                                    
                                    
                                    171
                                    
                                    
                                    
                                    (1,032
                                    )
                                    
                                    
                                    38,322
                                    
                                    
                                    
                                    38,666
                                    
                                    
                                    
                                    3,890
                                    
                                    
                                    
                                    358
                                    
                                    
                                    
                                    90
                                    
                                    
                                    
                                    43,004Nonoperating
      expenses(1)
                                    
                                    
                                    39,250
                                    
                                    
                                    
                                    (66
                                    )
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    39,184
                                    
                                    
                                    
                                    39,968
                                    
                                    
                                    
                                    (45
                                    )
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    39,923Income
      (loss) before equity in earnings (losses) of unconsolidated entities,
      income taxes, redeemable noncontrolling interests and discontinued
      operations
                                    
                                    
                                    (4,068
                                    )
                                    
                                    
                                    4,067
                                    
                                    
                                    
                                    171
                                    
                                    
                                    
                                    (1,032
                                    )
                                    
                                    
                                    (862
                                    )
                                    
                                    
                                    (1,302
                                    )
                                    
                                    
                                    3,935
                                    
                                    
                                    
                                    358
                                    
                                    
                                    
                                    90
                                    
                                    
                                    
                                    3,081Equity
      in losses of unconsolidated entities
                                    
                                    
                                    (4
                                    )
                                    
                                    
                                    (2
                                    )
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (6
                                    )
                                    
                                    
                                    (221
                                    )
                                    
                                    
                                    (2
                                    )
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (223
                                    )Income
      (loss) before income taxes, redeemable noncontrolling interests and
      discontinued operations(2)
                                    
                                    $
                                    (4,072
                                    )
                                    
                                    $
                                    4,065
                                    
                                    
                                    $
                                    171
                                    
                                    
                                    $
                                    (1,032
                                    )
                                    
                                    $
                                    (868
                                    )
                                    
                                    $
                                    (1,523
                                    )
                                    
                                    $
                                    3,933
                                    
                                    
                                    $
                                    358
                                    
                                    
                                    $
                                    90
                                    
                                    
                                    $
                                    2,858Total
      segment assets, as of September 30, 2009 and December 31, 2008
      (3)
                                    
                                    $
                                    772,419
                                    
                                    
                                    $
                                    5,642
                                    
                                    
                                    $
                                    4,415
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    782,476
                                    
                                    
                                    $
                                    760,477
                                    
                                    
                                    $
                                    2,381
                                    
                                    
                                    $
                                    4,567
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    767,425


(1)
            Nonoperating
      expenses include interest expense, interest income, gains (losses) on the
      extinguishment of debt, amortization of deferred financing costs,
      depreciation, amortization of intangibles and impairment
      losses.





(2)
            The
      following is a reconciliation of the reportable segments’ income (loss)
      before income taxes, redeemable noncontrolling interests and discontinued
      operations to the Trust’s consolidated loss before income taxes,
      redeemable noncontrolling interests and discontinued operations for the
      nine months ended September 30:





2009
                      
                      
                      2008Income
      (loss) before income taxes, redeemable noncontrolling interests and
      discontinued operations for reportable segments
                      
                      $
                      (868
                      )
                      
                      $
                      2,858Other
      unallocated corporate expenses
                      
                      
                      (4,671
                      )
                      
                      
                      (5,073
                      )Loss
      before income taxes, redeemable noncontrolling interests and discontinued
      operations
                      
                      $
                      (5,539
                      )
                      
                      $
                      (2,215
                      )





(3)
            The
      increase in segment assets related to student housing leasing is primarily
      related to the development of two wholly owned student apartment
      communities in Carbondale, IL and Syracuse, NY (see Note
      7).  The increase in segment assets related to development
      consulting services is primarily due to a $2,663 increase in operating
      cash related to the timing of the receipt of project fees, a $335 net
      increase in receivables for reimbursable project costs related to
      development projects and a $329 net increase in development fee
      receivables primarily related to Westchester University of
      Pennsylvania.


20





The
following table represents segment information for the three months ended
September 30, 2009 and 2008:





Three
      Months Ended September 30, 2009
                
                
                Three
      Months Ended September 30, 2008Student
                
                
                Development
                
                
                
                
                
                
                
                
                
                
                
                Student
                
                
                DevelopmentHousing
                
                
                Consulting
                
                
                Management
                
                
                
                
                
                
                
                
                Housing
                
                
                Consulting
                
                
                ManagementLeasing
                
                
                Services
                
                
                Services
                
                
                Adjustments
                
                
                Total
                
                
                Leasing
                
                
                Services
                
                
                Services
                
                
                Adjustments
                
                
                TotalRevenues:Student
      housing leasing revenue
                
                $
                25,105
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                25,105
                
                
                $
                24,587
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                24,587Student
      housing food service revenue
                
                
                577
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                577
                
                
                
                608
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                608Other
      leasing revenue
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Third-party
      development consulting services
                
                
                —
                
                
                
                2,559
                
                
                
                —
                
                
                
                —
                
                
                
                2,559
                
                
                
                —
                
                
                
                3,216
                
                
                
                —
                
                
                
                —
                
                
                
                3,216Third-party
      management services
                
                
                —
                
                
                
                —
                
                
                
                738
                
                
                
                —
                
                
                
                738
                
                
                
                —
                
                
                
                —
                
                
                
                870
                
                
                
                —
                
                
                
                870Intersegment
      revenues
                
                
                —
                
                
                
                80
                
                
                
                1,103
                
                
                
                (1,183
                )
                
                
                —
                
                
                
                —
                
                
                
                187
                
                
                
                1,076
                
                
                
                (1,263
                )
                
                
                —Operating
      expense reimbursements
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                3,523
                
                
                
                3,523
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                3,052
                
                
                
                3,052Total
      revenues
                
                
                25,682
                
                
                
                2,639
                
                
                
                1,841
                
                
                
                2,340
                
                
                
                32,502
                
                
                
                25,195
                
                
                
                3,403
                
                
                
                1,946
                
                
                
                1,789
                
                
                
                32,333Operating
      expenses:Student
      housing leasing operations
                
                
                17,826
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                17,826
                
                
                
                17,695
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                17,695Student
      housing food service operations
                
                
                566
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                566
                
                
                
                600
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                600General
      and administrative
                
                
                —
                
                
                
                921
                
                
                
                1,809
                
                
                
                (15
                )
                
                
                2,715
                
                
                
                —
                
                
                
                866
                
                
                
                1,897
                
                
                
                (76
                )
                
                
                2,687Intersegment
      expenses
                
                
                1,103
                
                
                
                —
                
                
                
                —
                
                
                
                (1,103
                )
                
                
                —
                
                
                
                1,076
                
                
                
                —
                
                
                
                —
                
                
                
                (1,076
                )
                
                
                —Reimbursable
      operating expenses
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                3,523
                
                
                
                3,523
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                3,052
                
                
                
                3,052Total
      operating expenses
                
                
                19,495
                
                
                
                921
                
                
                
                1,809
                
                
                
                2,405
                
                
                
                24,630
                
                
                
                19,371
                
                
                
                866
                
                
                
                1,897
                
                
                
                1,900
                
                
                
                24,034Net
      operating income
                
                
                6,187
                
                
                
                1,718
                
                
                
                32
                
                
                
                (65
                )
                
                
                7,872
                
                
                
                5,824
                
                
                
                2,537
                
                
                
                49
                
                
                
                (111
                )
                
                
                8,299Nonoperating
      expenses(1)
                
                
                13,454
                
                
                
                (24
                )
                
                
                —
                
                
                
                —
                
                
                
                13,430
                
                
                
                13,118
                
                
                
                (4
                )
                
                
                —
                
                
                
                —
                
                
                
                13,114Income
      (loss) before equity in earnings (losses) of unconsolidated entities,
      income taxes, redeemable noncontrolling interests and discontinued
      operations
                
                
                (7,267
                )
                
                
                1,742
                
                
                
                32
                
                
                
                (65
                )
                
                
                (5,558
                )
                
                
                (7,294
                )
                
                
                2,541
                
                
                
                49
                
                
                
                (111
                )
                
                
                (4,815
                )Equity
      in losses of unconsolidated entities
                
                
                (152
                )
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (152
                )
                
                
                (195
                )
                
                
                (1
                )
                
                
                —
                
                
                
                —
                
                
                
                (196
                )Income
      (loss) before income taxes, redeemable noncontrolling interests and
      discontinued operations(2)
                
                $
                (7,419
                )
                
                $
                1,742
                
                
                $
                32
                
                
                $
                (65
                )
                
                $
                (5,710
                )
                
                $
                (7,489
                )
                
                $
                2,540
                
                
                $
                49
                
                
                $
                (111
                )
                
                $
                (5,011
                )




21




(1)
            Nonoperating
      expenses include interest expense, interest income, gains (losses) on
      extinguishment of debt, amortization of deferred financing costs,
      depreciation, amortization of intangibles and impairment
      losses.





(2)
            The
      following is a reconciliation of the reportable segments’ loss before
      income taxes, redeemable noncontrolling interests and discontinued
      operations to the Trust’s consolidated loss before income taxes,
      redeemable noncontrolling interests and discontinued operations for the
      three months ended September 30:





2009
                        
                        
                        2008Loss
      before income taxes, redeemable noncontrolling interests and discontinued
      operations for reportable segments
                        
                        $
                        (5,710
                        )
                        
                        $
                        (5,011
                        )Other
      unallocated corporate expenses
                        
                        
                        (1,358
                        )
                        
                        
                        (1,789
                        )Loss
      before income taxes, redeemable noncontrolling interests and discontinued
      operations
                        
                        $
                        (7,068
                        )
                        
                        $
                        (6,800
                        )





6.
Commitments and contingencies





In
connection with one of the Trust’s student housing portfolio acquisitions in
2005, 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 September 30, 2009 and is secured by the Amended
Revolver.





