UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-Q


(Mark
One)


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


For the
quarterly period ended September 30, 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  ̈
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes  ̈  No  ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
 
 Large
      accelerated filer  ̈
                    Accelerated
      filer xNon-accelerated
      filer  ̈
                      (Do
      not check if a smaller reporting company)
                    Smaller
      reporting company  ̈
 
 Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes  ̈ No x





As of
November 4, 2010, the latest practicable date, the Registrant had outstanding
58,607,420shares of
common stock, $.01 par value per share.







EDUCATION REALTY TRUST, INC.


FORM
10-Q


QUARTER
ENDED SEPTEMBER 30, 2010


TABLE
OF CONTENTS


PagePART
      I—FINANCIAL INFORMATIONItem 1. Financial
      Statements (unaudited)
                      
                      
                      3Condensed
      Consolidated Balance Sheets of Education Realty Trust, Inc. and
      Subsidiaries as of September 30, 2010 and December 31,
      2009
                      
                      
                      3Condensed
      Consolidated Statements of Operations of Education Realty Trust, Inc. and
      Subsidiaries for the nine months ended September 30, 2010 and
      2009
                      
                      
                      4Condensed
      Consolidated Statements of Operations of Education Realty Trust, Inc. and
      Subsidiaries for the three months ended September 30, 2010 and
      2009
                      
                      
                      5Condensed
      Consolidated Statements of Changes in Equity of Education Realty Trust,
      Inc. and Subsidiaries for the nine months ended September 30, 2010 and
      2009
                      
                      
                      6Condensed
      Consolidated Statements of Cash Flows of Education Realty Trust, Inc. and
      Subsidiaries for the nine months ended September 30, 2010 and
      2009
                      
                      
                      7Notes
      to Condensed Consolidated Financial Statements
                      
                      
                      9Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations
                      
                      
                      26Item 3.
      Quantitative and Qualitative Disclosures about Market Risk
                      
                      
                      46Item 4.
      Controls and Procedures
                      
                      
                      47PART
      II — OTHER INFORMATIONItem 1.
      Legal Proceedings
                      
                      
                      48Item 1A.
      Risk Factors
                      
                      
                      48Item 2.
      Unregistered Sales of Equity Securities and Use of
Proceeds
                      
                      
                      49Item 3.
      Defaults upon Senior Securities
                      
                      
                      50Item 4.
      Removed and Reserved
                      
                      
                      50Item 5.
      Other Information
                      
                      
                      50Item 6.
      Exhibits
                      
                      
                      50Signatures
                      
                      
                      51




2





Part
I — Financial Information





Item 1.
Financial Statements.





CONDENSED
CONSOLIDATED BALANCE SHEETS


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


September
      30, 2010
                            
                            
                            December
      31, 2009(Unaudited)ASSETSAssets:Student
      housing properties, net
                            
                            $
                            708,496
                            
                            
                            $
                            749,884Assets
      under development
                            
                            
                            446
                            
                            
                            
                            —Corporate
      office furniture, net
                            
                            
                            869
                            
                            
                            
                            1,118Cash
      and cash equivalents
                            
                            
                            27,960
                            
                            
                            
                            31,169Restricted
      cash
                            
                            
                            6,488
                            
                            
                            
                            4,579Student
      contracts receivable, net
                            
                            
                            379
                            
                            
                            
                            386Receivable
      from affiliate
                            
                            
                            —
                            
                            
                            
                            18Management
      fee receivable from third party
                            
                            
                            395
                            
                            
                            
                            277Goodwill
      and other intangibles, net
                            
                            
                            3,070
                            
                            
                            
                            3,073Other
      assets
                            
                            
                            21,663
                            
                            
                            
                            14,109Total
      assets
                            
                            $
                            769,766
                            
                            
                            $
                            804,613LIABILITIES
      AND EQUITYLiabilities:Mortgage
      and construction loans, net of unamortized
premium/discount
                            
                            $
                            398,087
                            
                            
                            $
                            406,365Accounts
      payable
                            
                            
                            287
                            
                            
                            
                            235Accrued
      expenses
                            
                            
                            19,721
                            
                            
                            
                            11,423Deferred
      revenue
                            
                            
                            14,499
                            
                            
                            
                            10,346Total
      liabilities
                            
                            
                            432,594
                            
                            
                            
                            428,369Commitments
      and contingencies (see Note 6)
                            
                            
                            —
                            
                            
                            
                            —Redeemable
      noncontrolling interests
                            
                            
                            10,035
                            
                            
                            
                            11,079Equity:Education
      Realty Trust, Inc. stockholders’ equity:Common
      stock, $.01 par value per share, 200,000,000 shares authorized, 58,347,249
      and 56,705,605 shares issued and outstanding at September 30, 2010 and
      December 31, 2009, respectively
                            
                            
                            584
                            
                            
                            
