UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-Q


(Mark
One)


x
            
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
quarterly period ended March 31, 2010


Or


o
            
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
transition period
from                     to


Commission
File Number:001-32417


Education
Realty Trust, Inc.


(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) 259-2500Not
      Applicable(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x  No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o  No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):





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





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




As of May
6, 2010, the latest practicable date, the Registrant had outstanding
56,927,966shares of
common stock, $.01 par value per share.







EDUCATION
REALTY TRUST, INC.


FORM
10-Q


QUARTER
ENDED MARCH 31, 2010


TABLE
OF CONTENTS





PagePART
      I—FINANCIAL INFORMATION
                                                                  
                                                                  3Item 1.
      Financial Statements
                                                                  
                                                                  3Condensed
      Consolidated Balance Sheets of Education Realty Trust, Inc. and
      Subsidiaries as of March 31, 2010 and December 31,
    2009
                                                                  
                                                                  3Condensed
      Consolidated Statements of Operations of Education Realty Trust, Inc. and
      Subsidiaries for the three months ended March 31, 2010 and
      2009
                                                                  
                                                                  4Condensed
      Consolidated Statements of Changes in Equity of Education Realty Trust,
      Inc. and Subsidiaries for the three months ended March 31, 2010 and the
      year ended December 31, 2009
                                                                  
                                                                  6Condensed
      Consolidated Statements of Cash Flows of Education Realty Trust, Inc. and
      Subsidiaries for the three months ended March 31, 2010 and
      2009
                                                                  
                                                                  7Notes
      to Condensed Consolidated Financial Statements
                                                                  
                                                                  9Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations
                                                                  
                                                                  23Item 3.
      Quantitative and Qualitative Disclosures about Market Risk
                                                                  
                                                                  37Item 4.
      Controls and Procedures
                                                                  
                                                                  38PART
      II — OTHER INFORMATION
                                                                  
                                                                  39Item 1.
      Legal Proceedings
                                                                  
                                                                  39Item 1A.
      Risk Factors
                                                                  
                                                                  39Item 2.
      Unregistered Sales of Equity Securities and Use of
Proceeds
                                                                  
                                                                  40Item 3.
      Defaults upon Senior Securities
                                                                  
                                                                  41Item 4.
      Removed and Reserved
                                                                  
                                                                  41Item 5.
      Other Information
                                                                  
                                                                  41Item 6.
      Exhibits
                                                                  
                                                                  41Signatures
                                                                  
                                                                  42




2




Part
I — Financial Information





Item 1.
Financial Statements.





CONDENSED
CONSOLIDATED BALANCE SHEETS


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





March
      31, 2010
                                
                                
                                December
      31, 2009(Unaudited)ASSETSAssets:Student
      housing properties, net
                                
                                $
                                746,616
                                
                                
                                $
                                749,884Corporate
      office furniture, net
                                
                                
                                1,045
                                
                                
                                
                                1,118Cash
      and cash equivalents
                                
                                
                                28,384
                                
                                
                                
                                31,169Restricted
      cash
                                
                                
                                4,282
                                
                                
                                
                                4,579Student
      contracts receivable, net
                                
                                
                                268
                                
                                
                                
                                386Receivable
      from affiliate
                                
                                
                                19
                                
                                
                                
                                18Management
      fee receivable from third party
                                
                                
                                311
                                
                                
                                
                                277Goodwill
      and other intangibles, net
                                
                                
                                3,070
                                
                                
                                
                                3,073Other
      assets
                                
                                
                                15,726
                                
                                
                                
                                14,109Total
      assets
                                
                                $
                                799,721
                                
                                
                                $
                                804,613LIABILITIES
      AND EQUITYLiabilities:Mortgage
      and construction loans, net of unamortized
premium/discount
                                
                                $
                                405,300
                                
                                
                                $
                                406,365Accounts
      payable
                                
                                
                                336
                                
                                
                                
                                235Accrued
      expenses
                                
                                
                                11,493
                                
                                
                                
                                11,423Deferred
      revenue
                                
                                
                                8,790
                                
                                
                                
                                10,346Total
      liabilities
                                
                                
                                425,919
                                
                                
                                
                                428,369Commitments
      and contingencies (see Note 6)
                                
                                
                                —
                                
                                
                                
                                —Redeemable
      noncontrolling interests
                                
                                
                                11,228
                                
                                
                                
                                11,079Equity:Education
      Realty Trust, Inc. stockholders’ equity:Common
      stock, $.01 par value, 200,000,000 shares authorized, 56,714,466 and
      56,705,605 shares issued and outstanding at March 31, 2010 and
      December 31, 2009, respectively
                                
                                
                                567
                                
                                
                                
                                567Preferred
      stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and
      outstanding
                                
                                
                                —
                                
                                
                                
                                —Additional
      paid-in capital
                                
                                
                                408,429
                                
                                
                                
                                410,455Accumulated
      deficit
                                
                                
                                (48,466
                                )
                                
                                
                                (48,636
                                )Total
      Education Realty Trust, Inc. stockholders’ equity
                                
                                
                                360,530
                                
                                
                                
                                362,386Noncontrolling
      interest
                                
                                
                                2,044
                                
                                
                                
                                2,779Total
      equity
                                
                                
                                362,574
                                
                                
                                
                                365,165Total
      liabilities and equity
                                
                                $
                                799,721
                                
                                
                                $
                                804,613




See
accompanying notes to the condensed consolidated financial
statements.


3




CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


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


(Unaudited)


Three
      months
                    
                    
                    Three
      monthsended
                    
                    
                    endedMarch
      31,
                    
                    
                    March
      31,2010
                    
                    
                    2009Revenues:Student
      housing leasing revenue
                    
                    $
                    29,651
                    
                    
                    $
                    29,313Third-party
      development services
                    
                    
                    693
                    
                    
                    
                    1,457Third-party
      management services
                    
                    
                    866
                    
                    
                    
                    909Operating
      expense reimbursements
                    
                    
                    1,908
                    
                    
                    
                    2,190Total
      revenues
                    
                    
                    33,118
                    
                    
                    
                    33,869Operating
      expenses:Student
      housing leasing operations
                    
                    
                    13,438
                    
                    
                    
                    13,170General
      and administrative
                    
                    
                    4,300
                    
                    
                    
                    3,994Depreciation
      and amortization
                    
                    
                    7,416
                    
                    
                    
                    7,164Reimbursable
      operating expenses
                    
                    
                    1,908
                    
                    
                    
                    2,190Total
      operating expenses
                    
                    
                    27,062
                    
                    
                    
                    26,518Operating
      income
                    
                    
                    6,056
                    
                    
                    
                    7,351Nonoperating
      expenses:Interest
      expense
                    
                    
                    5,611
                    
                    
                    
                    6,352Amortization
      of deferred financing costs
                    
                    
                    334
                    
                    
                    
                    301Interest
      income
                    
                    
                    (117
                    )
                    
                    
                    (49
                    )Total
      nonoperating expenses
                    
                    
                    5,828
                    
                    
                    
                    6,604Income
      from continuing operations before equity in earnings of unconsolidated
      entities, income taxes, redeemable noncontrolling interests and
      discontinued operations
                    
                    
                    228
                    
                    
                    
                    747Equity
      in earnings of unconsolidated entities
                    
                    
                    79
                    
                    
                    
                    100Income
      from continuing operations before income taxes, redeemable noncontrolling
      interests and discontinued operations
                    
                    
                    307
                    
                    
                    
                    847Income
      tax expense (benefit)
                    
                    
                    (74
                    )
                    
                    
                    188Income
      from continuing operations before redeemable noncontrolling interests and
      discontinued operations
                    
                    
                    381
                    
                    
                    
                    659Income
      attributable to redeemable noncontrolling interests
                    
                    
                    205
                    
                    
                    
                    201Income
      from continuing operations
                    
                    
                    176
                    
                    
                    
                    458Loss
      from discontinued operations
                    
                    
                    —
                    
                    
                    
                    (16
                    )Net
      income
                    
                    
                    176
                    
                    
                    
                    442Less:
      Net income attributable to the noncontrolling interest
                    
                    
                    6
                    
                    
                    
                    9Net
      income attributable to Education Realty Trust, Inc.
                    
                    $
                    170
                    
                    
                    $
                    433




See
accompanying notes to the condensed consolidated financial
statements.


4




Three
      months
                      
                      
                      Three
      monthsended
                      
                      
                      endedMarch
      31,
                      
                      
                      March
      31,2010
                      
                      
                      2009Earnings
      per share information:Income
      attributable to Education Realty Trust, Inc. common stockholders per share
      — basic and diluted:Continuing
      operations
                      
                      $
                      0.00
                      
                      
                      $
                      0.02Discontinued
      operations
                      
                      
                      —
                      
                      
                      
                      —Net
      income attributable to Education Realty Trust, Inc. common stockholders
      per share
                      
                      $
                      0.00
                      
                      
                      $
                      0.02Weighted
      average common shares outstanding – basic
                      
                      
                      56,759,922
                      
                      
                      
                      28,516,522Weighted
      average common shares outstanding – diluted
                      
                      
                      57,870,917
                      
                      
                      
                      29,637,517Amounts
      attributable to Education Realty Trust, Inc. – common
      stockholders:Income
      from continuing operations, net of tax
                      
                      $
                      170
                      
                      
                      $
                      449Loss
      from discontinued operations, net of tax
                      
                      
                      —
                      
                      
                      
                      (16
                      )Net
      income
                      
                      
                      170
                      
                      
                      
                      433Distributions
      per share of common stock
                      
                      $
                      0.0500
                      
                      
                      $
                      0.1025




See
accompanying notes to the condensed consolidated financial
statements.


5




CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


(Amounts
in thousands, except share data)


(Unaudited)




Common
      Stock
                
                
                AdditionalPaid-In
                
                
                Accumulated
                
                
                NoncontrollingShares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                Interest
                
                
                TotalBalance,
      December 31, 2008
                
                
                28,475,855
                
                
                $
                285
                
                
                $
                308,356
                
                
                $
                (41,381
                )
                
                $
                2,918
                
                
                $
                270,178Common
      stock issued to officers and directors
                
                
                4,000
                
                
                
                —
                
                
                
                15
                
                
                
                —
                
                
                
                —
                
                
                
                15Amortization
      of restricted stock
                
                
                9,000
                
                
                
                —
                
                
                
                151
                
                
                
                —
                
                
                
                —
                
                
                
                151Cash
      dividends
                
                
                —
                
                
                
                —
                
                
                
                (2,923
                )
                
                
                —
                
                
                
                (27
                )
                
                
                (2,950
                )PIU’s
      issued
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                13
                
                
                
                13Net
      income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                433
                
                
                
                9
                
                
                
                442Balance,
      March 31, 2009
                
                
                28,488,855
                
                
                $
                285
                
                
                $
                305,599
                
                
                $
                (40,948
                )
                
                $
                2,913
                
                
                $
                267,849Balance,
      December 31, 2009
                
                
                56,705,605
                
                
                $
                567
                
                
                $
                410,455
                
                
                
                (48,636
                )
                
                $
                2,779
                
                
                $
                365,165Common
      stock issued to officers and directors
                
                
                4,000
                
                
                
                —
                
                
                
                22
                
                
                
                —
                
                
                
                —
                
                
                
                22Amortization
      of restricted stock
                
                
                4,861
                
                
                
                —
                
                
                
                60
                
                
                
                —
                
                
                
                —
                
                
                
                60PIU’s
      forfeited
                
                
                —
                
                
                
                —
                
                
                
                730
                
                
                
                —
                
                
                
                (730
                )
                
                
                —Cash
      dividends
                
                
                —
                
                
                
                —
                
                
                
                (2,838
                )
                
                
                —
                
                
                
                (11
                )
                
                
                (2,849
                )Net
      income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                170
                
                
                
                6
                
                
                
                176Balance,
      March 31, 2010
                
                
                56,714,466
                
                
                $
                567
                
                
                $
                408,429
                
                
                $
                (48,466
                )
                
                $
                2,044
                
                
                $
                362,574





See
accompanying notes to the condensed consolidated financial
statements.