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 was 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 $23,015 at September 30,
2009.  On October 30, 2008, the LLC borrowed an additional $1,200
which matures on November 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 September 30,
2009, the note has an outstanding balance of $824 and is subordinated to the
construction debt held by the LLC discussed above.  The balance is
reflected separately in the accompanying condensed consolidated balance
sheets.   Additionally, the Trust’s other investments in
unconsolidated entities have outstanding mortgage and construction indebtedness
totaling $86,249 at September 30, 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.


22





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, 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 of the Place-communities 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 on
February 1, 2008. The letter of credit remains outstanding in the amount of $500
at September 30, 2009 and is secured by the Amended Revolver.





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 September 30,
2009 and December 31, 2008, the Trust had reimbursable predevelopment
costs of $1,288 and $910, 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 and $10,779 in costs to develop the first and second phases of the
development which opened in August of 2008 and 2009, respectively. During the
nine months ended September 30, 2009, the Trust capitalized interest costs of
$67 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 incurred
$24,598 in costs to develop the property which opened in August of
2009.  In addition, the Trust owns and manages the property under a
long-term ground lease from Syracuse University.  During the nine
months ended September 30, 2009, the Trust capitalized interest costs of $487
related to the development.





All costs
related to the completed developments discussed above are classified in student
housing properties, net in the accompanying condensed consolidated balance
sheets.  All costs related to projects under development are
classified as assets under development in the accompanying condensed
consolidated balance sheets.





8.
Disposition of real estate investments and discontinued operations





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. The note is interest only and accrues interest
at a rate of 3% per annum through August 31, 2009 and matures on December 31,
2010 (option to extend from December 31, 2009 to December 31, 2010 was exercised
in September 2009). Beginning on September 1, 2009, the note accrues interest
at a rate of 6% per annum and is payable in monthly installments through
maturity. All unpaid principal and interest is due at maturity. However, if no
default exists at the maturity date, the note may be extended to June 30, 2011.
The note would remain interest only at a rate of 6% per annum payable in monthly
installments through December 31, 2010; thereafter, payments of principal and
interest (at a rate of 6% per annum) would be made on a monthly basis. Any
unpaid principal and interest would be due in full on June 30,
2011.  The resulting net gain on disposition of approximately $374 has
been deferred against the note receivable.


23




The
results of operations are reflected as discontinued operations in the
accompanying condensed consolidated statements of operations for all periods
presented. The following table summarizes income/(loss) from discontinued
operations for the nine and three months ended September 30, 2009 and
2008:





Nine
      months
                
                
                Nine
      monthsEnded
      September 30,
                
                
                Ended
      September 30,2009
                
                
                2008Student
      housing leasing revenue
                
                $
                131
                
                
                $
                298Student
      housing leasing operating expenses
                
                
                127
                
                
                
                338Depreciation
      and amortization
                
                
                25
                
                
                
                73Redeemable
      noncontrolling interest
                
                
                (1
                )
                
                
                (4
                )Loss
      from discontinued operations attributable to Education Realty Trust,
      Inc.
                
                $
                (20
                )
                
                $
                (109
                )





Three
      months
                
                
                Three
      monthsEnded
      September 30,
                
                
                Ended
      September 30,2009
                
                
                2008Student
      housing leasing revenue
                
                $
                —
                
                
                $
                84Student
      housing leasing operating expenses
                
                
                3
                
                
                
                138Depreciation
      and amortization
                
                
                —
                
                
                
                25Redeemable
      noncontrolling interest
                
                
                —
                
                
                
                (3
                )Loss
      from discontinued operations attributable to Education Realty Trust,
      Inc.
                
                $
                (3
                )
                
                $
                (76
                )





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 for the nine months ended September 30, 2008.  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 January 31, 2005. 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 September 30, 2009,
the Trust had 824,000 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 September 30, 2009 and
December 31, 2008, unearned compensation totaled $204 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 nine months ended September 30, 2009
and 2008, compensation expense of $453 was recognized in the accompanying
condensed consolidated statements of operations, related to the vesting of
restricted stock.


24


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 nine months
ended September 30, 2009 and 2008, was $509 and $597,
respectively.  Additionally during each of the nine months ended
September 30, 2009 and 2008, the Trust issued 4,000 shares of common stock to an
executive officer and 4,000 shares to its independent directors pursuant to
the Plan.





A summary
of the stock-based incentive plan activity as of and for the nine months ended
September 30, 2009 is as follows:





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
                              
                              
                              
                              492,000Granted
                              
                              
                              —
                              
                              
                              
                              4,000
                              
                              
                              
                              4,000Forfeited
                              
                              
                              (2,500
                              )
                              
                              
                              —
                              
                              
                              
                              (2,500
                              )Outstanding
      at June 30, 2009
                              
                              
                              277,500
                              
                              
                              
                              216,000
                              
                              
                              
                              493,500Granted
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Forfeited
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Outstanding
      at September 30, 2009
                              
                              
                              277,500
                              
                              
                              
                              216,000
                              
                              
                              
                              493,500Vested
      at September 30, 2009
                              
                              
                              277,500
                              
                              
                              
                              203,883
                              
                              
                              
                              481,383


(1)
            Includes
      restricted stock awards.


25


10.
Subsequent events





The Trust
evaluated subsequent events for recognition or disclosure in the condensed
consolidated financial statements through November 6, 2009.





On
October 8, 2009, our board of directors declared a distribution of $0.05 per
share of common stock for the quarter ended on September 30, 2009. The
distribution is payable on November 16, 2009 to stockholders of record at the
close of business on October 30, 2009.





As
discussed in Note 4, on November 6, 2009, the Trust repaid $76,000 of mortgage
debt with proceeds from the follow-on common stock offering discussed in Note
2.  The remaining $22,660 of debt was repaid using availability under
the Amended Revolver.





As
discussed in Note 6, the Operating Partnership entered into a note receivable
agreement with the LLC (balance of $824 at September 30, 2009).  On
November 3, 2009, the Operating Partnership committed to increase the amount
available under the agreement to $2,100.





26




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 Quarterly 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
“Item 1A. — Risk Factors” in our Annual Report on Form 10-K for the year
ended December 31, 2008 and “Part II, Item IA.-Risk Factors” below and in
our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31,
2009 and June 30, 2009.  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.





All
references to “we,” “our,” “us,” “EDR”, “Trust” and the “Company” in this
Quarterly Report mean Education Realty Trust, Inc. and its consolidated
subsidiaries, except where it is made clear that the term means only Education
Realty Trust, Inc.





Overview





We are a
self-managed and self-advised real estate investment trust (“REIT”) engaged in
the development, ownership, acquisition and management of high quality student
housing communities. We also provide student housing management and 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 our
taxable REIT subsidiaries 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
(income), gains (losses) on extinguishment of debt, 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.


27




Student
Housing Leasing





Student
housing leasing revenue represented approximately 87.3% of our revenue,
excluding operating expense reimbursements, for the nine months ended September
30, 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.





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. The number of lease
contracts that we administer is therefore equivalent to the number of beds
occupied instead of the number of apartment units occupied. A parent or guardian
is required to execute each lease as a guarantor unless the resident provides
adequate proof of income.





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 television 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 on 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
2009 and 2008, approximately 70.0% and 69.3%, respectively, of our leased
beds were leased 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 Turn period results in
seasonality in our operating results during the third quarter of each
year.





Management
Services





Revenue
from our management services, excluding operating expense reimbursements,
represented approximately 6.0% of our revenue for the nine months ended
September 30, 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 two to three years
with a renewal option for one additional year going forward. 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.





28




Development
Consulting Services


Revenue
from our development consulting services, excluding operating expense
reimbursements, represented approximately 6.7% of our revenue for the nine
months ended September 30, 2009. Fees for these services are typically 3-5% of
the total project cost and are payable over the life of the construction period,
which is typically one to two years in length. We incur expenses that are
reimbursable by a project when awarded. 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 nine months ended September 30, 2009 and 2008
there was $1,224 and $1,944 revenue recognized related to cost savings, 
respectively.




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.





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, we have completed
construction on all of our development projects in time for their targeted
occupancy dates.





In 2007,
we began developing projects for our ownership and plan to increase
self-development activity going forward. During the three months ended September
30, 2009, we have opened two wholly owned, self-developed properties servicing
Southern Illinois University and Syracuse University.





Trends
and Outlook





Rents
and Occupancy





We manage
our properties to maximize revenues, which are primarily driven 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 occupancy may be offset by an increase
in rental rates and may not be material to our
operations.  Periodically, certain of our markets experience increases
in new on-campus student housing being provided by universities and off-campus
student housing being provided by developers.  This additional student
housing both on and off campus can create competitive pressure on rental
rates and occupancy.





For the
nine months ended September 30, 2009, same-community revenue per available bed
remained at $382 and same-community physical occupancy decreased to 89.7%
compared to 92.3% for the nine months ended September 30, 2008. These 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 address them as quickly as possible in an effort to
minimize the Trust’s exposure and reverse any negative trend.  The
three communities previously identified in the challenging markets of Kalamazoo,
Michigan, Gainesville, Florida, and Oxford, Mississippi opened the 2009-2010
lease term with an occupancy of 96.0%, measured at September 30, 2009, compared
to 84.3% in the prior year.


29


On a
same-community basis, the 2009-2010 lease term opened with an occupancy of 90.5%
as measured at September 30, 2009 compared to 91.1% for the same date in 2008,
reflecting an occupancy decline of 0.7% while rental rates declined 1.8% from
the prior lease term.  The legacy-communities (which are the
same-communities, excluding the Place-communities) opened with an occupancy of
92.5% compared to 94.0% last year, reflecting a 1.6% decline in occupancy with
rental rates in the portfolio declining 2.0% from the prior lease
term.  The Place-communities opened the fall lease term with an
occupancy of 84.3% compared to 81.9% last year, achieving a 3.0% improvement in
number of beds occupied while rental rates declined approximately 0.4% from the
prior lease term.  The occupancies achieved during the new leasing
term required greater discounting of rents and a higher level of concessions
than in the past.