                            567Preferred
      stock, $0.01 par value per share, 50,000,000 shares authorized, no shares
      issued and outstanding
                            
                            
                            —
                            
                            
                            
                            —Additional
      paid-in capital
                            
                            
                            415,429
                            
                            
                            
                            410,455Accumulated
      deficit
                            
                            
                            (88,876
                            )
                            
                            
                            (48,636
                            )Total
      Education Realty Trust, Inc. stockholders’ equity
                            
                            
                            327,137
                            
                            
                            
                            362,386Noncontrolling
      interest
                            
                            
                            —
                            
                            
                            
                            2,779Total
      equity
                            
                            
                            327,137
                            
                            
                            
                            365,165Total
      liabilities and equity
                            
                            $
                            769,766
                            
                            
                            $
                            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)


Nine
      months
                                              
                                              
                                              Nine
      monthsended
                                              
                                              
                                              endedSeptember
      30,
                                              
                                              
                                              September
      30,2010
                                              
                                              
                                              2009Revenues:Student
      housing leasing revenue
                                              
                                              $
                                              84,628
                                              
                                              
                                              $
                                              82,962Other
      leasing revenue
                                              
                                              
                                              77
                                              
                                              
                                              
                                              —Third-party
      development consulting services
                                              
                                              
                                              1,675
                                              
                                              
                                              
                                              5,275Third-party
      management services
                                              
                                              
                                              2,335
                                              
                                              
                                              
                                              2,370Operating
      expense reimbursements
                                              
                                              
                                              11,017
                                              
                                              
                                              
                                              7,749Total
      revenues
                                              
                                              
                                              99,732
                                              
                                              
                                              
                                              98,356Operating
      expenses:Student
      housing leasing operations
                                              
                                              
                                              44,702
                                              
                                              
                                              
                                              44,491General
      and administrative
                                              
                                              
                                              11,661
                                              
                                              
                                              
                                              11,738Depreciation
      and amortization
                                              
                                              
                                              22,592
                                              
                                              
                                              
                                              21,501Loss
      on impairment
                                              
                                              
                                              33,610
                                              
                                              
                                              
                                              —Reimbursable
      operating expenses
                                              
                                              
                                              10,101
                                              
                                              
                                              
                                              7,749Total
      operating expenses
                                              
                                              
                                              122,666
                                              
                                              
                                              
                                              85,479Operating
      income (loss)
                                              
                                              
                                              (22,934
                                              )
                                              
                                              
                                              12,877Nonoperating
      expenses:Interest
      expense
                                              
                                              
                                              16,653
                                              
                                              
                                              
                                              18,825Amortization
      of deferred financing costs
                                              
                                              
                                              974
                                              
                                              
                                              
                                              749Interest
      income
                                              
                                              
                                              (402
                                              )
                                              
                                              
                                              (334
                                              )Gain
      on extinguishment of debt
                                              
                                              
                                              —
                                              
                                              
                                              
                                              (830
                                              )Total
      nonoperating expenses
                                              
                                              
                                              17,225
                                              
                                              
                                              
                                              18,410Loss
      before equity in losses of unconsolidated entities, income taxes and
      discontinued operations
                                              
                                              
                                              (40,159
                                              )
                                              
                                              
                                              (5,533
                                              )Equity
      in losses of unconsolidated entities
                                              
                                              
                                              (242
                                              )
                                              
                                              
                                              (6
                                              )Loss
      before income taxes and discontinued operations
                                              
                                              
                                              (40,401
                                              )
                                              
                                              
                                              (5,539
                                              )Income
      tax expense
                                              
                                              
                                              268
                                              
                                              
                                              
                                              1,203Loss
      from continuing operations
                                              
                                              
                                              (40,669
                                              )
                                              
                                              
                                              (6,742
                                              )Loss
      from discontinued operations
                                              
                                              
                                              —
                                              
                                              
                                              
                                              (21
                                              )Net
      loss
                                              
                                              
                                              (40,669
                                              )
                                              
                                              
                                              (6,763
                                              )Less:
      Net loss attributable to the noncontrolling interest
                                              
                                              
                                              (429
                                              )
                                              
                                              
                                              (43
                                              )Net
      loss attributable to Education Realty Trust, Inc.
                                              
                                              $
                                              (40,240
                                              )
                                              
                                              $
                                              (6,720
                                              )Earnings
      per share information:Loss
      attributable to Education Realty Trust, Inc. common stockholders per share
      — basic and diluted:Continuing
      operations
                                              
                                              $
                                              (0.70
                                              )
                                              
                                              $
                                              (0.19
                                              )Discontinued
      operations
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —Net
      loss attributable to Education Realty Trust, Inc. common stockholders per
      share
                                              
                                              $
                                              (0.70
                                              )
                                              
                                              $
                                              (0.19
                                              )Weighted
      average shares of common stock outstanding – basic
                                              