6


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts
in thousands)


(Unaudited)




Three
      months
                                                        
                                                        
                                                        Three
      monthsended
                                                        
                                                        
                                                        endedMarch
      31,
                                                        
                                                        
                                                        March
      31,2010
                                                        
                                                        
                                                        2009Operating
      activities:Net
      income
                                                        
                                                        $
                                                        176
                                                        
                                                        
                                                        $
                                                        442Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                                                        
                                                        
                                                        7,416
                                                        
                                                        
                                                        
                                                        7,164Depreciation
      included in discontinued operations
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        25Deferred tax
      expense (benefit)
                                                        
                                                        
                                                        171
                                                        
                                                        
                                                        
                                                        (38
                                                        )Loss
      (gain)  on disposal of assets
                                                        
                                                        
                                                        5
                                                        
                                                        
                                                        
                                                        (71
                                                        )Amortization
      of deferred financing costs
                                                        
                                                        
                                                        334
                                                        
                                                        
                                                        
                                                        301Loss
      (gain) on interest rate cap
                                                        
                                                        
                                                        188
                                                        
                                                        
                                                        
                                                        (8
                                                        )Amortization
      of unamortized debt premiums/discounts
                                                        
                                                        
                                                        (99
                                                        )
                                                        
                                                        
                                                        (101
                                                        )Distributions
      of earnings from unconsolidated entities
                                                        
                                                        
                                                        122
                                                        
                                                        
                                                        
                                                        85Noncash
      compensation expense related to PIUs and restricted stock
                                                        
                                                        
                                                        182
                                                        
                                                        
                                                        
                                                        192Equity
      in earnings of unconsolidated entities
                                                        
                                                        
                                                        (79
                                                        )
                                                        
                                                        
                                                        (100
                                                        )Redeemable
      noncontrolling interests
                                                        
                                                        
                                                        205
                                                        
                                                        
                                                        
                                                        201Change
      in operating assets and liabilities
                                                        
                                                        
                                                        (3,757
                                                        )
                                                        
                                                        
                                                        4,317Net
      cash provided by operating activities
                                                        
                                                        
                                                        4,864
                                                        
                                                        
                                                        
                                                        12,409Investing
      activities:Purchase
      of corporate furniture and fixtures
                                                        
                                                        
                                                        (31
                                                        )
                                                        
                                                        
                                                        (23
                                                        )Restricted
      cash
                                                        
                                                        
                                                        297
                                                        
                                                        
                                                        
                                                        253Investment
      in student housing properties
                                                        
                                                        
                                                        (4,046
                                                        )
                                                        
                                                        
                                                        (2,614
                                                        )Payments
      on note receivable
                                                        
                                                        
                                                        22
                                                        
                                                        
                                                        
                                                        —Insurance
      proceeds received from property damage
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        75Investment
      in assets under development
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        (9,338
                                                        )Investment
      in unconsolidated entities
                                                        
                                                        
                                                        (26
                                                        )
                                                        
                                                        
                                                        (171
                                                        )Net
      cash used in investing activities
                                                        
                                                        
                                                        (3,784
                                                        )
                                                        
                                                        
                                                        (11,818
                                                        )Financing
      activities:Payment
      of mortgage notes
                                                        
                                                        
                                                        (966
                                                        )
                                                        
                                                        
                                                        (639
                                                        )Borrowings
      under mortgage notes and construction loans
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        3,268Debt
      refund (issuance) costs
                                                        
                                                        
                                                        7
                                                        
                                                        
                                                        
                                                        (268
                                                        )Dividends
      and distributions paid to common and restricted
    stockholders
                                                        
                                                        
                                                        (2,838
                                                        )
                                                        
                                                        
                                                        (2,923
                                                        )Dividends
      and distributions paid to noncontrolling interests
                                                        
                                                        
                                                        (68
                                                        )
                                                        
                                                        
                                                        (143
                                                        )Net
      cash used in financing activities
                                                        
                                                        
                                                        (3,865
                                                        )
                                                        
                                                        
                                                        (705
                                                        )Net
      decrease in cash and cash equivalents
                                                        
                                                        
                                                        (2,785
                                                        )
                                                        
                                                        
                                                        (114
                                                        )Cash
      and cash equivalents, beginning of period
                                                        
                                                        
                                                        31,169
                                                        
                                                        
                                                        
                                                        9,003Cash
      and cash equivalents, end of period
                                                        
                                                        $
                                                        28,384
                                                        
                                                        
                                                        $
                                                        8,889




See
accompanying notes to the condensed consolidated financial
statements.


7




Three
      months
                
                
                Three
      monthsended
                
                
                endedMarch
      31,
                
                
                March
      31,2010
                
                
                2009Supplemental
      disclosure of cash flow information:Interest
      paid
                
                $
                5,194
                
                
                $
                5,685Income
      taxes paid
                
                $
                82
                
                
                $
                126




See
accompanying notes to the condensed consolidated financial
statements.


8




NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


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


(Unaudited)





1.
Organization and description of business





Education
Realty Trust, Inc. (the “Trust”) was organized in the state of Maryland on
July 12, 2004 and commenced operations as a real estate investment trust
(“REIT”) effective with the initial public offering (the “Offering”) that was
completed on January 31, 2005. Under the Trust’s Articles of Incorporation,
as amended, the Trust is authorized to issue up to 200 million shares of
common stock and 50 million shares of preferred stock, each having a par
value of $0.01 per share.





The Trust
operates primarily through a majority-owned Delaware limited partnership,
Education Realty Operating Partnership, LP (the “Operating Partnership”). The
Operating Partnership owns, directly or indirectly, interests in collegiate
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 collegiate student housing management
    activities.•
            
            Allen
      & O’Hara Development Company, LLC (“AODC”), a Delaware limited
      liability company providing development consulting services for third
      party collegiate student housing
communities.





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 of the Trust 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, 2009, filed with the Securities and Exchange Commission
(the “SEC”).


9




Use
of estimates





The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates and assumptions are used by
management in determining the recognition of third-party development consulting
services revenue under the percentage of completion method, useful lives of
student housing assets, the valuation of goodwill, the initial valuations and
underlying allocations of purchase price in connection with student property
acquisitions, the determination of fair value for impairment assessments, and in
the recording of the allowance for doubtful accounts. Actual results could
differ from those estimates.





Reclassifications





Certain
prior period amounts have been reclassified to conform to the current period
presentation.  In the condensed consolidated statements of operations,
food service revenue had previously been presented separately from student
housing leasing revenue. The reclassification of food service revenue to student
housing leasing revenue was not material to our condensed consolidated financial
statements and had no impact on our previously reported net income, changes in
equity, financial position or net cash flows from operations.





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
may exceed the amount the Federal Deposit Insurance Corporation (“FDIC”)
insures.  As of March 31, 2010, the Trust had $21,997 of cash on
deposit that was uninsured by the FDIC or in excess of the FDIC
limits.





Restricted
cash





Restricted
cash includes escrow accounts held by lenders for the purposes of paying taxes,
insurance, principal and interest and funding capital improvements.





Distributions





The Trust
pays regular quarterly cash distributions to stockholders. These distributions
are determined quarterly by the Board of Directors (“Board”) based on the
operating results, economic conditions, capital expenditure requirements, the
REIT annual distribution requirements of the Internal Revenue Code of 1986, as
amended (the “code”), leverage covenants imposed by our revolving credit
facility and other debt documents, and any other matters the Board 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.




10


Acquired
student housing communities’ results of operations are included in the Trust’s
results of operations from the respective dates of
acquisition.  Appraisals, estimates of cash flows and 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 community, were accounted for as part of the purchase price
prior to the adoption of the guidance issued by the FASB.





Management
assesses impairment of long-lived assets to be held and used whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Management uses an estimate of future undiscounted cash flows of
the related asset based on its intended use to determine whether the carrying
value is recoverable. If the Trust determines that the carrying value of an
asset is not recoverable, the fair value of the asset is estimated and an
impairment loss is recorded to the extent the carrying value exceeds estimated
fair value.





When a
student housing community has met the criteria to be classified as held for
sale, the fair value less cost to sell such asset is estimated. If the fair
value less cost to sell the asset is less than the carrying amount of the asset,
an impairment charge is recorded for the estimated loss. Depreciation expense is
no longer recorded once a student housing community has met the held for sale
criteria. Operations of student housing communities that are sold or classified
as held for sale are recorded as part of discontinued operations for all periods
presented.





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 entities





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 of the related issuance. Accordingly,
underwriting commissions and other stock issuance costs are reflected as a
reduction of additional paid-in capital in the accompanying condensed
consolidated 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.


11




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.





Income
taxes





The Trust
qualifies as a REIT under the Code. The Trust is generally not subject to
federal, state and local income taxes 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, state and local income taxes (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 March 31, 2010 and 2009.  As of
March 31, 2010, the Trust did not expect to record any unrecognized tax
benefits.  The Trust, and its subsidiaries, file federal and state
income tax returns. As of March 31, 2010, open tax years generally include tax
years for 2006, 2007 and 2008. The Trust’s policy is to include interest and
penalties related to unrecognized tax benefits in general and administrative
expenses.  At March 31, 2010 and 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 changed the accounting and reporting for noncontrolling interests. The
guidance established 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 established disclosure requirements
to clearly distinguish between the interests of the parent and the interests of
the noncontrolling owners. The units of limited partnership of the Operating
Partnership (“Operating Partnership Units”), units of limited partnership of
University Towers Operating Partnership, LP (“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 met 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 PIUs
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 and statements of changes in
equity.  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.


12




Earnings
per share





Basic
earnings per share is calculated by dividing net earnings available to shares of
common stock by weighted average shares of common stock 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 regarding the
determination of whether certain instruments are participating
securities.  All unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents are 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. The adoption did not have a material impact on the condensed
consolidated financial statements.





The
following reconciles the basic and diluted weighted average shares as of March
31, 2010 and 2009:





2010
                    
                    
                    2009Basic
      weighted average shares of common stock outstanding
                    
                    
                    56,759,922
                    
                    
                    
                    28,516,522Operating
      Partnership Units
                    
                    
                    903,738
                    
                    
                    
                    913,738University
      Towers Operating Partnership Units
                    
                    
                    207,257
                    
                    
                    
                    207,257Diluted
      weighted average shares of common stock outstanding
                    
                    
                    57,870,917
                    
                    
                    
                    29,637,517





Goodwill
and other intangible assets





Goodwill
is tested annually for impairment as of December 31, and is tested for
impairment more frequently if events and circumstances indicate that the assets
might be impaired. An impairment loss is recognized to the extent that the
carrying amount exceeds the asset’s fair value.  The carrying value of
goodwill was $3,070 at March 31, 2010 and December 31, 2009, of
which $2,149 was recorded on the management services segment and $921 was
recorded on the development consulting services segment.  Goodwill is
not subject to amortization.  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. There were no other intangible assets at March 31, 2010 and $3 at December
31, 2009.