Student
Housing Operating Costs





The cost
reduction initiatives put in place in the fourth quarter of 2008 continue to
work as evidenced by the 4.5% or $9 per bed reduction in same-community
operating expenses for the nine months ended September 30, 2009 compared to
the prior year. This decrease is partially attributable to a loss of $512 on the
sale of the land and parking garage at our University Towers community in 2008;
however, $988 or 3.0% of improvement in property operating expenses was a result
of the cost reduction initiatives. For the three months ended September 30,
2009, we also achieved cost reductions of 1.4% and 7.8% at our
legacy-communities and our Place-communities, respectively.  This
represents over twelve consecutive months with cost
reductions.  Although we do not expect to continue to reduce expenses
at this same rate into the future, we will continue to maintain our focus to
operate the communities as efficiently as possible.





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 the termination agreement, the Trust received
a lease termination fee of $6,000. As a result of the lease termination, the
Trust began managing the Place-communities and began recognizing the results of
operations for the Place-communities in its consolidated financial statements as
of the lease termination date. Previously, the Trust recognized base rental
income of $13,740 annually for the lease and had the right to receive
“Additional Rent” annually if the Place-communities exceeded certain criteria
defined in the lease agreement.  In the near term, the net operating
income generated by the Place-communities is expected to be less than the
rental income received under the lease; thus, potentially reducing 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 Place-communities.  Over time,
we expect to be able to improve the operating results of the Place-communities
through revenue growth driven by improved marketing and customer service
strategies. However, as with all its communities, management continually
assesses each Place-community and its respective market to determine if such
growth is achievable or if other alternatives should be pursued. The
Place-communities opened the 2009-2010 lease year with an occupancy of 84.3%
compared to 81.9% for the prior lease year.





Development
Consulting Services





Through
December 31, 2008, the Company has had four consecutive years of growth in its
development consulting services revenue as a result of an increase in the number
of development projects it has been awarded.  Through the nine months
ended September 30, 2009, third-party development consulting services revenue
was $5,275, a decrease of $949 over the prior period.  So far in 2009,
AODC has been receiving indications of interest from universities interested in
new housing and has continued to receive requests for proposals on new
development projects.  However, due to tightening in credit markets,
projects have not been able to obtain credit enhancement or viable financing to
allow projects to move beyond the development phase and into project financing
and construction.  AODC is expecting a continued decline in the number
of active development consulting services projects this fall and into 2010 or
until the credit markets return to more historical norms.





30




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 leasing
apartments by the bed, 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
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.





Student
Housing Food Service Revenue Recognition





We
maintain a dining facility at our University Towers community, 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 the Place Portfolio that we acquired
from Place on January 1, 2006. Previously, 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 Place-communities 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 $5,800 was recognized
during the nine months ended September 30, 2008.





Revenue
and Cost Recognition of Development 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 their
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.


31




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.





Acquired
student housing properties’ results of operations are included in the Trust’s
results of operations from the respective dates of acquisition. 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 the authoritative guidance issued by the FASB, which prospectively
changed 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.  The guidance also
enhanced the disclosures to enable the evaluation of the nature and financial
effects of the business combination and requires that pre-acquisition costs be
expensed as incurred. Pre-acquisition costs, which include legal and
professional fees and other third-party costs related directly to the
acquisition of a property, were accounted for as part of the purchase price
prior to the adoption of the guidance issued by the FASB.





When a
student housing property has met the criteria to be classified as held for sale,
the fair value less cost to sell such asset is estimated. If fair value less
cost to sell the asset is less than the carrying amount of the asset, an
impairment charge is recorded for the estimated loss. Depreciation expense is no
longer recorded once a 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 nine months
ended September 30, 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





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.


32




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.





Recently
Adopted Accounting Pronouncements





On
January 1, 2009, the Trust adopted the authoritative guidance issued by the FASB
on business combinations. The guidance 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. The guidance also
establishes disclosure requirements to enable the evaluation of the nature and
financial effects of the business combination and requires that pre-acquisition
costs be expensed as incurred. The adoption did not have a material impact on
the Trust’s consolidated financial statements.





On
January 1, 2009, the Trust adopted the authoritative guidance issued by the FASB
that changes the accounting and reporting for noncontrolling interests. The
guidance 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.
The guidance also establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. As a result of the adoption, the Trust has reported
nonredeemable 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 statements of operations.  The prior periods presented
have also been reclassified to conform to the current
classification.





In June
2008, the FASB issued guidance on determining whether instruments granted in
share-based payment transactions are participating securities. The guidance
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.The guidance requires
all presented prior-period earnings per share data to be adjusted
retrospectively. The adoption resulted in shares of unvested restricted stock
being included in the computation of earnings per share for all periods. The
adoption did not have a material impact on the Trust’s consolidated financial
statements.





In
May 2009, theFASB
issued new authoritative guidance on subsequent events.  The new
guidance is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. Specifically,
this standard sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date.  This guidance is effective for
financial statements issued for fiscal years and interim periods beginning after
June 15, 2009 and is applied prospectively.  The Trust adopted
this authoritative guidance during the three months ended September 30,
2009.


33




In
June 2009, the FASB issued guidance to establish only two levels of GAAP,
authoritative and nonauthoritative. The FASB Accounting Standards Codification
(the “Codification”) is the source of authoritative, nongovernmental GAAP,
except for rules and interpretive releases of the SEC, which are sources of
authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC
accounting literature not included in the Codification is nonauthoritative. This
standard is effective for financial statements issued for fiscal years and
interim periods ending after September 15, 2009.   As the
Codification was not intended to change or alter existing GAAP, it did not have
any impact on the Trust’s consolidated financial statements.





Recently
issued accounting pronouncements





In
June 2009, the FASB issued authoritative guidance to improve financial
reporting by enterprises involved with variable interest entities. The new
guidance is effective for financial statements issued for fiscal years beginning
after November 15, 2009, with earlier adoption prohibited. The Trust is
currently evaluating the impact of adoption on its consolidated financial
statements.





Results
of Operations for the Nine Months Ended September 30, 2009 and 2008





The
following table presents the results of operations for Education Realty Trust,
Inc. for the nine months ended September 30, 2009 and 2008:




Nine
      Months Ended September 30, 2009
                
                
                Nine
      Months Ended September 30, 2008Student
                
                
                Development
                
                
                
                
                
                
                
                
                
                
                
                Student
                
                
                DevelopmentHousing
                
                
                Consulting
                
                
                Management
                
                
                
                
                
                
                
                
                Housing
                
                
                Consulting
                
                
                ManagementLeasing
                
                
                Services
                
                
                Services
                
                
                Adjustments
                
                
                Total
                
                
                Leasing
                
                
                Services
                
                
                Services
                
                
                Adjustments
                
                
                TotalRevenues:Student
      housing leasing revenue
                
                $
                81,326
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                81,326
                
                
                $
                77,531
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                77,531Student
      housing food service revenue
                
                
                1,636
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,636
                
                
                
                1,804
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,804Other
      leasing revenue
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                6,945
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                6,945Third-party
      development consulting services
                
                
                —
                
                
                
                5,275
                
                
                
                —
                
                
                
                —
                
                
                
                5,275
                
                
                
                —
                
                
                
                6,224
                
                
                
                —
                
                
                
                —
                
                
                
                6,224Third-party
      management services
                
                
                —
                
                
                
                —
                
                
                
                2,370
                
                
                
                —
                
                
                
                2,370
                
                
                
                —
                
                
                
                —
                
                
                
                2,677
                
                
                
                —
                
                
                
                2,677Intersegment
      revenues
                
                
                —
                
                
                
                1,128
                
                
                
                3,289
                
                
                
                (4,417
                )
                
                
                —
                
                
                
                —
                
                
                
                187
                
                
                
                3,157
                
                
                
                (3,344
                )
                
                
                —Operating
      expense reimbursements
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                7,749
                
                
                
                7,749
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                8,192
                
                
                
                8,192Total
      revenues
                
                
                82,962
                
                
                
                6,403
                
                
                
                5,659
                
                
                
                3,332
                
                
                
                98,356
                
                
                
                86,280
                
                
                
                6,411
                
                
                
                5,834
                
                
                
                4,848
                
                
                
                103,373Operating
      expenses:Student
      housing leasing operations
                
                
                42,912
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                42,912
                
                
                
                42,726
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                42,726Student
      housing food service operations
                
                
                1,579
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,579
                
                
                
                1,728
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,728General
      and administrative
                
                
                —
                
                
                
                2,402
                
                
                
                5,488
                
                
                
                (96
                )
                
                
                7,794
                
                
                
                3
                
                
                
                2,521
                
                
                
                5,476
                
                
                
                (277
                )
                
                
                7,723Intersegment
      expenses
                
                
                3,289
                
                
                
                —
                
                
                
                —
                
                
                
                (3,289
                )
                
                
                —
                
                
                
                3,157
                
                
                
                —
                
                
                
                —
                
                
                
                (3,157
                )
                
                
                —Reimbursable
      operating expenses
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                7,749
                
                
                
                7,749
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                8,192
                
                
                
                8,192


34





Nine
      Months Ended September 30, 2009
                  
                  
                  Nine
      Months Ended September 30, 2008Student
                  
                  
                  Development
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  Student
                  
                  
                  DevelopmentHousing
                  
                  
                  Consulting
                  
                  
                  Management
                  
                  
                  
                  
                  
                  
                  
                  
                  Housing
                  
                  
                  Consulting
                  
                  
                  ManagementLeasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Adjustments
                  
                  
                  Total
                  
                  
                  Leasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Adjustments
                  
                  
                  TotalTotal
      operating expenses
                  
                  
                  47,780
                  
                  
                  
                  2,402
                  
                  
                  
                  5,488
                  
                  
                  
                  4,364
                  
                  
                  
                  60,034
                  
                  
                  
                  47,614
                  
                  
                  
                  2,521
                  
                  
                  