                                              
                                              57,120,291
                                              
                                              
                                              
                                              35,013,814Weighted
      average shares of common stock outstanding – diluted
                                              
                                              
                                              57,120,291
                                              
                                              
                                              
                                              35,013,814Amounts
      attributable to Education Realty Trust, Inc. – common
      stockholders:Loss
      from continuing operations, net of tax
                                              
                                              $
                                              (40,240
                                              )
                                              
                                              $
                                              (6,700
                                              )Loss
      from discontinued operations, net of tax
                                              
                                              
                                              —
                                              
                                              
                                              
                                              (20
                                              )Net
      loss
                                              
                                              $
                                              (40,240
                                              )
                                              
                                              $
                                              (6,720
                                              )Distributions
      per share of common stock
                                              
                                              $
                                              0.1500
                                              
                                              
                                              $
                                              0.3075


See
accompanying notes to the condensed consolidated financial
statements.


4


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


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


(Unaudited)


Three
      months
                      
                      
                      Three
      monthsended
                      
                      
                      endedSeptember
      30,
                      
                      
                      September
      30,2010
                      
                      
                      2009Revenues:Student
      housing leasing revenue
                      
                      $
                      26,583
                      
                      
                      $
                      25,682Other
      leasing revenue
                      
                      
                      77
                      
                      
                      
                      —Third-party
      development consulting services
                      
                      
                      334
                      
                      
                      
                      2,559Third-party
      management services
                      
                      
                      762
                      
                      
                      
                      738Operating
      expense reimbursements
                      
                      
                      7,152
                      
                      
                      
                      3,523Total
      revenues
                      
                      
                      34,908
                      
                      
                      
                      32,502Operating
      expenses:Student
      housing leasing operations
                      
                      
                      18,056
                      
                      
                      
                      18,392General
      and administrative
                      
                      
                      3,325
                      
                      
                      
                      3,903Depreciation
      and amortization
                      
                      
                      7,701
                      
                      
                      
                      7,227Loss
      on impairment
                      
                      
                      33,610
                      
                      
                      
                      —Reimbursable
      operating expenses
                      
                      
                      6,236
                      
                      
                      
                      3,523Total
      operating expenses
                      
                      
                      68,928
                      
                      
                      
                      33,045Operating
      loss
                      
                      
                      (34,020
                      )
                      
                      
                      (543
                      )Nonoperating
      expenses:Interest
      expense
                      
                      
                      5,524
                      
                      
                      
                      6,323Amortization
      of deferred financing costs
                      
                      
                      306
                      
                      
                      
                      230Interest
      income
                      
                      
                      (174
                      )
                      
                      
                      (180
                      )Total
      nonoperating expenses
                      
                      
                      5,656
                      
                      
                      
                      6,373Loss
      before equity in losses of unconsolidated entities, income taxes and
      discontinued operations
                      
                      
                      (39,676
                      )
                      
                      
                      (6,916
                      )Equity
      in losses of unconsolidated entities
                      
                      
                      (328
                      )
                      
                      
                      (152
                      )Loss
      before income taxes and discontinued operations
                      
                      
                      (40,004
                      )
                      
                      
                      (7,068
                      )Income
      tax expense
                      
                      
                      444
                      
                      
                      
                      513Loss
      from continuing operations
                      
                      
                      (40,448
                      )
                      
                      
                      (7,581
                      )Loss
      from discontinued operations
                      
                      
                      —
                      
                      
                      
                      (3
                      )Net
      loss
                      
                      
                      (40,448
                      )
                      
                      
                      (7,584
                      )Less:
      Net loss attributable to the noncontrolling interest
                      
                      
                      (628
                      )
                      
                      
                      (200
                      )Net
      loss attributable to Education Realty Trust, Inc.
                      
                      $
                      (39,820
                      )
                      
                      $
                      (7,384
                      )Earnings
      per share information:Loss
      attributable to Education Realty Trust, Inc. common stockholders per share
      — basic and diluted:Continuing
      operations
                      
                      $
                      (0.69
                      )
                      
                      $
                      (0.15
                      )Discontinued
      operations
                      
                      
                      —
                      
                      
                      
                      —Net
      loss attributable to Education Realty Trust, Inc. common stockholders per
      share
                      
                      $
                      (0.69
                      )
                      
                      $
                      (0.15
                      )Weighted
      average shares of common stock outstanding – basic
                      
                      
                      57,719,401
                      
                      
                      
                      47,932,410Weighted
      average shares of common stock outstanding – diluted
                      
                      
                      57,719,401
                      
                      
                      
                      47,932,410Amounts
      attributable to Education Realty Trust, Inc. – common
      stockholders:Loss
      from continuing operations, net of tax
                      
                      $
                      (39,820
                      )
                      
                      $
                      (7,381
                      )Loss
      from discontinued operations, net of tax
                      
                      
                      —
                      
                      
                      