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 is equal to net income.





Revenue
recognition





The Trust
recognizes revenue related to leasing activities at the student housing
communities owned by the Trust, management fees related to managing third-party
student housing communities, development consulting fees related to the general
oversight of third-party student housing development and operating expense
reimbursements for payroll and related expenses incurred for third-party student
housing communities managed by the Trust.





Student housing leasing revenue— Student housing leasing revenue is comprised of all activities related
to leasing and operating the student housing communities and includes revenues
from leasing apartments by the bed, food services, 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.


13




Third-party development services
revenue— The Trust provides development consulting services in an agency
capacity with third parties whereby the fee is determined based upon the total
construction costs. Total fees vary from 3-5% of the total estimated costs, and
the Trust typically receives a portion of the fees up front. These fees,
including the up-front fee, are recognized using the percentage of completion
method in proportion to the contract costs incurred by the owner over the course
of construction of the respective projects.  Occasionally, the
development consulting contracts include a provision whereby the Trust can
participate in project savings resulting from successful cost management
efforts. These revenues are recognized once all contractual terms have been
satisfied and no future performance requirements exist. This typically occurs
after construction is complete.  For the three months ended March 31,
2010 and 2009, there was no revenue recognized related to cost savings
agreements on development projects.





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 communities that are managed by the Trust. Under the terms of
the related management agreements, the third-party property 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.





Recent
accounting pronouncements





In
May 2009, the FASB 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 February 2010, the FASB amended the authoritative
guidance on subsequent events to remove the requirement for SEC filers to
disclose the date through which an entity has evaluated subsequent events. The
new guidance is effective upon issuance and had no impact on the Trust’s
consolidated financial statements.





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 consolidated financial statements.





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 early adoption prohibited. The adoption had
no impact on the Trust’s consolidated financial statements.




14


In
January 2010, the FASB updated the authoritative guidance for accounting and
reporting for decreases in ownership of a subsidiary. The updated guidance
clarifies the scope of the guidance related to a decrease in ownership
provisions and expands the disclosures related to the deconsolidation of a
subsidiary or group of assets. The updated guidance is effective for financial
statements issued for fiscal years and interim periods beginning after December
15, 2009.  The adoption had no impact on the Trust’s consolidated
financial statements.





3.
Investments in unconsolidated entities





As of
March 31, 2010, the Trust had investments, directly or indirectly, in the
following active unconsolidated joint ventures, limited liability companies and
limited partnerships that are accounted for under the equity
method:





•
              
              University
      Village-Greensboro LLC, a Delaware limited liability company, 25% owned by
      the Operating Partnership•
              
              WEDR
      Riverside Investors V, LLC, a Delaware limited liability company, 10%
      owned by the Operating Partnership•
              
              APF
      EDR, LP, a Delaware limited partnership, 10% owned by the Operating
      Partnership•
              
              APF
      EDR Food Services, LP, a Delaware limited partnership, 10% owned by the
      Operating Partnership•
              
              WEDR
      Stinson Investors V, LLC, a Delaware limited liability company, 10% owned
      by the Operating Partnership





The
following is a summary of financial information for the Trust’s unconsolidated
joint ventures, limited liability companies and limited partnerships for the
three months ended March 31, 2010 and 2009:





2010
                            
                            2009Results
      of Operations:Revenues
                            
                            $
                            4,192
                            
                            $
                            4,593Net
      income
                            
                            
                            409
                            
                            
                            601Equity
      in earnings of unconsolidated entities
                            
                            $
                            79
                            
                            $
                            100





These
entities primarily own collegiate student housing communities which are managed
by the Trust.  As of March 31, 2010 and December 31, 2009, the Trust’s
investment in unconsolidated entities totaled $1,433 and $1,450,
respectively.





4.
Debt





Revolving
credit facility





On
November 20, 2009, the Operating Partnership entered into a Second Amended
and Restated Credit Agreement (the “Second Amended Revolver”). The Second
Amended Revolver amended and restated the existing secured revolving credit
facility dated March 30, 2006 (the “Amended Revolver”). The Amended Revolver had
a maximum availability of $100,000 and was scheduled to mature on March 30,
2010. The Second Amended Revolver has a maximum availability of $95,000 and
within the first two years of the agreement may be expanded to a total of
$150,000 upon satisfaction of certain conditions.





Availability
under the Second Amended Revolver is limited to a “borrowing base availability”
equal to the lesser of (i) 60% of the property asset value (as defined in
the agreement) of the properties securing the Second Amended Revolver and
(ii) the loan amount which would produce a debt service coverage ratio of
no less than 1.40. As of March 31, 2010, our borrowing base was $43,048, we
had no amounts outstanding under the Second Amended Revolver and we had a letter
of credit outstanding of $1,500 (see Note 6); thus, our remaining borrowing base
availability was $41,548.





The Trust
serves as the guarantor for any funds borrowed by the Operating Partnership
under the Second Amended Revolver. Additionally, the Second Amended Revolver is
secured by a cross-collateralized, first mortgage lien on five otherwise
unmortgaged properties. The Second Amended Revolver matures on November 20,
2012, provided that the Operating Partnership may extend the maturity date for
one year subject to certain conditions. The interest rate per annum applicable
to the Second 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.


15




The
Second 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 unless either of the following
conditions is met: (a) after giving effect to the distribution, the total
leverage ratio is less than or equal to 65% prior to November 20, 2012, and less
than or equal to 60% thereafter; or (b) the distribution, when considered
along with all other distributions for the last 3 quarters, does not exceed 90%
of funds from operations for the applicable period.





During
the year ended December 31, 2009, the Trust used $30,600 of the proceeds
received in connection with the follow-on common stock offering that was
conducted in July 2009 (see Note 2) to repay the outstanding balance of the
Amended Revolver.





Mortgage
and construction debt





At March
31, 2010, the Trust had outstanding mortgage and construction indebtedness of
$404,602 (excluding unamortized debt premium of $698). $28,908 relates to
construction debt that is disclosed below and $132,509 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 $243,185 of the outstanding mortgage
indebtedness relates to the Fannie Mae master secured credit facility that
the Trust entered into on December 31, 2008 and expanded on December 2, 2009
(the “Master Secured Credit Facility”).  $49,133 of the outstanding
amount under the Master Secured Credit Facility bears interest at variable rates
based on the 30-day LIBOR plus an applicable margin (3.61%). The remaining
outstanding balance of $194,052 bears interest at a weighted average fixed rate
of 5.88%.





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 March 31, 2010 and December 31,
2009, the cap had a value of $98 and $286, respectively, and is classified in
other assets in the accompanying condensed consolidated balance
sheets.





At March
31, 2010, 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) (see Note 7). 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.





At March
31, 2010, 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.


16





The
scheduled maturities of outstanding mortgage and construction indebtedness at
March 31, 2010 are as follows:





Fiscal
      Year Ending2010
      (9 months ending December 31, 2010)
                                
                                $
                                22,9912011
                                
                                
                                12,9522012
                                
                                
                                68,6172013
                                
                                
                                33,0282014
                                
                                
                                100,115Thereafter
                                
                                
                                166,899Total
                                
                                
                                404,602Unamortized
      debt premium/discounts
                                
                                
                                698Outstanding
      at March 31, 2010, net of unamortized premiums/discounts
                                
                                $
                                405,300





At March
31, 2010, the outstanding mortgage and construction debt had a weighted average
interest rate of 5.33% and carried a weighted average term to maturity of
4.83 years.





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
three months ended March 31, 2010 and 2009:





Three
      Months Ended March 31, 2010
                                            
                                            Three
      Months Ended March 31, 2009Student
                                            
                                            Development
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            Student
                                            
                                            DevelopmentHousing
                                            
                                            Consulting
                                            
                                            
                                            Management
                                            
                                            
                                            
                                            
                                            
                                            
                                            Housing
                                            
                                            Consulting
                                            
                                            
                                            ManagementLeasing
                                            
                                            Services
                                            
                                            
                                            Services
                                            
                                            Eliminations
                                            
                                            
                                            Total
                                            
                                            Leasing
                                            
                                            Services
                                            
                                            
                                            Services
                                            
                                            Eliminations
                                            
                                            
                                            TotalSegment
      revenues:Student
      housing leasing revenue
                                            
                                            $
                                            29,651
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            29,651
                                            
                                            $
                                            29,313
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            29,313Third-party
      development consulting services
                                            
                                            
                                            —
                                            
                                            
                                            693
                                            
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            693
                                            
                                            
                                            —
                                            
                                            
                                            1,457
                                            
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            1,457Third-party
      management services
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            866
                                            
                                            
                                            —
                                            
                                            
                                            
                                            866
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            909
                                            
                                            
                                            —
                                            
                                            
                                            
                                            909Intersegment
      revenues
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            1,131
                                            
                                            
                                            (1,131
                                            )
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            474
                                            
                                            
                                            
                                            1,125
                                            
                                            
                                            (1,599
                                            )
                                            
                                            
                                            —Operating
      expense reimbursements
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            1,908
                                            
                                            
                                            
                                            1,908
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            2,190
                                            
                                            
                                            
                                            2,190Total
      segment revenues
                                            
                                            
                                            29,651
                                            
                                            
                                            693
                                            
                                            
                                            
                                            1,997
                                            
                                            
                                            777
                                            
                                            
                                            
                                            33,118
                                            
                                            
                                            29,313
                                            
                                            
                                            1,931
                                            
                                            
                                            
                                            2,034
                                            
                                            
                                            591
                                            
                                            
                                            
                                            33,869Segment
      operating expenses:Student
      housing leasing operations
                                            
                                            
                                            13,438
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            13,438
                                            
                                            
                                            13,170
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            13,170General
      and administrative
                                            
                                            
                                            —
                                            
                                            
                                            778
                                            
                                            
                                            
                                            2,106
                                            
                                            
                                            —
                                            
                                            
                                            
                                            2,884
                                            
                                            
                                            —
                                            
                                            
                                            732
                                            
                                            
                                            
                                            1,968
                                            
                                            
                                            (37
                                            )
                                            
                                            
                                            2,663Intersegment
      expenses
                                            
                                            
                                            1,131
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            (1,131
                                            )
                                            
                                            
                                            —
                                            
                                            
                                            1,125
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            (1,125
                                            )
                                            
                                            
                                            —Reimbursable
      operating expenses
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            1,908
                                            
                                            
                                            
                                            1,908
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            2,190
                                            
                                            
                                            
                                            2,190Total
      segment operating expenses
                                            
                                            
                                            14,569
                                            
                                            
                                            778
                                            
                                            
                                            
                                            2,106
                                            
                                            
                                            777
                                            
                                            
                                            
                                            18,230
                                            
                                            
                                            14,295
                                            
                                            
                                            732
                                            
                                            
                                            
                                            1,968
                                            
                                            
                                            1,028
                                            
                                            
                                            
                                            18,023Net
      operating income (loss)
                                            