                  5,476
                  
                  
                  
                  4,758
                  
                  
                  
                  60,369Net
      operating income
                  
                  
                  35,182
                  
                  
                  
                  4,001
                  
                  
                  
                  171
                  
                  
                  
                  (1,032
                  )
                  
                  
                  38,322
                  
                  
                  
                  38,666
                  
                  
                  
                  3,890
                  
                  
                  
                  358
                  
                  
                  
                  90
                  
                  
                  
                  43,004Nonoperating
      expenses(1)
                  
                  
                  39,250
                  
                  
                  
                  (66
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  39,184
                  
                  
                  
                  39,968
                  
                  
                  
                  (45
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  39,923Income
      before equity in earnings (losses) of unconsolidated entities, income
      taxes, redeemable noncontrolling interests and discontinued
      operations
                  
                  
                  (4,068
                  )
                  
                  
                  4,067
                  
                  
                  
                  171
                  
                  
                  
                  (1,032
                  )
                  
                  
                  (862
                  )
                  
                  
                  (1,302
                  )
                  
                  
                  3,935
                  
                  
                  
                  358
                  
                  
                  
                  90
                  
                  
                  
                  3,081Equity
      in losses of unconsolidated entities
                  
                  
                  (4
                  )
                  
                  
                  (2
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (6
                  )
                  
                  
                  (221
                  )
                  
                  
                  (2
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (223
                  )Income
      (loss) before income taxes, redeemable noncontrolling interests and
      discontinued operations(2)
                  
                  $
                  (4,072
                  )
                  
                  $
                  4,065
                  
                  
                  $
                  171
                  
                  
                  $
                  (1,032
                  )
                  
                  $
                  (868
                  )
                  
                  $
                  (1,523
                  )
                  
                  $
                  3,933
                  
                  
                  $
                  358
                  
                  
                  $
                  90
                  
                  
                  $
                  2,858





(1)
            Nonoperating
      expenses include interest expense, interest income, gains (losses) on
      extinguishment of debt, amortization of deferred financing costs,
      depreciation, amortization of intangibles and impairment
      losses.





(2)
            The
      following is a reconciliation of the reportable segments’ income (loss)
      before income taxes, redeemable noncontrolling interests and discontinued
      operations to the Trust’s consolidated loss before income taxes,
      redeemable noncontrolling interests and discontinued operations for the
      nine months ended September 30,
2009:





2009
                        
                        
                        2008Income
      (loss) before income taxes, redeemable noncontrolling interests and
      discontinued operations for reportable segments
                        
                        $
                        (868
                        )
                        
                        $
                        2,858Other
      unallocated corporate expenses
                        
                        
                        (4,671
                        )
                        
                        
                        (5,073
                        )Loss
      before income taxes, redeemable noncontrolling interests and discontinued
      operations
                        
                        $
                        (5,539
                        )
                        
                        $
                        (2,215
                        )





Student
housing leasing





Student
housing operating statistics for the nine months ended September 30, 2009 and
2008 were as follows:





Nine
      months
                  
                  
                  Nine
      monthsended
                  
                  
                  endedSeptember
      30,
                  
                  
                  September
      30,
                  
                  
                  Favorable2009
                  
                  
                  
                  2008 (9) (10)
                  
                  
                  (Unfavorable)All
      communities:OccupancyPhysical
      (1)
                  
                  
                  87.4
                  %
                  
                  
                  90.5
                  %
                  
                  
                  (3.1
                  )
      %Economic
      (2)
                  
                  
                  82.5
                  %
                  
                  
                  85.9
                  %
                  
                  
                  (3.4
                  )
      %NarPAB
      (3)
                  
                  $
                  338
                  
                  
                  $
                  342
                  
                  
                  $
                  (4
                  )Other
      income per avail. bed (4)
                  
                  $
                  24
                  
                  
                  $
                  21
                  
                  
                  $
                  3RevPAB
      (5)
                  
                  $
                  362
                  
                  
                  $
                  363
                  
                  
                  $
                  (1
                  )Operating
      expense per bed (6) (7)
                  
                  $
                  191
                  
                  
                  $
                  198
                  
                  
                  $
                  7Operating
      margin (7)
                  
                  
                  47.2
                  %
                  
                  
                  45.6
                  %
                  
                  
                  1.6
                  %Design
      beds (8)
                  
                  
                  224,400
                  
                  
                  
                  213,512
                  
                  
                  
                  10,888Same-communities:OccupancyPhysical
                  
                  
                  89.7
                  %
                  
                  
                  92.3
                  %
                  
                  
                  (2.6
                  )
      %Economic
                  
                  
                  84.9
                  %
                  
                  
                  87.7
                  %
                  
                  
                  (2.8
                  )
      %NarPAB
                  
                  $
                  355
                  
                  
                  $
                  358
                  
                  
                  $
                  (3
                  )Other
      income per avail. bed
                  
                  $
                  27
                  
                  
                  $
                  24
                  
                  
                  $
                  3RevPAB
                  
                  $
                  382
                  
                  
                  $
                  382
                  
                  
                  $
                  —Operating
      expense per bed (11)
                  
                  $
                  193
                  
                  
                  $
                  199
                  
                  
                  $
                  6Operating
      margin (11)
                  
                  
                  49.5
                  %
                  
                  
                  47.9
                  %
                  
                  
                  1.6
                  %Design
      beds
                  
                  
                  165,258
                  
                  
                  
                  165,304
                  
                  
                  
                  (46
                  )




35




(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)
            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/application fees, late fees, termination fees,
      parking fees, transfer fees, damage recovery, utility recovery, and other
      miscellaneous income.





(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 nine months ended September 30, 2008, approximately $2 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.




(9)
            Information
      related to the Place Portfolio is included starting February 1, 2008 when
      the previous lease with Place was terminated for the all community
      statistics. Place-communities are not considered same-community for the
      nine months ended September 30, 2009 and thus are not included in the same
      community statistics.




(10)
            This
      information excludes property information related to College Station
      (discontinued operations).





(11)
            For
      the nine months ended September 30, 2008, approximately $3 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,




Total
revenue in the student housing leasing segment was $82,962 for the nine
months ended September 30, 2009. This represents a decrease of $3,318, or
3.8%, from the same period in 2008. Student housing leasing revenue increased
4.9%, or $3,795 to $81,326. This increase was offset by a decline in other
leasing revenue of $6,945 as a result of the February 1, 2008 Place Portfolio
lease termination and related termination fee recognized in 2008. The
student housing leasing revenue increase of $3,795 included $1,790 related to
one additional month of operating results from the Place Portfolio in 2009
compared to 2008 and a $270 decline in revenue at the Place-communities since
the lease termination as a result of lower rates and lower
occupancy. The Reserve at Saluki Point (Carbondale) and University Village
on Colvin (Syracuse) communities, which opened in August of 2008 and 2009,
respectively, contributed $2,233 of additional revenue growth. Same-community
revenue remained relatively flat to the prior year, reflecting an approximate
2.4% increase in rates and a 0.6% increase in other income offset by an
approximate 2.9% decline in occupancy.




Operating
expenses in the student housing leasing segment were up $166 over the prior year
at $47,780 for the nine months ended September 30, 2009. Student housing
leasing operations expense increased a total of $186, or 0.4%, over the
prior year. This increase includes $928 of additional expenses related to one
additional month of operations at the Place portfolio in 2009 compared to 2008
as well as $1,265 of additional operating expenses related to The Reserve at
Saluki Point (Carbondale) and University Village on Colvin (Syracuse)
communities. These increases were offset by $2,007 of lower costs related to a
4.5% cost reduction in same-community operating expenses year over year and a
5.6% cost reduction at our Place communities for the comparable periods since
lease termination. While $512 of this improvement relates to a loss on the sale
of the University Towers land and parking garage in the prior year, specific
cost reduction measures implemented in the fall of 2008 drove a $892 reduction
in payroll costs, a $626 reduction in credit card fees and a $84 reduction on
maintenance costs. These improvements were partially offset by an increase in
marketing and utility costs.





36




Nonoperating
expenses decreased $718 or 1.8% to $39,250 for the nine months ended
September 30, 2009, compared to the same period in 2008. This decrease was
primarily driven by a $383 decline in depreciation expense due to fully
depreciated assets that remain in service and an $830 gain on the extinguishment
of debt resulting from the refund of defeasance costs in 2009 related to the
Trust’s debt refinancing in December of 2008. The decrease was partially offset
by a $260 increase in interest expense related to higher construction debt
levels over prior year associated with the wholly-owned student housing
communities in Carbondale, Illinois and Syracuse, New York that opened in August
of 2008 and 2009, respectively.




Equity in
earnings (losses) 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 nine months ended September 30, 2009, equity in losses was $4 compared
to equity in losses of $221 in the prior year. The main driver of the
improvement was better operating results from our joint venture properties in
Greensboro, North Carolina and Riverside, California, as a result of lower
interest expense at both communities.