                      (3
                      )Net
      loss
                      
                      $
                      (39,820
                      )
                      
                      $
                      (7,384
                      )Distributions
      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
                
                
                8,000
                
                
                
                —
                
                
                
                34
                
                
                
                —
                
                
                
                —
                
                
                
                34Proceeds
      from issuances, net of offering costs
                
                
                28,175,000
                
                
                
                282
                
                
                
                115,851
                
                
                
                —
                
                
                
                —
                
                
                
                116,133Amortization
      of restricted stock
                
                
                26,994
                
                
                
                —
                
                
                
                453
                
                
                
                —
                
                
                
                —
                
                
                
                453Cash
      dividends
                
                
                —
                
                
                
                —
                
                
                
                (11,656
                )
                
                
                —
                
                
                
                (85
                )
                
                
                (11,741
                )PIUs
      forfeited
                
                
                —
                
                
                
                —
                
                
                
                30
                
                
                
                —
                
                
                
                (30
                )
                
                
                —PIUs
      issued
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                13
                
                
                
                13Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (6,720
                )
                
                
                (14
                )
                
                
                (6,734
                )Balance,
      September 30, 2009
                
                
                56,685,849
                
                
                $
                567
                
                
                $
                413,068
                
                
                $
                (48,101
                )
                
                $
                2,802
                
                
                $
                368,336Balance,
      December 31, 2009
                
                
                56,705,605
                
                
                $
                567
                
                
                $
                410,455
                
                
                $
                (48,636)
                
                
                $
                2,779
                
                
                $
                365,165Common
      stock issued:To
      officers and directors
                
                
                34,000
                
                
                
                —
                
                
                
                336
                
                
                
                —
                
                
                
                —
                
                
                
                336To
      retire PIUs
                
                
                50,826
                
                
                
                1
                
                
                
                196
                
                
                
                —
                
                
                
                —
                
                
                
                197Proceeds
      from issuances, net of offering costs
                
                
                1,508,628
                
                
                
                16
                
                
                
                10,229
                
                
                
                —
                
                
                
                —
                
                
                
                10,245Amortization
      of restricted stock
                
                
                48,190
                
                
                
                —
                
                
                
                474
                
                
                
                —
                
                
                
                —
                
                
                
                474PIUs
      forfeited and redeemed
                
                
                —
                
                
                
                —
                
                
                
                2,286
                
                
                
                —
                
                
                
                (2,767)
                
                
                
                (481
                )Cash
      dividends
                
                
                —
                
                
                
                —
                
                
                
                (8,547
                )
                
                
                —
                
                
                
                (22)
                
                
                
                (8,569
                )Net
      income (loss)
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (40,240
                )
                
                
                10
                
                
                
                (40,230
                )Balance,
      September 30, 2010
                
                
                58,347,249
                
                
                $
                584
                
                
                $
                415,429
                
                
                $
                (88,876
                )
                
                $
                —
                
                
                $
                327,137





See
accompanying notes to the condensed consolidated financial
statements.


6




CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts
in thousands)


(Unaudited)


Nine
      months
                                                  
                                                  
                                                  Nine
      monthsended
                                                  
                                                  
                                                  endedSeptember
      30,
                                                  
                                                  
                                                  September
      30,2010
                                                  
                                                  
                                                  2009Operating
      activities:Net
      loss
                                                  
                                                  $
                                                  (40,669
                                                  )
                                                  
                                                  $
                                                  (6,763
                                                  )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
                                                  
                                                  
                                                  22,592
                                                  
                                                  
                                                  
                                                  21,501Depreciation
      included in discontinued operations
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  25Deferred tax
      (benefit) expense
                                                  
                                                  
                                                  (667
                                                  )
                                                  
                                                  
                                                  143Loss
      (gain)  on disposal of assets
                                                  
                                                  
                                                  20
                                                  
                                                  
                                                  
                                                  (3
                                                  )Loss
      on impairment
                                                  
                                                  
                                                  33,610
                                                  
                                                  
                                                  
                                                  —Gain
      on extinguishment of debt
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  (830
                                                  )Amortization
      of deferred financing costs
                                                  
                                                  
                                                  974
                                                  
                                                  
                                                  
                                                  749Loss
      (gain) on interest rate cap
                                                  
                                                  
                                                  258
                                                  
                                                  
                                                  
                                                  (237
                                                  )Amortization
      of unamortized debt premiums/discounts
                                                  
                                                  
                                                  (298
                                                  )
                                                  
                                                  
                                                  (304
                                                  )Distributions
      of earnings from unconsolidated entities
                                                  
                                                  
                                                  995
                                                  
                                                  
                                                  
                                                  294Noncash
      compensation expense related to stock-based incentive
    awards
                                                  
                                                  
                                                  583
                                                  
                                                  
                                                  