                                            
                                            15,082
                                            
                                            
                                            (85
                                            )
                                            
                                            
                                            (109
                                            )
                                            
                                            —
                                            
                                            
                                            
                                            14,888
                                            
                                            
                                            15,018
                                            
                                            
                                            1,199
                                            
                                            
                                            
                                            66
                                            
                                            
                                            (437
                                            )
                                            
                                            
                                            15,846Nonoperating
      expenses(1)
                                            
                                            
                                            12,992
                                            
                                            
                                            (23
                                            )
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            12,969
                                            
                                            
                                            13,429
                                            
                                            
                                            (11
                                            )
                                            
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            13,418




17




Three
      Months Ended March 31, 2010
                              
                              
                              Three
      Months Ended March 31, 2009Student
                              
                              
                              Development
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              Student
                              
                              
                              DevelopmentHousing
                              
                              
                              Consulting
                              
                              
                              Management
                              
                              
                              
                              
                              
                              
                              
                              
                              Housing
                              
                              
                              Consulting
                              
                              
                              ManagementLeasing
                              
                              
                              Services
                              
                              
                              Services
                              
                              
                              Eliminations
                              
                              
                              Total
                              
                              
                              Leasing
                              
                              
                              Services
                              
                              
                              Services
                              
                              
                              Eliminations
                              
                              
                              TotalIncome
      (loss) before equity in earnings of unconsolidated entities, income taxes,
      redeemable noncontrolling interests and discontinued
      operations
                              
                              
                              2,090
                              
                              
                              
                              (62
                              )
                              
                              
                              (109
                              )
                              
                              
                              —
                              
                              
                              
                              1,919
                              
                              
                              
                              1,589
                              
                              
                              
                              1,210
                              
                              
                              
                              66
                              
                              
                              
                              (437
                              )
                              
                              
                              2,428Equity
      in earnings of unconsolidated entities
                              
                              
                              79
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              79
                              
                              
                              
                              100
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              100Income
      (loss) before income taxes, redeemable noncontrolling interests and
      discontinued operations(2)
                              
                              $
                              2,169
                              
                              
                              $
                              (62
                              )
                              
                              $
                              (109
                              )
                              
                              $
                              —
                              
                              
                              $
                              1,998
                              
                              
                              $
                              1,689
                              
                              
                              $
                              1,210
                              
                              
                              $
                              66
                              
                              
                              $
                              (437
                              )
                              
                              $
                              2,528Total
      segment assets, as of March 31, 2010 and December 31, 2009
    (3)
                              
                              $
                              763,254
                              
                              
                              $
                              3,914
                              
                              
                              $
                              4,139
                              
                              
                              $
                              —
                              
                              
                              $
                              771,307
                              
                              
                              $
                              766,655
                              
                              
                              $
                              3,742
                              
                              
                              $
                              5,535
                              
                              
                              $
                              —
                              
                              
                              $
                              775,932




(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 on assets.
      Certain expenses which are classified as operating expenses in accordance
      with GAAP, are classified as nonoperating expenses for presentation
      purposes above based on how management evaluates segment operating
      performance.(2)
            
            The
      following is a reconciliation of the reportable segments’ net income
      before income taxes, redeemable noncontrolling interests and discontinued
      operations to the Trust’s consolidated net income before income taxes,
      redeemable noncontrolling interests and discontinued operations for the
      three months ended March 31:  2010
                          
                          
                          2009Income
      before income taxes, redeemable noncontrolling interests and discontinued
      operations for reportable segments
                          
                          $
                          1,998
                          
                          
                          $
                          2,528Other
      unallocated corporate expenses
                          
                          
                          (1,691
                          )
                          
                          
                          (1,681
                          )Income
      before income taxes, redeemable noncontrolling interests and discontinued
      operations
                          
                          $
                          307
                          
                          
                          $
                          847


(3)
            The
      decrease in segment assets related to management services is primarily due
      to a decrease in operating cash related to the timing of insurance
      payments offset by the increase in prepaid
  insurance.





6.
Commitments and contingencies





In
connection with the acquisition of certain of the Trust’s properties, the
previous owner disclosed to the Trust in 2004 that, in June 2001, the United
States Department of Justice (“DOJ”) had notified the previous owner of an
on-going investigation regarding possible violations of the Americans with
Disabilities Act of 1990 (“ADA”) and the Fair Housing Amendments Act of 1988
(“FHAA”). The previous owner disclosed to us in 2004 that DOJ had reviewed the
property plans for certain of its properties, that DOJ had not issued a report
regarding its review, that in October 2002, DOJ had indicated to the previous
owner that the investigation was being delayed for an undetermined period of
time, and that DOJ had not contacted the previous owner between 2002 and August
2004. In February 2010, DOJ served a subpoena on the Trust seeking access to one
of the purchased properties in connection with a complaint filed by DOJ in March
2009 against the previous owner. The investigation has not been resolved and, at
this point, no conclusion can be reached regarding what will be required to
conclude it or whether it will result in a dispute or legal proceedings between
the Trust and DOJ or the previous owner. Noncompliance with the ADA and the FHAA
could result in the imposition of injunctive relief, fines, awards of damages to
private litigants or additional capital expenditures to remedy such
noncompliance. The Trust is unable to predict the outcome of the DOJ’s
investigation.





The
Operating Partnership entered into a letter of credit agreement in conjunction
with the closing of the acquisition of a student housing community at the
University of Florida. The letter of credit remains outstanding in the amount of
$1,500 at March 31, 2010 and is secured by the Second Amended
Revolver.


18




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 $22,721 at March 31, 2010.  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.  On October 30, 2008, the LLC borrowed an
additional $1,200, which was also guaranteed by the Operating Partnership that
was repaid on November 10, 2009. The Operating Partnership loaned the LLC an
additional $1,200 in order to repay this loan by increasing the note receivable
due to the Operating Partnership to $2,021 and amending the maturity date to
December 31, 2019. As of March 31, 2010 and December 31, 2009, the note has an
outstanding balance of $1,991 and $2,021, respectively, and is subordinated to
the construction debt held by the LLC discussed above.  The balance is
reflected in other assets in the accompanying condensed consolidated balance
sheets.





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 communities 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.





Under the
terms of the limited partnership agreement of University Towers Operating
Partnership, LP, so long as the contributing owners of such property hold at
least 25% of the University Towers Partnership Units, the Trust has agreed to
maintain certain minimum amounts of debt on the property to avoid triggering
gain to the contributing owners. If the Trust fails to do this, the Trust must
repay the contributing owners the amount of taxes they incur.





Under the
terms of the purchase agreement with Place Properties, L.P., 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.





After
being awarded a development consulting contract, the Trust will enter into
predevelopment consulting contracts with educational institutions to develop
student housing communities on their behalf.  The Trust
will enter into reimbursement agreements that provide for the Trust to be
reimbursed for the predevelopment costs incurred prior to the institution’s
governing body formally approving the final development contract.  At
March 31, 2010 and December 31, 2009, the Trust had reimbursable predevelopment
costs of $2,185 and $1,563, respectively, which are reflected in other
assets in the accompanying condensed consolidated balance sheets.





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 $11,797 in costs to develop the first and second phases of the
development which opened in August of 2008 and 2009, respectively.





During
2008, the Trust also began development of a wholly-owned student apartment
community located on the campus of Syracuse University. The Trust incurred
$25,792 in costs to develop the community which opened in August of
2009.  In addition, the Trust owns and manages the community under a
long-term ground lease from Syracuse University.





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


19




8.
Disposition of real estate investments and discontinued operations





On
April 7, 2009, the Trust sold the College Station student housing community
for a purchase price of $2,550.  The Trust received proceeds of $250
and a note receivable of $2,300. The note was interest only and
accrued interest at a rate of 3% per annum through August 31, 2009 and
matures on December 31, 2010 (the 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.




The
results of operations of College Station are reflected as discontinued
operations in the accompanying condensed consolidated statement of operations
for the three months ended March 31, 2009. The following table summarizes
income/(loss) from discontinued operations, net of redeemable noncontrolling
interests and noncontrolling interests, for the three months ended March 31,
2009:




Three monthsEnded March 31,2009Student
      housing leasing revenue
                      
                      $
                      121Student
      housing leasing operating expenses
                      
                      
                      112Depreciation
      and amortization
                      
                      
                      25Loss
      from discontinued operations attributable to Education Realty Trust,
      Inc.
                      
                      $
                      (16
                      )





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 March 31, 2010, the
Trust had 767,500 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.





On March
11, 2010, the Trust adopted the 2010 Long-Term Incentive Plan (the
“LTIP”).  The purposes of the LTIP are to attract, retain and motivate
the executive officers and certain key employees of the Trust and to promote the
long-term growth and profitability of the Trust.  Awards under the
LTIP will be made pursuant to the Plan described above and will consist of a
mixture of time vested restricted stock and performance vested restricted stock
units.





A
restricted stock award is an award of the Trust’s common stock that is subject
to restrictions on transferability and other restrictions as the Trust’s
compensation committee determines in its sole discretion on the date of grant.
The restrictions may lapse over a specified period of employment or the
satisfaction of pre-established criteria as our compensation committee may
determine. Except to the extent restricted under the award agreement, a
participant awarded restricted shares will have all of the rights of a
stockholder as to those shares, including, without limitation, the right to vote
and the right to receive dividends or distributions on the shares. Restricted
stock is generally taxed at the time of vesting. At March 31, 2010 and
December 31, 2009, unearned compensation totaled $1,802 and $40,
respectively, and will be recorded as expense over the applicable vesting
period. The value is determined based on the market value of the Trust’s common
stock on the grant date. During each of the three months ended March 31, 2010
and 2009, compensation expense of $109 and $151, respectively, was recognized in
the accompanying condensed consolidated statements of operations, related to the
vesting of restricted stock.


20





On
January 11, 2010, the Trust issued 50,000 shares of restricted common stock to
an executive as an inducement to enter into an employment agreement with the
Trust.  The restricted stock will lapse ratably over five years as
long as the executive remains employed with the Trust. The award was granted
outside of the Plan described above pursuant to Section 303A.08 of the New York
Stock Exchange Listed Company Manual.





PIUs
are units in a limited liability company controlled by the Trust that hold
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
Operating Partnership Units with respect to liquidating distributions. Upon the
occurrence of specified capital equalization events, PIUs may, over time,
achieve full or partial parity with Operating Partnership Units 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
non-cash compensation cost recognized in general and administrative expense in
the accompanying condensed consolidated statements of operations for the three
months ended March 31, 2010 and 2009, was $182 and $192,
respectively.  Additionally during each of the three months ended
March 31, 2010 and 2009, the Trust issued 4,000 shares of common stock to an
executive officer pursuant to the Plan.





A summary
of the stock-based incentive plan activity as of and for the three months ended
March 31, 2010 is as follows:





StockPIUs
                                                      
                                                      
                                                      Awards
      (1)
                                                      
                                                      
                                                      TotalOutstanding
      at December 31, 2009
                                                      
                                                      
                                                      275,000
                                                      
                                                      
                                                      
                                                      216,000
                                                      
                                                      
                                                      
                                                      491,000Granted
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      54,000
                                                      
                                                      
                                                      
                                                      54,000Forfeited
                                                      
                                                      
                                                      (62,500
                                                      )
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      (62,500
                                                      )Outstanding
      at March 31, 2010
                                                      
                                                      
                                                      212,500
                                                      
                                                      
                                                      
                                                      270,000
                                                      
                                                      
                                                      
                                                      482,500Vested
      at March 31, 2010
                                                      
                                                      
                                                      212,500
                                                      
                                                      
                                                      
                                                      222,500
                                                      
                                                      
                                                      
                                                      435,000


(1)
            Includes
      restricted stock awards.