Development
consulting services





The
following table represents the development consulting projects that were active
during the nine months ended September 30, 2009 and 2008:





Recognized EarningsProject
                  
                  Beds
                  
                  Fee Type
                  
                  2009
                  
                  
                  2008
                  
                  
                  DifferenceUniversity
      of Michigan
                  
                  
                  896
                  
                  Development
      fee
                  
                  $
                  178
                  
                  
                  $
                  245
                  
                  
                  $
                  (67
                  )University
      of Alabama — Tuscaloosa
                  
                  
                  631
                  
                  Development
      fee
                  
                  
                  —
                  
                  
                  
                  670
                  
                  
                  
                  (670
                  )Slippery
      Rock University — Phase II
                  
                  
                  746
                  
                  Development
      fee
                  
                  
                  —
                  
                  
                  
                  1,015
                  
                  
                  
                  (1,015
                  )Indiana
      University of Pennsylvania — Phase II
                  
                  
                  1,102
                  
                  Development
      fee
                  
                  
                  —
                  
                  
                  
                  2,341
                  
                  
                  
                  (2,341
                  )Fontainebleu
      Renovation Project
                  
                  
                  435
                  
                  Development
      fee
                  
                  
                  68
                  
                  
                  
                  101
                  
                  
                  
                  (33
                  )West
      Chester— Phase I
                  
                  
                  1,197
                  
                  Development
      fee
                  
                  
                  1,366
                  
                  
                  
                  1,182
                  
                  
                  
                  184West
      Chester— Phase II
                  
                  
                  
                  
                  Development
      fee
                  
                  
                  65
                  
                  
                  
                  —
                  
                  
                  
                  65Indiana
      University of Pennsylvania — Phase III
                  
                  
                  1,084
                  
                  Development
      fee
                  
                  
                  1,946
                  
                  
                  
                  599
                  
                  
                  
                  1,347Colorado
      State University — Pueblo I
                  
                  
                  253
                  
                  Development
      fee
                  
                  
                  568
                  
                  
                  
                  71
                  
                  
                  
                  497Colorado
      State University — Pueblo II
                  
                  
                  500
                  
                  Development
      fee
                  
                  
                  682
                  
                  
                  
                  —
                  
                  
                  
                  682Auraria
      Higher Education System
                  
                  
                  685
                  
                  Development
      fee
                  
                  
                  182
                  
                  
                  
                  —
                  
                  
                  
                  182Indiana
      University of Pennsylvania — Phase IV
                  
                  
                  596
                  
                  Development
      fee
                  
                  
                  220
                  
                  
                  
                  —
                  
                  
                  
                  220Third-party
      development consulting services
                  
                  
                  
                  
                  
                  
                  
                  5,275
                  
                  
                  
                  6,224
                  
                  
                  
                  (949
                  )Southern
      Illinois University— Carbondale
                  
                  
                  528
                  
                  Construction
      oversight fee
                  
                  
                  99
                  
                  
                  
                  187
                  
                  
                  
                  (88
                  )Syracuse
      University
                  
                  
                  432
                  
                  Development
      fee
                  
                  
                  1,029
                  
                  
                  
                  —
                  
                  
                  
                  1,029Inter-segment
      development revenue
                  
                  
                  
                  
                  
                  
                  
                  1,128
                  
                  
                  
                  187
                  
                  
                  
                  941Development
      consulting services
                  
                  
                  
                  
                  
                  
                  $
                  6,403
                  
                  
                  $
                  6,411
                  
                  
                  $
                  (8
                  )


37


Development
consulting services revenue remained relatively flat compared to the prior year
at $6,403 for the nine months ended September 30, 2009. Third-party
development consulting revenue was down $949 to $5,275 for the nine months ended
September 30, 2009. The decline in third-party fees relates mostly to the $670
of final fees received in 2008 on the previously closed project at the
University of Alabama. In addition, the average size of the active jobs in 2009
were smaller than the active jobs in 2008 which included six development
projects representing 4,526 beds and a renovation project in 2009 compared to
six active projects representing 5,278 beds and a renovation project in 2008.
The inter-segment development revenue relates to fees recognized for projects
owned by the Trust at The Reserve at Saluki Point (Carbondale) and
University Village on Colvin (Syracuse) for which AODC provided development
consulting services; therefore, they are eliminated in the accompanying
condensed consolidated financial statements. Inter-segment revenue was only $187
in the prior year as these jobs were started in the summer and fall of
2008.





General
and administrative expenses declined $119 to $2,402 during the nine months ended
September 30, 2009 primarily due to a decrease in payroll expenses of $231
related to specific cost reduction measures implemented in the fall of 2008.
These cost reductions were offset by higher development project pursuit
costs.




Management
services





Total
management services revenue decreased by $175, or 3.0%, to $5,659 for the nine
months ended September 30, 2009. Third-party management fee revenue decreased
$307, or 11.5%, to $2,370 for the nine months ended September 30, 2009. The
cancellation of a contract in 2008 related to a five property portfolio in
Michigan, for which the owner chose to take management in-house, contributed to
$315 of the decrease, $150 came from the cancellation of a contract in Illinois
as a result of a sale of the property in 2008, and $27 resulted from a net
decrease in fees from existing contracts. These decreases were partially offset
by $185 related to four new contracts entered into at various times in 2008.
Growth in our owned portfolio offset the decline in third-party management fee
revenue by contributing an increase of $132 in intersegment revenue primarily
related to nine full months of managing the Place Portfolio in 2009 compared to
eight months in 2008 and the opening of the Reserve at Saluki Pointe
(Carbondale) in August of 2008 and University Village Colvin (Syracuse) in
August of 2009.


General
and administrative costs for our third-party management services segment
remained relatively flat at $5,488 for the nine months ended September 30, 2009
compared to $5,476 for the same period in 2008.




Unallocated
corporate expenses





Unallocated
corporate expenses represent general and administrative expenses that are not
allocated to any of our business segments. For the nine months ended September
30, 2009, unallocated corporate expenses decreased $402 or 7.9% when compared to
the prior year. This decrease is primarily attributable to a decrease in
interest expense related to the repayment of the Amended Revolver in July of
2009.





Results
of Operations for the Three Months Ended September 30, 2009 and
2008





The
following table presents the results of operations for Education Realty Trust,
Inc. for the three months ended September 30, 2009 and 2008:





Three
      Months Ended September 30, 2009
                
                
                Three
      Months Ended September 30, 2008Student
                
                
                Development
                
                
                
                
                
                
                
                
                
                
                
                Student
                
                
                DevelopmentHousing
                
                
                Consulting
                
                
                Management
                
                
                
                
                
                
                
                
                Housing
                
                
                Consulting
                
                
                ManagementLeasing
                
                
                Services
                
                
                Services
                
                
                Adjustments
                
                
                Total
                
                
                Leasing
                
                
                Services
                
                
                Services
                
                
                Adjustments
                
                
                TotalRevenues:Student
      housing leasing revenue
                
                $
                25,105
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                25,105
                
                
                $
                24,587
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                24,587Student
      housing food service revenue
                
                
                577
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                577
                
                
                
                608
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                608Other
      leasing revenue
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Third-party
      development consulting services
                
                
                —
                
                
                
                2,559
                
                
                
                —
                
                
                
                —
                
                
                
                2,559
                
                
                
                —
                
                
                
                3,216
                
                
                
                —
                
                
                
                —
                
                
                
                3,216


38





Three
      Months Ended September 30, 2009
                  
                  
                  Three
      Months Ended September 30, 2008Student
                  
                  
                  Development
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  Student
                  
                  
                  DevelopmentHousing
                  
                  
                  Consulting
                  
                  
                  Management
                  
                  
                  
                  
                  
                  
                  
                  
                  Housing
                  
                  
                  Consulting
                  
                  
                  ManagementLeasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Adjustments
                  
                  
                  Total
                  
                  
                  Leasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Adjustments
                  
                  
                  TotalThird-party
      management services
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  738
                  
                  
                  
                  —
                  
                  
                  
                  738
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  870
                  
                  
                  
                  —
                  
                  
                  
                  870Intersegment
      revenues
                  
                  
                  —
                  
                  
                  
                  80
                  
                  
                  
                  1,103
                  
                  
                  
                  (1,183
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  187
                  
                  
                  
                  1,076
                  
                  
                  
                  (1,263
                  )
                  
                  
                  —Operating
      expense reimbursements
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,523
                  
                  
                  
                  3,523
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,052
                  
                  
                  
                  3,052Total
      revenues
                  
                  
                  25,682
                  
                  
                  
                  2,639
                  
                  
                  
                  1,841
                  
                  
                  
                  2,340
                  
                  
                  
                  32,502
                  
                  
                  
                  25,195
                  
                  
                  
                  3,403
                  
                  
                  
                  1,946
                  
                  
                  
                  1,789
                  
                  
                  
                  32,333Operating
      expenses:Student
      housing leasing operations
                  
                  
                  17,826
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  17,826
                  
                  
                  
                  17,695
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  17,695Student
      housing food service operations
                  
                  
                  566
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  566
                  
                  
                  
                  600
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  600General
      and administrative
                  
                  
                  —
                  
                  
                  
                  921
                  
                  
                  
                  1,809
                  
                  
                  
                  (15
                  )
                  
                  
                  2,715
                  
                  
                  
                  —
                  
                  
                  
                  866
                  
                  
                  
                  1,897
                  
                  
                  
                  (76
                  )
                  
                  
                  2,687Intersegment
      expenses
                  
                  
                  1,103
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,103
                  )
                  
                  
                  —
                  
                  
                  
                  1,076
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,076
                  )
                  
                  
                  —Reimbursable
      operating expenses
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,523
                  
                  
                  
                  3,523
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,052
                  
                  
                  
                  3,052Total
      operating expenses
                  
                  
                  19,495
                  
                  
                  
                  921
                  
                  
                  
                  1,809
                  
                  
                  
                  2,405
                  
                  
                  
                  24,630
                  
                  
                  
                  19,371
                  
                  
                  
                  866
                  
                  
                  
                  1,897
                  
                  
                  
                  1,900
                  
                  
                  
                  24,034Net
      operating income
                  
                  
                  6,187
                  
                  
                  
                  1,718
                  
                  
                  
                  32
                  
                  
                  
                  (65
                  )
                  
                  
                  7,872
                  
                  
                  
                  5,824
                  
                  
                  
                  2,537
                  
                  
                  
                  49
                  
                  
                  
                  (111
                  )
                  
                  
                  8,299Nonoperating
      expenses(1)
                  
                  
                  13,454
                  
                  
                  
                  (24
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  13,430
                  
                  
                  
                  13,118
                  
                  
                  
                  (4
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  13,114Income
      (loss) before equity in earnings of unconsolidated entities, income
      taxes, redeemable noncontrolling interests and discontinued
      operations
                  
                  
                  (7,267
                  )
                  
                  
                  1,742
                  
                  
                  
                  32
                  
                  
                  
                  (65
                  )
                  
                  
                  (5,558
                  )
                  
                  
                  (7,294
                  )
                  
                  
                  2,541
                  
                  
                  
                  49
                  
                  
                  
                  (111
                  )
                  
                  
                  (4,815
                  )Equity
      in losses of unconsolidated entities
                  
                  
                  (152
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (152
                  )
                  
                  
                  (195
                  )
                  
                  
                  (1
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (196
                  )Income
      (loss) before taxes, redeemable noncontrolling interests and
      discontinued operations(2)
                  
                  $
                  (7,419
                  )
                  
                  $
                  1,742
                  
                  
                  $
                  32
                  
                  
                  $
                  (65
                  )
                  
                  $
                  (5,710
                  )
                  
                  $
                  (7,489
                  )
                  
                  $
                  2,540
                  
                  
                  $
                  49
                  
                  
                  $
                  (111
                  )
                  
                  $
                  (5,011
                  )





(1)
            Nonoperating
      expenses include interest expense, interest income, gains (losses) on
      extinguishment of debt, amortization of deferred financing costs,
      depreciation, amortization of intangibles and impairment
      losses.