                                                  509Equity
      in losses of unconsolidated entities
                                                  
                                                  
                                                  242
                                                  
                                                  
                                                  
                                                  6Change
      in operating assets and liabilities
                                                  
                                                  
                                                  8,357
                                                  
                                                  
                                                  
                                                  14,355Net
      cash provided by operating activities
                                                  
                                                  
                                                  25,997
                                                  
                                                  
                                                  
                                                  29,445Investing
      activities:Purchase
      of corporate furniture and fixtures
                                                  
                                                  
                                                  (64
                                                  )
                                                  
                                                  
                                                  (85
                                                  )Restricted
      cash
                                                  
                                                  
                                                  (1,909
                                                  )
                                                  
                                                  
                                                  (2,347
                                                  )Investment
      in student housing properties
                                                  
                                                  
                                                  (14,518
                                                  )
                                                  
                                                  
                                                  (16,102
                                                  )Proceeds
      from sale of student housing properties
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  154Payments
      on notes receivable
                                                  
                                                  
                                                  2,078
                                                  
                                                  
                                                  
                                                  —Loan
      to participating development
                                                  
                                                  
                                                  (7,231
                                                  )
                                                  
                                                  
                                                  —Insurance
      proceeds received from property damage
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  224Investment
      in assets under development
                                                  
                                                  
                                                  (446
                                                  )
                                                  
                                                  
                                                  (22,676
                                                  )Investment
      in unconsolidated entities
                                                  
                                                  
                                                  (40
                                                  )
                                                  
                                                  
                                                  (384
                                                  )Net
      cash used in investing activities
                                                  
                                                  
                                                  (22,130
                                                  )
                                                  
                                                  
                                                  (41,216
                                                  )Financing
      activities:Payment
      of mortgage and construction notes
                                                  
                                                  
                                                  (7,979
                                                  )
                                                  
                                                  
                                                  (2,162
                                                  )Borrowings
      under mortgage notes and construction loans
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  17,815Borrowings
      under the Amended Revolver
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  1,000Repayments
      under the Amended Revolver
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  (33,900
                                                  )Payment
      of offering costs
                                                  
                                                  
                                                  (148
                                                  )
                                                  
                                                  
                                                  (6,428
                                                  )Debt
      refund (issuance) costs
                                                  
                                                  
                                                  6
                                                  
                                                  
                                                  
                                                  (588
                                                  )Proceeds
      from refund of defeasance costs
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  830Proceeds
      from common stock offering
                                                  
                                                  
                                                  10,385
                                                  
                                                  
                                                  
                                                  122,561Redemption
      of noncontrolling interests
                                                  
                                                  
                                                  (167
                                                  )
                                                  
                                                  
                                                  —Dividends
      and distributions paid to common and restricted
    stockholders
                                                  
                                                  
                                                  (8,547
                                                  )
                                                  
                                                  
                                                  (11,656
                                                  )Dividends
      and distributions paid to noncontrolling interests
                                                  
                                                  
                                                  (626
                                                  )
                                                  
                                                  
                                                  (764
                                                  )Net
      cash (used in) provided by financing activities
                                                  
                                                  
                                                  (7,076
                                                  )
                                                  
                                                  
                                                  86,708Net
      (decrease) increase in cash and cash equivalents
                                                  
                                                  
                                                  (3,209
                                                  )
                                                  
                                                  
                                                  74,937Cash
      and cash equivalents, beginning of period
                                                  
                                                  
                                                  31,169
                                                  
                                                  
                                                  
                                                  9,003Cash
      and cash equivalents, end of period
                                                  
                                                  $
                                                  27,960
                                                  
                                                  
                                                  $
                                                  83,940





See
accompanying notes to the condensed consolidated financial
statements.




7




Nine
      months
                
                
                Nine
      monthsended
                
                
                endedSeptember
      30,
                
                
                September
      30,2010
                
                
                2009Supplemental
      disclosure of cash flow information:Interest
      paid
                
                $
                16,438
                
                
                $
                18,989Income
      taxes paid
                
                $
                224
                
                
                $
                695Supplemental
      disclosure of noncash activities:Note
      receivable received in connection with sale of student housing
      property
                
                $
                —
                
                
                $
                2,300





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 September 30, 2010, the Trust had $26,274 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
15 to 40 years, land improvements are depreciated over 15 years and
furniture, fixtures, and equipment are depreciated over 3 to 7 years.
Depreciation is computed using the straight-line method for financial reporting
purposes over the estimated useful life.


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. Management estimates fair value using discounted cash flow models,
market appraisals if available, and other market participant data. During the
nine months ended September 30, 2010, management determined that the carrying
value of nine different student housing communities may not be recoverable due
to a decline in estimated net operating income and/or the potential sale of
these assets. The fair value of these properties was estimated and management
recorded an impairment loss of $33,610 in the accompanying condensed
consolidated statement of operations.





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.