21




10.
Subsequent events





Our board
of directors declared a distribution of $0.05 per share of common stock for the
quarter ended on March 31, 2010. The distribution is payable on May 17, 2010 to
stockholders of record at the close of business on April 30, 2010.





On April
13, 2010, the Trust issued 136,000 shares of restricted stock and 204,000
restricted stock units to executives and key employees pursuant to the LTIP
discussed in Note 9.




22





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 on Form 10-Q
(“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, 2009. Certain statements contained in this Report are
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, including but not limited to statements related
to plans for future acquisitions, our business and investment strategy, market
trends and projected capital expenditures. When used in this report, the words
“expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate, “would,”
“could,” “should,” and similar expressions are generally intended to identify
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which reflect our opinions only as of the date of
this Report. We assume no obligation to update or supplement forward-looking
statements that become untrue because of subsequent events. Forward-looking
statements are subject to risks, uncertainties and other factors that could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. For further information about these
and other factors that could affect our future results, please see the
“Item 1A. — Risk Factors” in our Annual Report on Form 10-K for the year
ended December 31, 2009 and “Part II, Item IA.-Risk Factors”
below.  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 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 ownership, acquisition and management of high-quality collegiate student
housing communities. We also provide student housing development consulting
services to universities, charitable foundations and other third parties. We
believe that we are one of the largest private owners, developers and managers
of high-quality collegiate 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 communities. We also earn income by performing property management
services and development consulting services for third parties through Allen
& O’Hara Education Services, Inc. (“AOES”) and Allen & O’Hara
Development Company, LLC (“AODC”), respectively. While we manage 100% of the
communities 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 communities 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 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, 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 accompanying condensed consolidated financial statements.
Inter-company fees are reflected at the contractually stipulated
amounts.


23





Student
Housing Leasing





Student
housing leasing revenue represented approximately 91.7% of our revenue,
excluding operating expense reimbursements, for the three months ended March 31,
2010.





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 and/or pays a deposit, which is usually equal
to two months rent.





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 communities can typically command
higher per-unit and per-square foot rental rates than most multi-family
communities in the same geographic markets. We are also typically able to
command higher rental rates than on-campus student housing, which tends to offer
fewer amenities.





The
majority of our leases commence mid-August and terminate the last day of July.
These dates generally coincide with the commencement of the universities’ fall
academic term and the completion of the subsequent summer school session. As
such, we are required to re-lease each community 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 to students who were first-time residents at our communities. 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 communities’ 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 when incurred. This Turn period results in
seasonality in our operating results during the third quarter of each
year.





Management
Services





For the
three months ended March 31, 2010, revenue from our management services segment
represented approximately 6.2% of our revenue, excluding operating expense
reimbursements.  We provide management services for collegiate student
housing communities owned by educational institutions, charitable foundations,
the Trust and others. Our management services typically cover all aspects of
community operations, including residence life and student development,
marketing, leasing administration, strategic relationships, information systems
and accounting services. We provide these services pursuant to multi-year
management agreements under which management fees are typically 3-5% of leasing
revenue.  These agreements usually have an initial term of two to five
years with renewal options of like terms. As part of the management agreements,
there are certain payroll and related expenses we pay on behalf of the property
owners. These costs are included in reimbursable operating expenses and are
required to be reimbursed to us by the property owners. We recognize the expense
and revenue related to these reimbursements when incurred. These operating
expenses are wholly reimbursable and therefore not considered by management when
analyzing the operating performance of our management services
business.





Development
Consulting Services





For the
three months ended March 31, 2010, revenue from our development consulting
services represented approximately 2.1% of our revenue, excluding operating
expense reimbursements. We provide development consulting services primarily to
colleges and universities seeking to modernize their on-campus student housing
communities but also to the Trust and other third-party investors. Our
development consulting services typically include the
following:


24




•
            market
      analysis and evaluation of  student housing needs and
      options;





•
            cooperation
      with college or university in architectural
  design;





•
            negotiation
      of ground lease, development agreement, construction contract,
      architectural contract and bond
documents;





•
            oversight
      of architectural design process;





•
            coordination
      of governmental and university plan
approvals;





•
            oversight
      of construction process;





•
            design,
      purchase and installation of
furniture;





•
            pre-opening
      marketing to students; and





•
            obtaining
      final approvals of construction.





Fees for
these services are typically 3-5% of the total cost of a project and are payable
over the life of the construction period, which in most cases is one to two
years in length. 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.





In 2007,
we began developing projects for our ownership and plan to increase
self-development activity going forward. We opened the first of these
self-developed projects in 2008 in Carbondale, Illinois (Reserve at Saluki
Point).  In August of 2009, we opened a second phase at Carbondale and
also completed the development of a wholly-owned self-developed community in
Syracuse, New York.





Trends
and Outlook





Rents
and Occupancy





We manage
our communities 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 revenue from the
community. 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 colleges and 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
three months ended March 31, 2010, same-community revenue per available bed
decreased to $384 and same-community physical occupancy increased to 90.4%
compared to revenue per available bed of $392 and physical occupancy of 89.3%
for the three months ended March 31, 2009. The results represent averages for
the Trust’s portfolio which are not necessarily indicative of every community in
the portfolio. As would be expected, individual communities can and do
perform both above and below these averages, and, at times, an individual
community may experience 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
average physical and economic occupancies on a legacy-community basis (which are
the same-communities, excluding the Place-communities)  for the first
quarter of 2010 were 92.5% and 91.9%, respectively, compared to 92.3% and 92.7%
for the same quarter in 2009.  The Place-communities had average
physical and economic occupancies of 84.1% and 80.1%, respectively, for the
first quarter of 2010 compared to 79.7% and 76.7% in the first quarter of 2009.
The occupancies achieved for the 2009-2010 lease term were at rental rates
approximately 1.9% below the prior lease term due to more rental discounting and
a higher level of concessions than in the past.


25




Leasing
for the 2010-2011 lease term on a same-community basis reflects approximately
52.2% of beds already leased compared to 51.0% at this time last
year.  The legacy-communities and the Place-communities have
approximately 52.3% and 49.6% of the beds leased compared to 54.6% and 43.7%,
respectively, at this time last year.





General
and Administrative Costs





For the
three months ended March 31, 2010, general and administrative expenses increased
to $4,300 or 7.7% from the first quarter of 2009. This increase is primarily
attributable to $293 of nonrecurring severance costs recorded in the first
quarter.





Development
Consulting Services





Third-party
development consulting services revenue experienced considerable growth from
2007 to 2009.  However, third-party development revenue declined 52.4%
to $0.7 million in the first quarter of 2010 as credit market conditions in 2009
delayed the financing and commencement of construction on previously awarded
projects.  Our development team is seeing an increase in interest from
colleges and universities that are considering new housing and continues to
receive requests for proposals on new development projects.  This is
evidenced by a third-party development award in March 2010 for a 634 bed
on-campus community at Mansfield University of Pennsylvania that increased our
third-party development fee backlog to $9,402 at March 31,
2010.  However, due to the delays experienced though March 31, 2010
and until the credit markets return to more historical norms, we expect a lower
level of third-party development revenue throughout 2010.





The
amount and timing of future revenues from development consulting services will
be contingent upon our ability to successfully compete in public colleges and
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.





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 communities and includes revenues from leasing
apartments by the bed, food services, parking space rentals and certain
ancillary services.





Students
are required to execute lease contracts with payment schedules that vary from
per semester to monthly. Generally, a parental guarantee must accompany each
executed contract. Receivables are recorded when due, while leasing revenue and
related lease incentives/concessions 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.


26





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.





We also
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 condensed consolidated 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 to which 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 communities’ results of operations are included in the Trust’s
results of operations from the respective dates of
acquisition.  Appraisals, estimates of cash flows and 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 interests 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 community, were accounted for as part
of the purchase price prior to the adoption of the guidance issued by the
FASB.





When a
student housing community has met the criteria to be classified as held for
sale, the fair value less cost to sell such asset is estimated. If 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 community has met the held for sale
criteria. The related carrying value of the community is recorded as held for
sale in the consolidated balance sheet and operations of student housing
communities that are sold or classified as held for sale are recorded as part of
discontinued operations for all periods presented.




27





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 condensed
consolidated 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 community’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 community, based on its
intended use, is less than the carrying value of the community. These estimates
of cash flows are based on factors such as future intended use of the asset,
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 community
over the fair value of the community, thereby reducing our net
income.





Use
of Estimates





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




We review
our assets, including our student housing communities, communities 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 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
consolidated balance sheets and the net income or loss attributable to
noncontrolling interests has been separately identified in the consolidated
statements of operations.  The prior periods presented have also been
reclassified to conform to the current classification.




28


In
May 2009, the FASB 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 February 2010, the FASB amended the authoritative
guidance on subsequent events to remove the requirement for SEC filers to
disclose the date through which an entity has evaluated subsequent events. The
new guidance is effective upon issuance and had no impact on the Trust’s
consolidated financial statements.




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 consolidated financial statements.





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 early adoption prohibited. The adoption did
not have a material impact on the consolidated financial
statements.





In
January 2010, the FASB updated the authoritative guidance for accounting and
reporting for decreases in ownership of a subsidiary. The updated guidance
clarifies the scope of the guidance related to a decrease in ownership
provisions and expands the disclosures related to the deconsolidation of a
subsidiary or group of assets. The updated guidance is effective for financial
statements issued for fiscal years and interim periods beginning after December
15, 2009.  The adoption did not have a material impact on the
consolidated financial statements.