(2)
            The
      following is a reconciliation of the reportable segments’ loss before
      income taxes, redeemable noncontrolling interests and discontinued
      operations to the Trust’s consolidated loss before income taxes,
      redeemable noncontrolling interest and discontinued operations for the
      nine months ended September 30,
2009:





2009
                        
                        
                        2008Loss before
      income taxes, redeemable noncontrolling interests and discontinued
      operations for reportable segments
                        
                        
                        (5,710
                        )
                        
                        
                        (5,011
                        )Other
      unallocated corporate expenses
                        
                        
                        (1,358
                        )
                        
                        
                        (1,789
                        )Loss
      before income taxes, redeemable noncontrolling interests and discontinued
      operations
                        
                        $
                        (7,068
                        )
                        
                        $
                        (6,800
                        )


39


Student
housing leasing





Student
housing operating statistics for all owned and operated communities and Legacy
communities for the three months ended September 30, 2009 and 2008 were as
follows:





Three
      months
                  
                  
                  Three
      monthsended
                  
                  
                  endedSeptember
      30,
                  
                  
                  September
      30,
                  
                  
                  Favorable/2009
                  
                  
                  2008(8)
                  
                  
                  (unfavorable)All
      communities:OccupancyPhysical
      (1)
                  
                  
                  86.9
                  %
                  
                  
                  89.3
                  %
                  
                  
                  (2.4
                  )
      %Economic
      (2)
                  
                  
                  74.1
                  %
                  
                  
                  77.0
                  %
                  
                  
                  (2.9
                  )
      %NarPAB
      (3)
                  
                  $
                  305
                  
                  
                  $
                  311
                  
                  
                  $
                  (6
                  )Other
      income per avail. bed (4)
                  
                  $
                  27
                  
                  
                  $
                  22
                  
                  
                  $
                  5RevPAB
      (5)
                  
                  $
                  332
                  
                  
                  $
                  333
                  
                  
                  $
                  (1
                  )Operating
      expense per bed (6)
                  
                  $
                  236
                  
                  
                  $
                  240
                  
                  
                  $
                  4Operating
      margin
                  
                  
                  29.0
                  %
                  
                  
                  28.0
                  %
                  
                  
                  1.0
                  %Design
      beds (7)
                  
                  
                  76,690
                  
                  
                  
                  73,836
                  
                  
                  
                  1,854Legacy
      communities:OccupancyPhysical
      (1)
                  
                  
                  89.0
                  %
                  
                  
                  91.4
                  %
                  
                  
                  (2.4
                  )
      %Economic
      (2)
                  
                  
                  75.9
                  %
                  
                  
                  78.4
                  %
                  
                  
                  (2.5
                  )
      %NarPAB
      (3)
                  
                  $
                  315
                  
                  
                  $
                  325
                  
                  
                  $
                  (10
                  )Other
      income per avail. bed (4)
                  
                  $
                  31
                  
                  
                  $
                  26
                  
                  
                  $
                  5RevPAB
      (5)
                  
                  $
                  346
                  
                  
                  $
                  351
                  
                  
                  $
                  (5
                  )Operating
      expense per bed (6)
                  
                  $
                  238
                  
                  
                  $
                  241
                  
                  
                  $
                  3Operating
      margin
                  
                  
                  31.2
                  %
                  
                  
                  31.3
                  %
                  
                  
                  (0.1
                  )
      %Design
      beds (7)
                  
                  
                  55,080
                  
                  
                  
                  55,098
                  
                  
                  
                  (18
                  )





(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 potential rent for the respective
  period.





(3)
            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
      GAAP-based other 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/application fees, late fees, termination fees,
      parking fees, transfer fees, damage recovery, utility recovery and other
      miscellaneous income.





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





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




(7)
            Represents
      the sum of the monthly design beds in the portfolio during the
      period.




(8)
            This
      information excludes property information related to College Station
      (discontinued operations).





Total
revenue in the student housing leasing segment was $25,682 for the three months
ended September 30, 2009. This represents an increase of $487 or 1.9% from
the same period in 2008. Student housing leasing revenue was up $518 or 2.1%
compared to the prior year. This improvement included $713 related to the new
communities The Reserve at Saluki Point (Carbondale) and University Village on
Colvin (Syracuse) that opened in August of 2008 and 2009, respectively. The
Place-communities contributed $90 of revenue growth which was primarily driven
by an increase in other rental revenue. These improvements were offset by an
overall $285 or 1.5% decline in leasing revenue at our legacy- communities,
which included relatively flat rental rates, a 3.0% decline in occupancy and a
1.5% increase in other rental income.


40





Operating
expenses in the student housing leasing segment increased $124 or 0.6% to
$19,495 for the three months ended September 30, 2009. Student housing leasing
operations increased a total of $131 or 0.7% over the prior year, primarily due
to $644 of additional expenses related to The Reserve at Saluki Point
(Carbondale) and University Village on Colvin (Syracuse).  This
expense growth was offset by $513 of cost reductions at our same-communities,
including, operating expense reduction of 1.4% at the legacy-communities and
7.8% at the Place-communities.  The legacy-community improvement comes
mainly from $291 in lower payroll costs as a result of cost reduction measures
implemented in the fall of 2008 and a $185 reduction in credit card
fees.  These improvements were offset by $218 in higher maintenance
and Turn costs and $305 of higher bad debt expense.  The Place
Portfolio improvement comes mainly from $106 in lower payroll costs as a result
of cost reduction measures initiated in the fall of 2008, $113 in bad debt
expense improvement and a $96 reduction in maintenance and Turn
expenses.





Nonoperating
expenses increased $336 or 2.6% to $13,454 for the three months ended
September 30, 2009. This increase was primarily driven by a $148 increase in
depreciation expense due to the opening of The Reserve at Saluki Point
(Carbondale) and University Village on Colvin (Syracuse) and a $133 increase in
interest expense related to the construction debt associated with these
properties. Also, a decrease in interest income of $44 due to lower escrows and
an $11 increase in the amortization of deferred financing fees related to the
debt refinancing in December of 2008 contributed to the increase in nonoperating
expenses quarter over quarter.





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 September 30, 2009 equity in losses
improved $43. The improvement comes as a result of better operating results
from our joint venture properties in Greensboro, North Carolina, and Riverside,
California, due to lower interest expense at both communities.





Development
consulting services





The
following table represents the development consulting projects that were active
during the three months ended September 30, 2009 and 2008:





Recognized EarningsProject
                      
                      Beds
                      
                      Fee Type
                      
                      2009
                      
                      
                      2008
                      
                      
                      DifferenceUniversity
      of Michigan
                      
                      896
                      
                      Development
      fee
                      
                      $
                      23
                      
                      
                      $
                      76
                      
                      
                      $
                      (53
                      )Slippery
      Rock University — Phase II
                      
                      746
                      
                      Development
      fee
                      
                      
                      —
                      
                      
                      
                      510
                      
                      
                      
                      (510
                      )Indiana
      University of Pennsylvania — Phase II
                      
                      1,102
                      
                      Development
      fee
                      
                      
                      —
                      
                      
                      
                      1,366
                      
                      
                      
                      (1,366
                      )Fontainebleu
      Renovation Project
                      
                      435
                      
                      Development
      fee
                      
                      
                      17
                      
                      
                      
                      48
                      
                      
                      
                      (31
                      )West
      Chester— Phase I
                      
                      1,197
                      
                      Development
      fee
                      
                      
                      378
                      
                      
                      
                      685
                      
                      
                      
                      (307
                      )West
      Chester— Phase II
                      
                      
                      
                      
                      
                      
                      65
                      
                      
                      
                      —
                      
                      
                      
                      65Indiana
      University of Pennsylvania — Phase III
                      
                      1,084
                      
                      Development
      fee
                      
                      
                      1,207
                      
                      
                      
                      460
                      
                      
                      
                      747Colorado
      State University — Pueblo I
                      
                      253
                      
                      Development
      fee
                      
                      
                      215
                      
                      
                      
                      71
                      
                      
                      
                      144Colorado
      State University — Pueblo II
                      
                      500
                      
                      Development
      fee
                      
                      
                      486
                      
                      
                      
                      —
                      
                      
                      
                      486Indiana
      University of Pennsylvania — Phase IV
                      
                      596
                      
                      Development
      fee
                      
                      
                      168
                      
                      
                      
                      —
                      
                      
                      
                      168Third-party
      development consulting services
                      
                      
                      
                      
                      
                      
                      2,559
                      
                      
                      
                      3,216
                      
                      
                      
                      (657
                      )Southern
      Illinois University— Carbondale
                      
                      528
                      
                      Construction
      oversight fee
                      
                      
                      13
                      
                      
                      
                      187
                      
                      
                      
                      (174
                      )Syracuse
      University
                      
                      432
                      
                      Development
      fee
                      
                      
                      67
                      
                      
                      
                      —
                      
                      
                      
                      67Inter-segment
      development revenue
                      
                      
                      
                      
                      
                      
                      80
                      
                      
                      
                      187
                      
                      
                      
                      (107
                      )Development
      consulting services
                      
                      
                      
                      
                      
                      $
                      2,639
                      
                      
                      $
                      3,403
                      
                      
                      $
                      (764
                      )


41


Development
consulting services revenue decreased $764 or 22.5% to $2,639 for the three
months ended September 30, 2009.  Third-party development consulting
revenue was down $657 to $2,559 for the three months ended September 30,
2009.  The decline is primarily related to the timing of development fee
incentives earned by completing projects under budget, but was also impacted by
the job mix in the current quarter, which included smaller projects compared to
the prior year.  Inter-segment development revenue, which relates to
fees recognized for projects owned by the Trust, was down $107 to $80 for the
three months ended September 30, 2009.  This decline is reflective of
the completion of construction and both communities opening in August
2009.  These inter-segment fees are eliminated in the accompanying
condensed consolidated financial statements.