11





On June
2, 2010, the Trust entered into two equity distribution
agreements.  Pursuant to the terms and conditions of the agreements,
the Trust may issue and sell shares of its common stock having an aggregate
offering amount of up to $50,000. Sales of the common stock will depend upon
market conditions and other factors to be determined by the Trust and may be
made in transactions that are deemed to be “at-the-market” offerings as defined
in Rule 415 under the Securities Act of 1933, as amended. The Trust has no
obligation to sell any of the common stock, and may at any time suspend offers
under the agreements or terminate the agreements. As of September 30, 2010, the
Trust had sold 1,502,400 shares of common stock under the equity distribution
program for net proceeds of approximately $10,347.





On May
19, 2010, the Trust’s stockholders approved the Education Realty Trust, Inc.
Employee Stock Purchase Plan (the “ESPP”) which became effective on July 1,
2010. Pursuant to the ESPP, all employees of the Trust are eligible to make
periodic purchases of common stock through payroll
deductions.  Subject to the discretion of the compensation committee
of the board of directors, the purchase price per share of common stock
purchased by employees under the ESPP is 85% of the fair market value on the
applicable purchase date.  The Trust reserved 300,000 shares of common
stock for sale under the ESPP.  The aggregate cost of the ESPP
(generally the 15% discount on the shares purchased) is recorded by the Trust as
a period expense. Total compensation expense relating to the ESPP was $6 for the
three months ended September 30, 2010.





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 approximately $122,561.  The net proceeds to
the Trust, after the underwriting discount and other expenses of the
offering were approximately $116,133.





Debt
premiums/discounts





Differences
between the estimated fair value of debt and the principal value of debt assumed
in connection with student housing property acquisitions are amortized over the
term of the related debt as an offset to interest expense using the effective
interest method.





Income
taxes





The Trust
qualifies as a REIT under the Code. The Trust is generally not subject to
federal, state and local income taxes on any of its taxable income that it
distributes if it distributes at least 90% of its taxable income for each tax
year to its stockholders and meets certain other requirements. 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.





The Trust
has elected to treat its management company, AOES, as a taxable REIT subsidiary
(“TRS”). The TRS is subject to federal, state and local income taxes. AOES
manages the Trust’s non-REIT activities which include management services and
development services, which are provided through AODC. Deferred tax assets and
liabilities are recognized based on the difference between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates in effect in the years in which those temporary differences
are expected to reverse.





The Trust
had no unrecognized tax benefits as of September 30, 2010 and
2009.  As of September 30, 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 September 30, 2010, open tax years
generally include tax years for 2006, 2007, 2008 and 2009. The Trust’s policy is
to include interest and penalties related to unrecognized tax benefits in
general and administrative expenses.  At September 30, 2010 and 2009,
the Trust had no interest or penalties recorded related to unrecognized tax
benefits.


12





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 and net income attributable to
noncontrolling interests in the accompanying condensed consolidated statement of
operations.  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 were 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. During June 2010, all of the
outstanding PIUs were redeemed by the Trust for $167 of cash and 50,826 shares
of common stock that had a market value of $314 (see Note 9).





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.





As of
September 30, 2010 and 2009, the following potentially dilutive securities were
outstanding but were not included in the computation of diluted earnings per
share because the effects of their inclusion would be
anti-dilutive:





2010
                
                
                2009Operating
      Partnership units
                
                
                903,738
                
                
                
                913,738University
      Towers Operating Partnership units
                
                
                207,257
                
                
                
                207,257Profits
      Interest Units
                
                
                —
                
                
                
                277,500Total
      potentially dilutive securities
                
                
                1,110,995
                
                
                
                1,398,495





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


13


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 accumulated impairment loss
recorded by the Trust as of December 31, 2008 is $388. No additional
impairment has been recorded through September 30, 2010. The carrying value of
goodwill was $3,070 at September 30, 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 September 30, 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. 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.





Other leasing revenue — On
August 1, 2010, the Trust leased the student housing community known as
Collegiate Village located in Macon, Georgia to Macon State College (“MSC”) for
monthly rent of $30 for a period of one year.  MSC will operate and
manage the property while the lease is in place.  MSC has the option
to renew the lease for one additional year or has the option to purchase the
property for $7,500 plus the cost of capital improvements made at the request of
MSC.  The purchase option can be exercised at any time between
February 28, 2011 and July 31, 2011. During the nine months ended September 30,
2010, the Trust recognized $77 in other leasing revenue related to the
lease.





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 nine months ended September
30, 2010 and 2009, there was no revenue and $1,224 of revenue recognized related
to cost savings agreements on development projects, respectively.