Results
of Operations for the Three Months Ended March 31, 2010 and 2009





The
following table presents the results of operations for Education Realty Trust,
Inc. for the three months ended March 31, 2010 and 2009:


Three
      Months Ended March 31, 2010
                  
                  
                  Three Months
      Ended March 31, 2009Student
                  
                  
                  Development
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  Student
                  
                  
                  DevelopmentHousing
                  
                  
                  Consulting
                  
                  
                  Management
                  
                  
                  
                  
                  
                  
                  
                  
                  Housing
                  
                  
                  Consulting
                  
                  
                  ManagementLeasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Eliminations
                  
                  
                  Total
                  
                  
                  Leasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Eliminations
                  
                  
                  TotalSegment
      revenues:Student
      housing leasing revenue
                  
                  $
                  29,651
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  29,651
                  
                  
                  $
                  29,313
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  29,313Third-party
      development consulting services
                  
                  
                  —
                  
                  
                  
                  693
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  693
                  
                  
                  
                  —
                  
                  
                  
                  1,457
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,457Third-party
      management services
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  866
                  
                  
                  
                  —
                  
                  
                  
                  866
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  909
                  
                  
                  
                  —
                  
                  
                  
                  909Intersegment
      revenues
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,131
                  
                  
                  
                  (1,131
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  474
                  
                  
                  
                  1,125
                  
                  
                  
                  (1,599
                  )
                  
                  
                  —Operating
      expense reimbursements
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,908
                  
                  
                  
                  1,908
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2,190
                  
                  
                  
                  2,190Total
      segment  revenues
                  
                  
                  29,651
                  
                  
                  
                  693
                  
                  
                  
                  1,997
                  
                  
                  
                  777
                  
                  
                  
                  33,118
                  
                  
                  
                  29,313
                  
                  
                  
                  1,931
                  
                  
                  
                  2,034
                  
                  
                  
                  591
                  
                  
                  
                  33,869Segment
      operating expenses:




29





Three
      Months Ended March 31, 2010
                                
                                
                                Three Months
      Ended March 31, 2009Student
                                
                                
                                Development
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                Student
                                
                                
                                DevelopmentHousing
                                
                                
                                Consulting
                                
                                
                                Management
                                
                                
                                
                                
                                
                                
                                
                                
                                Housing
                                
                                
                                Consulting
                                
                                
                                ManagementLeasing
                                
                                
                                Services
                                
                                
                                Services
                                
                                
                                Eliminations
                                
                                
                                Total
                                
                                
                                Leasing
                                
                                
                                Services
                                
                                
                                Services
                                
                                
                                Eliminations
                                
                                
                                TotalStudent
      housing leasing operations
                                
                                
                                13,438
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                13,438
                                
                                
                                
                                13,170
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                13,170General
      and administrative
                                
                                
                                —
                                
                                
                                
                                778
                                
                                
                                
                                2,106
                                
                                
                                
                                —
                                
                                
                                
                                2,884
                                
                                
                                
                                —
                                
                                
                                
                                732
                                
                                
                                
                                1,968
                                
                                
                                
                                (37
                                )
                                
                                
                                2,663Intersegment
      expenses
                                
                                
                                1,131
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                (1,131
                                )
                                
                                
                                —
                                
                                
                                
                                1,125
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                (1,125
                                )
                                
                                
                                —Reimbursable
      operating expenses
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                1,908
                                
                                
                                
                                1,908
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                2,190
                                
                                
                                
                                2,190Total
      segment operating expenses
                                
                                
                                14,569
                                
                                
                                
                                778
                                
                                
                                
                                2,106
                                
                                
                                
                                777
                                
                                
                                
                                18,230
                                
                                
                                
                                14,295
                                
                                
                                
                                732
                                
                                
                                
                                1,968
                                
                                
                                
                                1,028
                                
                                
                                
                                18,023Net
      operating income (loss)
                                
                                
                                15,082
                                
                                
                                
                                (85
                                )
                                
                                
                                (109
                                )
                                
                                
                                —
                                
                                
                                
                                14,888
                                
                                
                                
                                15,018
                                
                                
                                
                                1,199
                                
                                
                                
                                66
                                
                                
                                
                                (437
                                )
                                
                                
                                15,846Nonoperating
      expenses(1)
                                
                                
                                12,992
                                
                                
                                
                                (23
                                )
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                12,969
                                
                                
                                
                                13,429
                                
                                
                                
                                (11
                                )
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                13,418Income
      before equity in earnings of unconsolidated entities, income taxes,
      redeemable noncontrolling interests and discontinued
      operations
                                
                                
                                2,090
                                
                                
                                
                                (62
                                )
                                
                                
                                (109
                                )
                                
                                
                                —
                                
                                
                                
                                1,919
                                
                                
                                
                                1,589
                                
                                
                                
                                1,210
                                
                                
                                
                                66
                                
                                
                                
                                (437
                                )
                                
                                
                                2,428Equity
      in earnings of unconsolidated entities
                                
                                
                                79
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                79
                                
                                
                                
                                100
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                100Income
      before income taxes, redeemable noncontrolling interests and discontinued
      operations(2)
                                
                                $
                                2,169
                                
                                
                                $
                                (62
                                )
                                
                                $
                                (109
                                )
                                
                                $
                                —
                                
                                
                                $
                                1,998
                                
                                
                                $
                                1,689
                                
                                
                                $
                                1,210
                                
                                
                                $
                                66
                                
                                
                                $
                                (437
                                )
                                
                                $
                                2,528





(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 on assets.
      Certain expenses which are classified as operating expenses in accordance
      with GAAP, are classified as nonoperating expenses for presentation
      purposes above based on how management evaluates segment operating
      performance.(2)
            
            The
      following is a reconciliation of the reportable segments’ net income
      before income taxes, redeemable noncontrolling interests and discontinued
      operations to the Trust’s consolidated net income before income taxes,
      redeemable noncontrolling interests and discontinued operations for the
      three months ended March 31:





2010
                                
                                
                                2009Income
      before income taxes, redeemable noncontrolling interests and discontinued
      operations for reportable segments
                                
                                $
                                1,998
                                
                                
                                $
                                2,528Other
      unallocated corporate expenses
                                
                                
                                (1,691
                                )
                                
                                
                                (1,681
                                )Income
      before income taxes, redeemable noncontrolling interests and discontinued
      operations
                                
                                $
                                307
                                
                                
                                $
                                847




30





Student
housing leasing





Student
housing operating statistics for wholly-owned communities and same-communities
for the three months ended March 31, 2010 and 2009 were as follows:




Three
      monthsendedMarch
      31,2010
                                                            
                                                            
                                                            Three
      monthsendedMarch
      31,2009 (8)
                                                            
                                                            
                                                            Favorable
                                                              (Unfavorable)Wholly-owned
      communities:OccupancyPhysical
      (1)
                                                            
                                                            
                                                            89.8
                                                            %
                                                            
                                                            
                                                            89.4
                                                            %
                                                            
                                                            
                                                            40
                                                            bpsEconomic
      (2)
                                                            
                                                            
                                                            88.2
                                                            %
                                                            
                                                            
                                                            89.4
                                                            %
                                                            
                                                            
                                                            (120
                                                            )bpsNARPAB
      (3)
                                                            
                                                            $
                                                            370
                                                            
                                                            
                                                            $
                                                            373
                                                            
                                                            
                                                            $
                                                            (3
                                                            )Other
      income per avail. bed (4)
                                                            
                                                            $
                                                            18
                                                            
                                                            
                                                            $
                                                            21
                                                            
                                                            
                                                            $
                                                            (3
                                                            )RevPAB
      (5)
                                                            
                                                            $
                                                            388
                                                            
                                                            
                                                            $
                                                            394
                                                            
                                                            
                                                            $
                                                            (6
                                                            )Operating
      expense per bed (6)
                                                            
                                                            $
                                                            176
                                                            
                                                            
                                                            $
                                                            177
                                                            
                                                            
                                                            $
                                                            1Operating
      margin (9)
                                                            
                                                            
                                                            54.7
                                                            %
                                                            
                                                            
                                                            55.2
                                                            %
                                                            
                                                            
                                                            (49
                                                            )bpsDesign
      Beds (7)
                                                            
                                                            
                                                            76,362
                                                            
                                                            
                                                            
                                                            74,364
                                                            
                                                            
                                                            
                                                            1,998Same-communities:OccupancyPhysical
      (1)
                                                            
                                                            
                                                            90.4
                                                            %
                                                            
                                                            
                                                            89.3
                                                            %
                                                            
                                                            
                                                            110
                                                            bpsEconomic
      (2)
                                                            
                                                            
                                                            89.4
                                                            %
                                                            
                                                            
                                                            89.4
                                                            %
                                                            
                                                            
                                                            —NARPAB
      (3)
                                                            
                                                            $
                                                            366
                                                            
                                                            
                                                            $
                                                            371
                                                            
                                                            
                                                            $
                                                            (5
                                                            )Other
      income per avail. bed (4)
                                                            
                                                            $
                                                            18
                                                            
                                                            
                                                            $
                                                            21
                                                            
                                                            
                                                            $
                                                            (3
                                                            )RevPAB
      (5)
                                                            
                                                            $
                                                            384
                                                            
                                                            
                                                            $
                                                            392
                                                            
                                                            
                                                            $
                                                            (8
                                                            )Operating
      expense per bed (6)
                                                            
                                                            $
                                                            176
                                                            
                                                            
                                                            $
                                                            176
                                                            
                                                            
                                                            $
                                                            —Operating
      margin (9)
                                                            
                                                            
                                                            54.2
                                                            %
                                                            
                                                            
                                                            55.1
                                                            %
                                                            
                                                            
                                                            (90
                                                            )bpsDesign
      Beds (7)
                                                            
                                                            
                                                            72,762
                                                            
                                                            
                                                            
                                                            72,780
                                                            
                                                            
                                                            
                                                            (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 market rent for the respective period.(3)
            NarPAB
      represents GAAP net apartment rent for the respective period divided by
      the sum of the design beds in the portfolio for each of the included
      months.(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 fees.(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)
            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).(9)
            Represents
      operating income divided by
revenue.




Total
revenue in the student housing leasing segment was $29,651 for the three months
ended March 31, 2010. This represents an increase of $338, or 1.2%, from the
same period in 2009. This increase was driven by an increase in student housing
leasing revenue of $311 or 1.1% and an increase in food service revenue of $27
or 4.6%.   The increase in student housing leasing revenue
included $952 related to the new communities, University Village on Colvin
(Syracuse) and The Reserve at Saluki Pointe (Carbondale).  Revenue at
Place-communities increased 4.6%, or $245, on a 5.0% improvement in occupancies,
a decline in rental rates of approximately 0.6% and a 0.2% increase in other
rental revenue.  These increases were offset by a 3.7%, or $859,
decline in legacy-community revenue, which was the result of a 2.8% decline in
rental rates, a 0.9% decline in other rental revenue and an occupancy rate that
was essentially flat to the prior year.





Operating
expenses in the student housing leasing segment increased $274, or 1.9%, to
$14,569 for the three months ended March 31, 2010 as compared to the same period
in 2009. Student housing leasing operations increased $268, or 2.0%, over the
prior year, with an increase of $239 related to the new communities, University
Village on Colvin and The Reserve at Saluki Pointe.  Place-community
operating expenses increased $90 due to higher utilities and insurance costs.
These increases were offset by a decline in legacy-community operating expenses
of $61, which was primarily attributable to internet cost reductions offset by a
gain in the prior year related to insurance claim proceeds.