General
and administrative costs in the third-party development consulting services
segment increased $55 or 6.3% to $921 for the three months ended September 30,
2009. The increase relates to $121 of development pursuit costs in 2009
associated with projects that will not come to fruition offset by a decrease in
payroll costs related to specific cost reduction measures implemented in the
fall of 2008.





Nonoperating
expenses included $24 of interest income primarily related to AODC funding
project costs under predevelopment agreements for which AODC is reimbursed with
interest when the institution’s governing body formally approves the final
development contract and project financing is put in place.





Management
services





Management
services revenue decreased by $105 or 5.4% to $1,841 for the three months
ended September 30, 2009. Third-party management fee revenue was down $132 or
15.2%, while growth in our owned portfolio period over period, as discussed
under student housing leasing above, resulted in an increase of $27 by way of
intersegment revenue.  Third party fees declined approximately $148 as
a result of the cancellation of three contracts since the third quarter of 2008
including a five property portfolio in Michigan, for which the owner chose to
take management in-house.  In addition, revenue from existing
contracts contributed to $28 of the decline. These decreases were partially
offset by $18 related to a new contract signed in 2009 and $26 related to a
property that came out of development in 2009.





General
and administrative costs for our third-party management services segment
decreased $88 to $1,809 for the three months ended September 30, 2009, due to
cost cutting measures implemented in the fourth quarter of 2008.





Unallocated
corporate expenses





Unallocated
corporate expenses represent general and administrative expenses that are not
allocated to any of our business segments. For the three months ended September
30, 2009, unallocated corporate expenses decreased $431 compared to the prior
quarter.  This improvement is primarily related to $128 in interest
income earned on the proceeds from the follow-on common stock offering in July
of 2009, a $152 reduction in interest expense related to the repayment of the
Amended Revolver with proceeds from the follow-on common stock offering and a
decline in general and administrative expenses due to cost cutting measures
implemented in the fourth quarter of 2008.





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
interest in 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.


42





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 flows 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 our net income for the three and nine
months ended September 30, 2009 and 2008:





Three
      Months Ended September 30,
                  
                  
                  Nine Months Ended September
    30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      loss attributable to Education Realty Trust, Inc.
                  
                  $
                  (7,384
                  )
                  
                  $
                  (7,259
                  )
                  
                  $
                  (6,720
                  )
                  
                  $
                  (3,052
                  )Loss
      on sale of student housing assets
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  512Student
      housing property depreciation and amortization
                  
                  
                  7,056
                  
                  
                  
                  6,927
                  
                  
                  
                  21,015
                  
                  
                  
                  21,424Real
      estate depreciation and amortization included in equity in earning of
      investees
                  
                  
                  129
                  
                  
                  
                  123
                  
                  
                  
                  373
                  
                  
                  
                  371Depreciation
      and amortization of discontinued operations
                  
                  
                  —
                  
                  
                  
                  25
                  
                  
                  
                  25
                  
                  
                  
                  73Noncontrolling
      interest
                  
                  
                  (200
                  )
                  
                  
                  (329
                  )
                  
                  
                  (43
                  )
                  
                  
                  (158
                  )Funds
      from operations
                  
                  $
                  (399
                  )
                  
                  $
                  (513
                  )
                  
                  $
                  14,650
                  
                  
                  $
                  19,170





Liquidity
and Capital Resources





Amended
revolver and 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 five otherwise unmortgaged
properties.  The Amended Revolver has an extended maturity of March
30, 2010. 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 that is based upon our
leverage.





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 September 30, 2009,
our borrowing base was $47,055, we had no amounts outstanding and we had letters
of credit outstanding of $2,000; thus, our remaining availability was $45,055.
We do, however, have additional unmortgaged properties that can be pledged
against the Amended Revolver to increase total borrowing
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.


43


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.





As the
Amended Revolver matures on March 30, 2010, the Operating Partnership has been
working with and is in the final stages of negotiations with Key Bank National
Association, its lead bank agent, to replace the Amended
Revolver.  The term sheet for the new credit facility contemplates a
senior secured revolving credit facility that would permit borrowings of up to
$100 million with the ability to expand the facility up to an additional $50
million, upon satisfaction of certain conditions. The term sheet contemplates a
three-year facility, which we can elect to extend for one additional year,
assuming no defaults thereunder and payment of an extension fee. As with our
Amended Revolver, the new facility is expected to (i) be secured by a
cross-collateralized, first mortgage lien on five otherwise unmortgaged
properties and a guaranty by us and the subsidiaries that own these five
properties and (ii) contain customary affirmative and negative covenants such as
those described above. The Company anticipates closing on the new facility
during the fourth quarter of 2009.  The closing of the new facility,
however, is subject to the negotiation and execution of definitive loan
documentation and the fulfillment of customary conditions; accordingly, no
assurance can be given that this facility will be procured on the terms,
including the amount available to be borrowed, described above or at
all.





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
September 30, 2009, the Trust had $10,759 and $9,323 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 (Carbondale). The loans bear interest equal to LIBOR plus
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.





At
September 30, 2009, the Trust had $8,826 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 Master Secured Credit
Facility with Fannie Mae (the “Master 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 extinguishment of debt related to the
defeasance in 2008 and received a refund of $830 related to defeasance costs
during the nine months ended September 30, 2009.  The initial
borrowings under the Master Facility consisted of 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 Master 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 weighted average interest rate of
3.64% per annum.





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.


44





At
September 30, 2009, the Trust had nine properties unencumbered by mortgage debt.
Five of those nine properties have, however, been pledged as collateral against
any borrowing under our Amended Revolver.





Liquidity
outlook and capital requirements





On July
28, 2009, the Company completed a follow-on common stock offering, selling
28,175,000 shares, including the over-allotment, at a price per share to the
public of $4.35.  The stock issuance raised $116,133 in net
proceeds.  During the third quarter, $30,600 of the proceeds was used
to repay all balances outstanding under the Amended Revolver.





During
the nine months ended September 30, 2009, we generated net cash proceeds of
$116,133 from our follow-on common stock offering, provided $29,445 of cash from
operations and borrowed $17,815 on the construction loans related to the company
owned developments in Carbondale, Illinois and Syracuse, New
York.  This allowed us to invest $22,676 in new developments,
distribute $12,420 to our stockholders and unitholders, repay the outstanding
balance of $32,900 on our Amended Revolver, fund other investment needs and
increase our cash balances by $74,937 to $83,940 at September 30,
2009.





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 $0.20 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 cash provided by debt refinancing, the net
proceeds from our follow-on common stock offering discussed above and potential
asset sales.





Distributions
for the nine months ended September 30, 2009 totaled $12,420 or $0.34 per
weighted average share/unit, compared to cash provided by operations of $29,445,
or $0.81 per weighted average share/unit.  The Trust’s Board of
Directors lowered the annual dividend target from $0.82 in 2008 to $0.41 per
share/unit beginning in 2009.  Subsequently, and in conjunction with
the Trust’s follow-on common stock offering, the Board of Directors lowered the
annual dividend rate to $0.20 per share/unit effective with the November 16,
2009 dividend.





We had
$98,660 of mortgage debt, related to certain Place-communities, that was due to
mature in December of 2009.  To lower our interest costs, we utilized
$76,000 of existing cash and borrowed $22,660 on our Amended Revolver to repay
all of this debt on November 6, 2009.  We are still in the process of
expanding the committed principal amount available under our Master Credit
Facility with Fannie Mae to effectively refinance eight of the nine properties
that were encumbered by this debt.  We are in final negotiations with
Red Mortgage Capital, Inc., a Fannie Mae Delegated Underwriting and Servicing
lender, that would increase the maximum amount available under our Master Credit
Facility Agreement with Fannie Mae to approximately $251,000 to
$259,000.  We expect to add up to eight of the thirteen
Place-communities as collateral for the expansion of the Master
Facility.  This facility expansion is subject to negotiating an
amendment to our existing agreement with Fannie Mae, and no assurance can be
given that we will be successful in completing such expansion on the terms above
or at all.





Based on
our closing share price of $5.93 on September 30, 2009, our total enterprise
value was $799,576.  With total debt outstanding on September 30, 2009
of $456,710, our current debt to enterprise value was 57.1%.  With
gross assets outstanding on September 30, 2009 of $999,900, which excludes
accumulated depreciation of $134,206, our current debt to gross assets ratio was
45.7%.





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 potential asset
sales, additional issuances of common or preferred stock, private capital in the
form of joint ventures, debt financing and issuances of units in our Operating
Partnership. There can be no assurance, however, that such funding will be
obtained on reasonable terms, or at all, particularly in light of current
capital market conditions.