On July
14, 2010, the Trust entered into definitive agreements for the development,
financing and management of a $60,700, 20-story, 572-bed graduate student
housing complex at the Science + Technology Park at Johns Hopkins Medical
Institute.  The Trust will develop and manage the building which will
be constructed on land owned by Johns Hopkins University and leased to a
subsidiary of East Baltimore Development, Inc., a nonprofit partnership of
private and public entities dedicated to Baltimore’s urban revitalization. Under
terms of the agreements, the Trust will (a) receive development and construction
oversight fees and reimbursement of pre-development expenses, (b) invest in the
form of an $18,000 second mortgage, (c) receive a $3,000 fee for providing a
repayment guarantee of the construction first mortgage, and (d) receive a
10-year management contract. At September 30, 2010, the note receivable for the
second mortgage had a balance of $7,231 and is recorded in other assets in the
accompanying condensed consolidated balance sheet. Due to its financing
commitments to the project along with other factors, the Trust will not
recognize the development services revenue, guarantee fee revenue and interest
income earned on the second mortgage until the second mortgage is
repaid.


14





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 development consulting services





Costs
associated with the pursuit of third-party 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.





Costs
directly associated with internal development projects are capitalized as part
of the cost of the project.





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.





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.


15





3.
Investments in unconsolidated entities





As of
September 30, 2010, the Trust had investments, directly or indirectly, in the
following active unconsolidated joint ventures and limited liability companies
that are accounted for under the equity method:





•
            University
      Village-Greensboro LLC, a Delaware limited liability company, 25% owned by
      the Operating Partnership





•
            WEDR
      Riverside Investors V, LLC, a Delaware limited liability company, 10%
      owned by the Operating Partnership





•
            APF
      EDR, LP, a Delaware limited partnership, 10% owned by the Operating
      Partnership





•
            APF
      EDR Food Services LP, a Delaware limited partnership, 10% owned by the
      Operating Partnership





•
            WEDR
      Stinson Investors V, LLC, a Delaware limited liability company, 10% owned
      by the Operating Partnership





The
following is a summary of financial information for the Trust’s unconsolidated
joint ventures, limited liability companies and limited partnerships for the
nine months ended September 30, 2010 and 2009:





2010
                
                2009Results
      of Operations:Revenues
                
                $
                10,659
                
                
                $
                11,718Net
      loss
                
                
                (2,856
                )
                
                
                (753
                )Equity
      in earnings (losses) of unconsolidated entities
                
                $
                (242
                )
                
                $
                (6
                )





These
entities primarily own collegiate student housing communities which are managed
by the Trust.  As of September 30, 2010 and December 31, 2009, the
Trust’s investment in unconsolidated entities totaled $252 and $1,450,
respectively.  The decline in the Trust’s investment in unconsolidated
entities is primarily due to the sale of the majority of the assets of the APF
EDR, LP and APF EDR Food Services LP joint ventures during the three months
ended September 30, 2010.  The Trust recognized $137 as its
portion of the loss on the sale of assets as part of equity in losses of
unconsolidated entities in the condensed consolidated statement of operations
and recorded its share of the proceeds from the sale in the amount of $676 as a
distribution in the condensed consolidated financial statements.





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 previous
facility 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 September 30, 2010, our borrowing base was $43,347, 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 $41,847.





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.


16





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. As of September 30, 2010, the Trust was in compliance with all covenants
discussed above.





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 three 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
September 30, 2010, the Trust had outstanding mortgage and construction
indebtedness of $397,588 (excluding unamortized debt premium of
$499).  $23,794 relates to construction debt that is disclosed
below and $132,078 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 $241,716 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”).  $48,816 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. This
variable rate debt had a weighted average interest rate of 3.64% as of September
30, 2010. The remaining outstanding balance of $192,900 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. The fair value of the interest rate cap is
determined using available market information or other appropriate valuation
methodologies and is classified as level 2 as defined in the authoritative
guidance. At September 30, 2010 and December 31, 2009, the cap had a value of
$28 and $286, respectively, and is classified in other assets in the
accompanying condensed consolidated balance sheets.





At
September 30, 2010, we had borrowed $10,688 and $4,281 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 were interest only
through June 14, 2010. On June 14, 2010, the Trust paid down $5,013 of the
outstanding construction debt and extended the maturity date until June 28,
2012. Going forward, a debt service coverage ratio calculated annually on a
rolling 12 months basis, of not less than 1.25 to 1, must be maintained
with principal and interest being repaid on a monthly basis.





At
September 30, 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.