Development
consulting services





The
following table represents the development consulting projects that were active
during the three months ended March 31, 2010 and 2009:


31




Recognized
      EarningsProject
                                                                                                                  
                                                                                                                  Beds
                                                                                                                  
                                                                                                                  Fee
      Type
                                                                                                                  
                                                                                                                  2010
                                                                                                                  
                                                                                                                  
                                                                                                                  2009
                                                                                                                  
                                                                                                                  
                                                                                                                  DifferenceUniversity
      of Michigan
                                                                                                                  
                                                                                                                  896
                                                                                                                  
                                                                                                                  Development fee
                                                                                                                  
                                                                                                                  $
                                                                                                                  1
                                                                                                                  
                                                                                                                  
                                                                                                                  $
                                                                                                                  34
                                                                                                                  
                                                                                                                  
                                                                                                                  $
                                                                                                                  (33
                                                                                                                  )Fontainebleu
      Renovation Project
                                                                                                                  
                                                                                                                  435
                                                                                                                  
                                                                                                                  Development fee
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  46
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (46
                                                                                                                  )West
      Chester— Phase I
                                                                                                                  
                                                                                                                  1,197
                                                                                                                  
                                                                                                                  Development fee
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  518
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (518
                                                                                                                  )Indiana
      University of Pennsylvania — Phase III
                                                                                                                  
                                                                                                                  1,084
                                                                                                                  
                                                                                                                  Development fee
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  473
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (473
                                                                                                                  )Indiana
      University of Pennsylvania — Phase IV
                                                                                                                  
                                                                                                                  596
                                                                                                                  
                                                                                                                  Development fee
                                                                                                                  
                                                                                                                  
                                                                                                                  333
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  333Colorado
      State University — Pueblo I
                                                                                                                  
                                                                                                                  253
                                                                                                                  
                                                                                                                  Development fee
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  195
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (195
                                                                                                                  )Colorado
      State University — Pueblo II
                                                                                                                  
                                                                                                                  500
                                                                                                                  
                                                                                                                  Development fee
                                                                                                                  
                                                                                                                  
                                                                                                                  359
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  9
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  350Auraria
      Higher Education System
                                                                                                                  
                                                                                                                  685
                                                                                                                  
                                                                                                                  Development fee
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  182
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (182
                                                                                                                  )Third-party
      development consulting services
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  693
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1,457
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (764
                                                                                                                  )Southern
      Illinois University— Carbondale
                                                                                                                  
                                                                                                                  768
                                                                                                                  
                                                                                                                  Construction
      oversight fee
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  35
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (35
                                                                                                                  )Syracuse
      University
                                                                                                                  
                                                                                                                  432
                                                                                                                  
                                                                                                                  Development fee
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  439
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (439
                                                                                                                  )Intersegment
      development services
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  474
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (474
                                                                                                                  )Development
      consulting services
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  $
                                                                                                                  693
                                                                                                                  
                                                                                                                  
                                                                                                                  $
                                                                                                                  1,931
                                                                                                                  
                                                                                                                  
                                                                                                                  $
                                                                                                                  (1,238
                                                                                                                  )





Development
consulting services revenue decreased $1,238, or 64.1%, to $693 for the three
months ended March 31, 2010 as compared to the same period in
2009.  Third-party development consulting revenue declined $764 from
the prior year as credit market conditions in 2009 delayed the financing and the
commencement of construction on previously awarded projects, resulting in only
two active third-party development jobs so far this year.  The
intersegment revenue decline relates to two internal developments that were
completed in 2009.  As these fees relate to development services
performed on projects owned by the Trust, they are eliminated in the
accompanying condensed consolidated financial statements.





General
and administrative expenses increased $46 or 6.2% for the quarter. This increase
is primarily due to an increase in third-party development pursuit costs of $169
offset by a decrease in lower payroll and benefits.





Management
services





Total
management services revenue decreased by $37, or 1.8%, to $1,997 for the three
months ended March 31, 2010 as compared to the same period in 2009. Third-party
management fee revenue decreased $43, or 4.7%, to $866 for the three months
ended March 31, 2010 as compared to the same period in 2009.  This
decrease is mainly due to the cancellation of a contract for one community in
Alabama.  Revenue for existing contracts remained essentially flat
when compared to the same period in 2009.  Intersegment revenue was
essentially flat as compared to the prior year, which is indicative of the
growth in our owned portfolio period over period as discussed under “Student
housing leasing” above.





General
and administrative costs for our third-party management services segment
increased $138 to $2,106 for the three months ended March 31, 2010, as compared
to the same period in 2009. This increase is due to severance costs of $293
incurred in the first quarter of 2010 offset by a decrease in other payroll and
benefits.





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 March 31,
2010, unallocated corporate expenses remained essentially flat at $1,691 for the
quarter.


32




Nonoperating
expenses





Nonoperating
expenses decreased $449 or 3.3% for the three months ended March 31, 2010,
compared to the same period in 2009. This decrease includes a $765 decline in
interest expense as a result of the July 2009 repayment of the Amended Revolver
and a reduction in the mortgage debt on certain Place-communities, offset by an
increase in depreciation expense related to the two new
communities.





Equity
in earnings of unconsolidated entities





Equity in
earnings of unconsolidated entities remained relatively flat to the prior year
at $79 for the three months ended March 31, 2010. Equity in earnings of
unconsolidated entities represents our share of the net income related to four
investments in unconsolidated entities that own student housing
communities.





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 to be 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.





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





The
following table presents a reconciliation of FFO available to our stockholders
and unitholders to net income for the three months ended March 31, 2010 and
2009:





Three
      Months Ended March 31,2010
                
                
                2009Net
      income attributable to Education Realty Trust, Inc.
                
                $
                170
                
                
                $
                433Student
      housing property depreciation and amortization of lease
      intangibles
                
                
                7,310
                
                
                
                7,005Real
      estate depreciation and amortization included in equity in earnings of
      investees
                
                
                124
                
                
                
                122Depreciation
      and amortization of discontinued operations
                
                
                —
                
                
                
                25Noncontrolling
      interests
                
                
                211
                
                
                
                210Funds
      from operations
                
                $
                7,815
                
                
                $
                7,795




33




Liquidity
and Capital Resources





Second
Amended Revolver, Master Secured Credit Facility and other
indebtedness





On
November 20, 2009, the Operating Partnership entered into a Second Amended
and Restated Credit Agreement (the “Second Amended Revolver”). The Second
Amended Revolver amended and restated the existing secured revolving credit
facility agreement dated March 30, 2006. The previous facility had a maximum
availability of $100,000 and was scheduled to mature on March 30, 2010 (the
“Amended Revolver”). The Second Amended Revolver has a maximum availability of
$95,000 and within the first two years of the date of execution of the agreement
may be, upon satisfaction of certain conditions, expanded to a total of
$150,000.





Availability
under the Second Amended Revolver is limited to a “borrowing base availability”
equal to the lesser of (i) 60% of the property asset value (as defined in
the agreement) of the properties securing the facility and (ii) the loan
amount which would produce a debt service coverage ratio of no less than 1.40.
As of March 31, 2010, our borrowing base was $43,048, we had no amounts
outstanding under the Second Amended Revolver and we had letters of credit
outstanding of $1,500 (see Note 6 to our accompanying condensed consolidated
financial statements); thus, our remaining borrowing base availability was
$41,548.The Trust has
five communities unencumbered by debt of which two are eligible to be included
in the pool of properties pledged as collateral against borrowings under the
Second Amended Revolver.  The Trust estimates that the borrowing base
availability would increase by approximately $9,000 if these two communities
were included.





At March
31, 2010, the Trust had ten properties unencumbered by mortgage
debt.  Five of the ten properties have, however, been pledged as
collateral against any borrowings under our Second Amended
Revolver.





The Trust
serves as the guarantor for any funds borrowed by the Operating Partnership
under the Second Amended Revolver. Additionally, the Second Amended Revolver is
secured by a cross-collateralized, first mortgage lien on five otherwise
unmortgaged properties. The Second Amended Revolver matures on November 20,
2012, provided that the Operating Partnership may extend the maturity date for
one year subject to certain conditions. The interest rate per annum applicable
to the Second 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.





The
Second 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 unless either of the following
conditions is met: (a) after giving effect to the distribution, the total
leverage ratio is less than or equal to 65% prior to November 20, 2012, and less
than or equal to 60% thereafter; or (b) the distribution, when considered
along with all other distributions for the last 3 quarters, does not exceed 90%
of funds from operations for the applicable period.





During
the year ended December 31, 2009, the Trust used $30,600 of the proceeds
received in connection with the follow-on common stock offering conducted in
July 2009 (see Note 2 in the accompanying condensed consolidated financial
statements) to repay the Amended Revolver.





At March
31, 2010, the Trust had outstanding mortgage and construction indebtedness of
$404,602 (excluding unamortized debt premium of $698). $28,908 relates to
construction debt that is disclosed below and $132,509 pertains to outstanding
mortgage debt that is secured by the underlying student housing properties or
leaseholds and bears interest at fixed rates ranging from 4.92% to
6.97%.  The remaining $243,185 of the outstanding mortgage
indebtedness relates to the Fannie Mae master secured credit facility the
Trust entered into on December 31, 2008 and expanded on December 2, 2009
(“Master Secured Credit Facility”).  $49,133 of the outstanding amount
under the Master Secured Credit Facility bears interest at variable rates based
on the 30-day LIBOR plus an applicable margin (3.61%). The remaining outstanding
balance of $194,052 bears interest at a weighted average fixed rate of
5.88%.


34





At March
31, 2010, 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) (see Note 7). 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.  Upon initial maturity, the Trust expects to exercise its
option to extend these loans.





At March
31, 2010, 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 to our accompanying condensed consolidated
financial statements). 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.  Upon initial maturity, the Trust expects to exercise its
option to extend this loan.





Liquidity
outlook and capital requirements





During
the three months ended March 31, 2010, we generated $4,864 of cash from
operations and, when combined with $31,169 of existing cash, we were able to
invest $4,046 of capital into existing communities, distribute $2,906 to our
stockholders and unitholders and end the quarter with $28,384 of
cash.





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 operations, debt refinancing,
existing cash, recycling capital by way of potential asset sales and raising
additional equity capital.





Distributions
for the three months ended March 31, 2010 totaled $2,906 or $0.05 per weighted
average share/unit, compared to cash provided by operations of $4,864, or $0.08
per weighted average share/unit.  Our current targeted annual dividend
rate is $0.20 per share/unit.





Based on
our closing share price of $5.74 on March 31, 2010, our total enterprise value
was $708,409.  With net debt (total debt less cash) of $376,218 at
March 31, 2010, our debt to enterprise value was 53.1% compared 57.2% at
December 31, 2009.  With gross assets of $948,500, which excludes
accumulated depreciation of $148,779, our debt to gross assets was 42.7% at
March 31, 2010 as compared to 42.9% at December 31, 2009.





Management
believes that it has strengthened the Company’s balance sheet through its
follow-on equity offering in July 2009 and the successful pay down and
refinancing of the debt related to the Place-communities in December
2009.  These steps have relieved near-term pressure on our balance
sheet and, coupled with our current annual dividend rate of $0.20 as established
by our Board of Directors in 2009, the Company is positioned to take advantage
of growth opportunities by way of acquisition and development, both on and off
campus.





An
additional source of capital, subject to appropriate market conditions, is the
targeted disposition of non-strategic properties. We continually assess all of
our properties, the markets in which they are located and the colleges and
universities they serve to determine if any dispositions are necessary or
appropriate. 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.





We intend
to invest in additional communities only as suitable opportunities arise. We
also plan to develop communities 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
Second Amended Revolver. We intend to finance property acquisitions and
development projects over the longer term with cash from operations, 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.


35




Our
existing universal shelf registration statement permits us to issue up to
$250,000 in securities, including equity or debt securities, from time to time
in one or more transactions.  As of March 31, 2010, the entire balance
of the amount of securities registered remains available.





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 two wholly-owned,
self-developed communities 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 and other non-recurring capital
expenditures that are needed periodically for our communities as well as
potential community acquisitions and developments. We expect to meet these needs
through existing working capital, cash provided by operations, additional
borrowings under our Second Amended Revolver, 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 communities.  Our Second 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.