45





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. We are currently
testing the market for three of our properties: The Lofts, located in Orlando,
Florida; NorthePointe, located in Tucson, Arizona; and The Reserve at Clemson,
located in Central, South Carolina. These student housing communities contain a
total of 2,233 beds in 731 apartment units and may be sold individually or as a
portfolio if appropriate market conditions exist. These properties would be
subject to the assumption of existing mortgage financing secured by these
properties. Interest rates on the mortgages range from 5.55% to 5.59% per annum,
and all mortgages have either full or partial interest-only periods remaining on
their respective terms. We can give no assurance, however, that any of these
properties will actually be sold or as to the terms on which they may be sold.
The net proceeds from the sale of any 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 2 wholly owned,
self-developed properties in August of 2008 and 2009 which serve Southern
Illinois University and Syracuse University, respectively. 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 are needed periodically for our properties. We expect
to meet these needs through existing working capital, cash provided by
operations, additional borrowings under our Amended Revolver (or the replacement
facility discussed above), net proceeds from potential asset sales, the issuance
of equity instruments, including common or preferred stock, Operating
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. 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.  As of September 30, 2009, we are in compliance with all
covenants related to our Amended Revolver.


46





Commitments





The
following table summarizes our contractual obligations as of September 30,
2009:





Payments due by Period(5)Less
      than
                
                
                1-3
                
                
                3-5
                
                
                More
      than 51 Year
                
                
                Years
                
                
                Years
                
                
                Years
                
                
                TotalCommitments
      and Contractual Obligations:Long-Term
      Debt Obligations(1)
                
                $
                99,469
                
                
                $
                35,691
                
                
                $
                100,243
                
                
                $
                221,307
                
                
                $
                456,710Contractual
      Interest Obligations(2)
                
                
                6,020
                
                
                
                37,524
                
                
                
                28,437
                
                
                
                25,312
                
                
                
                97,293Operating
      Lease and Future Purchase Obligations (3)
                
                
                1,083
                
                
                
                7,418
                
                
                
                4,021
                
                
                
                694
                
                
                
                13,216Capital
      Reserve Obligations(4)
                
                
                1,584
                
                
                
                2,736
                
                
                
                2,560
                
                
                
                2,582
                
                
                
                9,462Total
                
                $
                108,156
                
                
                $
                83,369
                
                
                $
                135,261
                
                
                $
                249,895
                
                
                $
                576,681





(1)
            Includes
      required monthly principal amortization and amounts due at maturity on
      first mortgage debt secured by student housing properties, construction
      loans and amounts due under the Amended Revolver. The first mortgage debt
      does not include $898 of unamortized debt premium. On November 6, 2009 we
      paid off $98,660 of mortgage debt with available cash and borrowings of
      $22,660 under our Amended Revolver. In addition, we borrowed $1,910 under
      our Amended Revolver to advance an additional $1,200 to our joint venture
      partner in Greensboro, North Carolina and we used the remaining $710 for
      general cash purposes. This leaves total commitments and contractual
      obligations of $9,496 due prior to December 31, 2009 and total debt
      outstanding of $382,620.




(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.





(5)
            The
      contractual obligations are based on the Trust’s fiscal year-end. For
      example, the amounts presented in the less than 1 year column represent
      amounts maturing prior to December 31,
2009.





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 Amended Revolver, 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.





In
January 2009, in an effort to increase financial stability, the Trust’s Board of
Directors lowered the annual dividend target from $0.82 to $0.41 per
share/unit.  In conjunction with our follow-on common stock offering
in July of 2009, the board again lowered the annual dividend target from $0.41
to $0.20 per share/unit effective with the November 16, 2009
dividend.





On
October 8, 2009, our board of directors declared a distribution of $0.05 per
share of common stock for the quarter ended on September 30, 2009. The
distribution is payable on November 16, 2009 to stockholders of record at the
close of business on October 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 ($23,015 outstanding
at September 30, 2009). 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 2010. On October 30, 2008,
the LLC borrowed an additional $1,200 which matures on September 10, 2009 and
has also been guaranteed by the Operating Partnership.


47





Additionally,
as discussed in Note 3 to the condensed consolidated financial statements, we
hold investments in unconsolidated entities. These unconsolidated entities have
third-party mortgage and construction indebtedness totaling $86,249 at
September 30, 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.





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 rate 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 September 30, 2009, we had fixed rate debt of $378,351.
Holding other variables constant a 100 basis point increase in interest rates
would cause a $12,084 decline in the fair value of our fixed rate debt.
Conversely, a 100 basis point decrease in interest rates would cause a $12,887
increase in the fair value of our fixed rate debt. At September 30, 2009, 82.9%
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 4.06 years.





At
September 30, 2009, we had borrowed $10,759 and $9,323 on construction loans
with availability of $11,000 and $12,285, respectively, related to the
development of a wholly owned student apartment community near Southern Illinois
University (Carbondale). The loans bear interest equal to LIBOR plus 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
borrowed $8,826, 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.


48





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.





Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the design and operation
of the Trust’s disclosure controls and procedures pursuant to
Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on their
evaluation as of September 30, 2009, our Chief Executive Officer and Chief
Financial Officer have concluded that the Trust’s disclosure controls and
procedures were effective.





Changes
in Internal Control Over Financial Reporting





During
the three months ended September 30, 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 Rules 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 September 30, 2009, there have been no
material changes to the risk factors set forth in the Trust’s Annual Report on
Form 10-K for the year ended December 31, 2008 andin our Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 2009 and June 30, 2009.





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





Issuer
Purchases of Equity Securities


49


During
the three months ended September 30, 2009, in connection with our Amended and
Restated Dividend Reinvestment and Direct Stock Purchase Plan for our common
stockholders, we directed the plan administrator to purchase 971 shares of our
common stock for $5.56 per share in the open market pursuant to the dividend
reinvestment component of the plan with respect to our dividend for the third
quarter of 2009.  We also directed the plan administrator to purchase
1,498 shares of our common stock for $5.53 per share 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 September 30, 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 ProgramsJuly
      1-31, 2009
                
                
                473
                
                
                $
                4.86
                
                
                
                ―
                
                
                
                ―August
      1-31, 2009
                
                
                1,461
                
                
                
                5.51
                
                
                
                ―
                
                
                
                ―September 1-30, 2009
                
                
                535
                
                
                
                6.23
                
                
                
                ―
                
                
                
                ―Total
                
                
                2,469
                
                
                $
                5.54
                
                
                
                ―
                
                
                
                ―





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





Item 3.
Defaults upon Senior Securities.





None.





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





None.





Item 5. Other Information.





On
November 5, 2009, we drew $24,570 in principal amount under our Amended Revolver
which was established pursuant to a Credit Agreement dated as of January 31,
2005, among the Operating Partnership, certain of its subsidiaries and the
agents and lenders party thereto, as amended by the Amended and Restated Credit
Agreement dated as of March 30, 2006. The interest rate per annum applicable to
the loans under 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.
For the $24,570 we borrowed on November 5, 2009, we selected a loan with an
all-in rate of 3.75% per annum, including our borrowing spread. The maturity
date of the Amended Revolver is March 30, 2010, at which time all borrowings
under the Amended Revolver must be repaid.  Subsequent to the draw,
the borrowing base availability of the Amended Revolver is approximately
$20,485, including $24,570 in borrowings outstanding and approximately $2,000 in
letters of credit outstanding. We used the proceeds of the draw to repay (i) a
portion of the $98,660 of mortgage debt, related to certain Place-communities,
that was due to mature in December 2009 and (ii) $1,200 of construction debt,
related to our joint venture property in Greensboro, North Carolina, that was
guaranteed by the Operating Partnership and held by University
Village-Greensboro LLC (“LLC”) which was due to mature on November 10, 2009.
Additionally, a nominal amount of excess cash will be used for general corporate
purposes.  The $1,200 of construction debt repaid by the Operating
Partnership on behalf of the LLC will be added to the note receivable due from
the LLC (for more detail regarding the note receivable, see Note 6 in the
condensed consolidated financial statements).





The
Amended Revolver is secured by a cross-collateralized, first mortgage lien on
five otherwise unmortgaged properties. Additionally, 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 as compared to interest expense and
total fixed charges. The financial covenants also include consolidated net worth
and leverage ratio tests. If any event of default under the Amended Revolver
occurs, the administrative agent, at the request of the lenders, may terminate
all commitments, declare immediately due all borrowings under the Amended
Revolver and foreclose upon the collateral.


50





The
Credit Agreement is described under Item 1.01 in the Trust’s Current Report on
Form 8-K filed on February 2, 2005, which description is incorporated by
reference herein. Such description is qualified by reference to the full text of
the Credit Agreement, which was filed as Exhibit 10.1 to such previously filed
Form 8-K. The Amended and Restated Credit Agreement is described under Item 1.01
in the Trust’s Current Report on Form 8-K filed on April 6, 2006, which
description is incorporated by reference herein. Such description is qualified
by reference to the full text of the Amended and Restated Credit Agreement,
which was filed as Exhibit 10.2 to such previously filed Form 8-K.





Item 6.
Exhibits.





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





51




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:
      November 6, 2009
              
              By
      /s/ Paul O. BowerPaul O.
      BowerPresident,
      Chief Executive Officer andChairman
      of the Board of Directors(Principal
      Executive Officer)Date:
      November 6, 2009
              
              By
      /s/ Randall H. BrownRandall H.
      BrownExecutive
      Vice President, Chief FinancialOfficer,
      Treasurer and Secretary(Principal
      Financial Officer)Date:
      November 6, 2009
              
              By
      /s/ J. Drew KoesterJ. Drew
      KoesterVice
      President, Assistant Secretary and Chief
                Accounting
      Officer(Principal
      Accounting Officer)


52





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.)10.1
              
              Underwriting
      Agreement, dated July 22, 2009, by and between Education Realty Trust,
      Inc., Education Realty Operating Partnership, LP and Merrill Lynch,
      Pierce, Fenner & Smith Incorporated, KeyBanc Capital Markets Inc. and
      UBS Securities LLC, as representatives of the several underwriters named
      in Schedule I thereto (Incorporated by reference to Exhibit 1.1 to the
      Trust’s Current Report on Form 8-K, filed on July 23,
    2009).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.




*
            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 or the Securities Exchange Act of
    1934.


53