Commitments





The
following table summarizes our contractual obligations as of March 31,
2010:





Payment
      due by PeriodLess
      than
                  
                  
                  1-3
                  
                  
                  3-5
                  
                  
                  More
      than 51
      Year
                  
                  
                  Years
                  
                  
                  Years
                  
                  
                  Years
                  
                  
                  TotalCommitments
      and Contractual Obligations:Long-Term
      Debt Obligations(1)
                  
                  $
                  22,991
                  
                  
                  $
                  81,569
                  
                  
                  $
                  133,143
                  
                  
                  $
                  166,899
                  
                  
                  $
                  404,602Contractual
      Interest Obligations(2)
                  
                  
                  16,220
                  
                  
                  
                  39,037
                  
                  
                  
                  26,488
                  
                  
                  
                  24,746
                  
                  
                  
                  106,491Operating
      Lease and Future Purchase Obligations (3)
                  
                  
                  3,337
                  
                  
                  
                  6,511
                  
                  
                  
                  2,262
                  
                  
                  
                  120
                  
                  
                  
                  12,230Capital
      Reserve Obligations(4)
                  
                  
                  1,347
                  
                  
                  
                  3,524
                  
                  
                  
                  2,861
                  
                  
                  
                  3,052
                  
                  
                  
                  10,784Total
                  
                  $
                  43,895
                  
                  
                  $
                  130,641
                  
                  
                  $
                  164,754
                  
                  
                  $
                  194,817
                  
                  
                  $
                  534,107




(1)
                
                Includes
      required monthly principal amortization and amounts due at maturity on
      first mortgage debt secured by student housing properties and amounts due
      under the Second Amended Revolver and construction loan agreements. The
      first mortgage debt does not include $698 of unamortized debt
      premium.




36





(2)
            
            Includes
      contractual fixed-rate interest payments as well as estimates of variable
      rate interest payments based on variable interest rates effective as of
      March 31, 2010.  The Trust has $78,041 of variable rate debt as
      of March 31, 2010.(3)
            
            Includes
      future minimum lease commitments under operating lease obligations and
      future purchase obligations for advertising.(4)
            
            Includes
      future annual contributions to the capital reserve as required by certain
      mortgage debt.





Distributions





We are
required to distribute 90% of our REIT taxable income (excluding the deduction
for dividends paid and 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 and Operating Partnership units. All such distributions are
authorized at the discretion of our board of directors. We may be required to
use borrowings under our Second 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 of directors again lowered the annual dividend target
from $0.41 to $0.20 per share/unit effective with the November 16, 2009
dividend.





Our board
of directors declared a first quarter distribution of $0.05 per share of common
stock for the quarter ending on March 31, 2010. The distribution is payable on
May 17, 2010 to stockholders of record at the close of business on April 30,
2010.





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 joint venture with College Park Apartments ($22,721
outstanding at March 31, 2010). 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 June of 2010.





Additionally,
we hold investments in three other unconsolidated entities that have third-party
mortgage and construction indebtedness totaling $86,179 at March 31,
2010.





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 and/or a
reduction in student enrollment at our principal colleges and
universities.





Item 3.
Quantitative and Qualitative Disclosures about Market Risk.





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




37


For fixed
rate debt, interest rate changes affect the fair market value but do not impact
net income to common stockholders or cash flows. Conversely, for floating rate
debt, interest changes generally do not affect the fair market value but do
impact net income to common stockholders and cash flows, assuming other factors
are held constant. At March 31, 2010, we had fixed rate debt of $326,561.
Holding other variables constant a 100 basis point increase in interest rates
would cause a $14,123 decline in the fair value for our fixed rate debt.
Conversely, a 100 basis point decrease in interest rates would cause a $15,094
increase in the fair value of our fixed rate debt. At March 31, 2010, 80.7%
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
5.91% and an average term to maturity of 5.36 years.





At March
31, 2010, 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.





At March
31, 2010, 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.





Additionally,
in 2008, we borrowed $49,874 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 $49,874 of the 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 gain or loss
associated with this derivative instrument in earnings.





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





Item 4.
Controls and Procedures.





Management’s
Evaluation of Disclosure Controls and Procedures





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





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
Rule 13a-15(e) and 15d-15(e) of the Exchange Act. Based on their evaluation
as of March 31, 2010, 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 March 31, 2010, the Trust continued with the
implementation of a financial reporting analyses package. There were no other
changes in the Trust’s internal control over financial reporting that materially
affected, or are reasonably likely to materially affect, the Trust’s internal
control over financial reporting (as defined in Rule 13a-15(f) and
15d-15(f) of the Exchange Act).


38




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, 2009 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.





On March
23, 2010, the President signed into law the Patient Protection and Affordable
Care Act of 2010 and on March 30, 2010, the President signed into law the Health
Care and Education Reconciliation Act, which in part modified the Patient
Protection and Affordable Care Act.  Together, the two Acts serve as
the primary vehicle for comprehensive health care reform in the United
States.  The Acts are intended to reduce the number of individuals in
the United States without health insurance and effect significant other changes
to the ways in which health care is organized, delivered and
reimbursed.  The complexities and ramifications of the new legislation
are significant, and will be implemented in a phased approach beginning in 2010
and concluding in 2018.  At this time, the effects of health care
reform and its impact on our business, our revenues and financial condition and
those of are tenants are not yet known.  Accordingly, the reform could
adversely affect the cost of providing healthcare coverage generally and the
financial success of our tenants and consequently us.


39




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





Issuer Purchases of Equity
Securities





During
the three months ended March 31, 2010, in connection with our Amended and
Restated Dividend Reinvestment and Stock Purchase Plan (“DRSPP”) for our common
stockholders, we directed the plan administrator to purchase 453 shares of our
common stock for approximately $2 in the open market pursuant to the dividend
reinvestment component of the plan with respect to our dividend for the first
quarter of 2010.  We also directed the plan administrator to purchase
1,184 shares of our common stock for approximately $7 in the open market for
investors pursuant to the direct stock purchase component of the
plan.  The following chart summarizes these purchases of our common
stock for the three months ended March 31, 2010.





Period
                  
                  Total
      Number
                    of Shares
                    Purchased(1)
                  
                  
                  Average
      Price Paid per
                    Share
                  
                  
                  Total
      Number of
                    Shares
      Purchased as
                    Part
      of Publicly
                    Announced
      Plans or
                    Programs
                  
                  
                  Maximum
                    Number
      (or
                    Approximate
                    Dollar
      Value) of
                    Shares
      that May
                    Yet
      Be
                    Purchased
                    Under
      the Plans
                    or
      ProgramsJanuary
      1-31, 2010
                  
                  
                  440
                  
                  
                  $
                  5.33
                  
                  
                  
                  ―
                  
                  
                  
                  ―February
      1-28, 2010
                  
                  
                  849
                  
                  
                  
                  5.30
                  
                  
                  
                  ―
                  
                  
                  
                  ―March
      1-31, 2010
                  
                  
                  348
                  
                  
                  
                  5.74
                  
                  
                  
                  ―
                  
                  
                  
                  ―Total
                  
                  
                  1,637
                  
                  
                  $
                  5.40
                  
                  
                  
                  ―
                  
                  
                  
                  ―





(1) All shares purchased in the open
market pursuant to the terms of our DRSPP.Our board of directors
authorized the issuance or purchase of 4,000,000 shares of common stock under
the DRSPP.


40




Item 3.
Defaults upon Senior Securities.





None.





Item 4.
[Removed and Reserved.]





None.





Item 5. Other Information.





None.




Item 6.
Exhibits.





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




41




SIGNATURES





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





EDUCATION
      REALTY TRUST, INC.Date:
      May 6, 2010
              
              By /s/ Randy ChurcheyRandy
      ChurcheyPresident,
      Chief Executive Officer andDirector
      (Principal Executive Officer)Date:
      May 6, 2010
              
              By /s/ Randall H. BrownRandall H.
      BrownExecutive
      Vice President, Chief FinancialOfficer,
      Treasurer and Secretary(Principal
      Financial Officer)Date:
      May 6, 2010
              
              By /s/ J. Drew KoesterJ. Drew
      KoesterVice
      President, Assistant Secretary and Chief
                Accounting
      Officer(Principal
      Accounting Officer)




42


EXHIBIT
INDEX





Exhibit
      No.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 Annual Report on
      Form 10-K, filed on March 16, 2010).10.1
            Executive
      Employment Agreement between Education Realty Trust, Inc. and Randall L.
      Churchey, effective as of January 1, 2010. (Incorporated by reference to
      Exhibit 10.1 to the Trust’s Current Report on Form 8-K, filed on January
      12, 2010).10.2
            Restricted
      Stock Award Agreement between Education Realty Trust, Inc. and Randall L.
      Churchey, dated as of January 12, 2010 (Incorporated by reference to
      Exhibit 10.2 to the Trust’s Current Report on Form 8-K, filed on January
      12, 2010).10.3
            Separation
      and Release Agreement by and between Craig L. Cardwell and Education
      Realty Trust, Inc., dated as of February 1, 2010 (Incorporated by
      reference to Exhibit 10.1 to the Trust’s Current Report on Form 8-K, filed
      on February 2, 2010).10.4
            Amendment,
      Waiver and Retirement Agreement by and between Education Realty Trust,
      Inc. and Thomas J. Hickey, dated as of March 15, 2010 (Incorporated by
      reference to Exhibit 10.16 to the Trust’s Annual Report on Form 10-K,
      filed on March 16, 2010).10.5
            Incentive
      Compensation Plan for Executive Officers (Incorporated by reference to
      Exhibit 10.38 to the Trust’s Annual Report on Form 10-K, filed on March
      16, 2010).10.6
            Education
      Realty Trust, Inc. 2010 Long-Term Incentive Plan (Incorporated by
      reference to Exhibit 10.40 to the Trust’s Annual Report on Form 10-K,
      filed on March 16, 2010).10.7
            Form
      of Restricted Stock Award Agreement (Time-Vested Restricted Stock) for the
      Education Realty Trust, Inc. 2010 Long-Term Incentive Plan (Incorporated
      by reference to Exhibit 10.41 to the Trust’s Annual Report on Form 10-K,
      filed on March 16, 2010).10.8
            Form
      of Restricted Stock Unit Award Agreement (Performance Shares) for the
      Education Realty Trust, Inc. 2010 Long-Term Incentive Plan (Incorporated
      by reference to Exhibit 10.42 to the Trust’s Annual Report on Form 10-K,
      filed on March 16, 2010).10.9
            Amendment
      No. 1 to Amended and Restated Master Credit Facility Agreement, dated as
      of February 25, 2010, Education Realty Trust, Inc., Education Realty
      Operating Partnership, LP and certain subsidiaries, Red Mortgage Capital
      Inc. and Fannie Mae (Incorporated by reference to Exhibit 10.45 to the
      Trust’s Annual Report on Form 10-K, filed on March 16,
    2010).10.10
            Amendment
      No. 1 to the Education Realty Trust, Inc. 2004 Incentive Plan
      (Incorporated by reference to Exhibit 10.47 to the Trust’s Annual Report
      on Form 10-K, filed on March 16, 2010).12
            Statement
      Regarding Computation of Ratios, filed herewith.31.1
            Certification
      Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act
      (filed herewith).31.2
            Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act
      (filed herewith).32.1
            Chief
      Executive Officer certification pursuant to 18 U.S.C. Section 1350,
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      (furnished herewith).




43





32.2
            Chief
      Financial Officer certification pursuant to 18 U.S.C. Section 1350,
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      (furnished herewith).




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




44