The
scheduled maturities of outstanding mortgage and construction indebtedness at
September 30, 2010 are as follows:


17





Fiscal
      Year Ending2010
      (3 months ending December 31, 2010)
                                    
                                    $
                                    1,1122011
                                    
                                    
                                    13,3672012
                                    
                                    
                                    83,0672013
                                    
                                    
                                    33,0282014
                                    
                                    
                                    100,115Thereafter
                                    
                                    
                                    166,899Total
                                    
                                    
                                    397,588Unamortized
      debt premium
                                    
                                    
                                    499Outstanding
      at September 30, 2010, net of unamortized premiums
                                    
                                    $
                                    398,087





At
September 30, 2010, the outstanding mortgage and construction debt had a
weighted average interest rate of 5.37% and carried a weighted average term to
maturity of 4.46 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 net operating income, which is defined as
income before depreciation, amortization, impairment losses, interest expense
(income), gains (losses) on extinguishment of debt, equity in earnings of
unconsolidated entities, and noncontrolling interests. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies. Intercompany fees are reflected
at the contractually stipulated amounts. Discontinued operations are not
included in segment reporting as management addresses these items on a corporate
level. The following table represents segment information for the nine months
ended September 30, 2010 and 2009:





Nine
      Months Ended September 30, 2010
                    
                    
                    Nine Months
      Ended September 30, 2009Student
                    
                    
                    Development
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    Student
                    
                    
                    DevelopmentHousing
                    
                    
                    Consulting
                    
                    
                    Management
                    
                    
                    
                    
                    
                    
                    
                    
                    Housing
                    
                    
                    Consulting
                    
                    
                    ManagementLeasing
                    
                    
                    Services
                    
                    
                    Services
                    
                    
                    Eliminations
                    
                    
                    Total
                    
                    
                    Leasing
                    
                    
                    Services
                    
                    
                    Services
                    
                    
                    Eliminations
                    
                    
                    TotalSegment
      revenues:Student
      housing leasing revenue
                    
                    $
                    84,628
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    84,628
                    
                    
                    $
                    82,962
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    82,962Other
      leasing revenue
                    
                    
                    77
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    77
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Third-party
      development consulting services
                    
                    
                    —
                    
                    
                    
                    1,777
                    
                    
                    
                    —
                    
                    
                    
                    (102)
                    
                    
                    
                    1,675
                    
                    
                    
                    —
                    
                    
                    
                    5,275
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    5,275Third-party
      management services
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    2,335
                    
                    
                    
                    —
                    
                    
                    
                    2,335
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    2,370
                    
                    
                    
                    —
                    
                    
                    
                    2,370Intersegment
      revenues
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    3,328
                    
                    
                    
                    (3,328
                    )
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    1,128
                    
                    
                    
                    3,289
                    
                    
                    
                    (4,417
                    )
                    
                    
                    —Operating
      expense reimbursements
                    
                    
                    —
                    
                    
                    
                    916
                    
                    
                    
                    —
                    
                    
                    
                    10,101
                    
                    
                    
                    11,017
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    7,749
                    
                    
                    
                    7,749Total
      segment revenues
                    
                    
                    84,705
                    
                    
                    
                    2,693
                    
                    
                    
                    5,663
                    
                    
                    
                    6,671
                    
                    
                    
                    99,732
                    
                    
                    
                    82,962
                    
                    
                    
                    6,403
                    
                    
                    
                    5,659
                    
                    
                    
                    3,332
                    
                    
                    
                    98,356Segment
      operating expenses:Student
      housing leasing operations
                    
                    
                    44,702
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    44,702
                    
                    
                    
                    44,491
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    44,491General
      and administrative
                    
                    
                    —
                    
                    
                    
                    2,071
                    
                    
                    
                    5,561
                    
                    
                    
                    (63
                    )
                    
                    
                    7,569
                    
                    
                    
                    —
                    
                    
                    
                    2,402
                    
                    
                    
                    5,488
                    
                    
                    
                    (96
                    )
                    
                    
                    7,794Intersegment
      expenses
                    
                    
                    3,328
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (3,328
                    )
                    
                    
                    —
                    
                    
                    
                    3,289
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (3,289
                    )
                    
                    
                    —Reimbursable
      operating expenses
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    10,101
                    
                    
                    
                    10,101
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    7,749
                    
                    
                    
                    7,749Total
      segment operating expenses
                    
                    
                    48,030
                    
                    
                    
                    2,071
                    
                    
                    
                    5,561
                    
                    
                    
                    6,710
                    
                    
                    
                    62,372
                    
                    
                    
                    47,780
                    
                    
                    
                    2,402
                    
                    
                    
                    5,488
                    
                    
                    
                    4,364
                    
                    
                    
                    60,034Net
      operating income (loss) (1)
                    
                    $
                    36,675
                    
                    
                    $
                    622
                    
                    
                    $
                    102
                    
                    
                    $
                    (39
                    )
                    
                    $
                    37,360
                    
                    
                    $
                    35,182
                    
                    
                    $
                    4,001
                    
                    
                    $
                    171
                    
                    
                    $
                    (1,032
                    )
                    
                    $
                    38,322Total
      segment assets, as of September 30, 2010 and December 31, 2009
      (2)
                    
                    $
                    726,393
                    
                    
                    $
                    6,197
                    
                    
                    $
                    4,682
                    
                    
                    $
                    —
                    
                    
                    $
                    737,272
                    
                    
                    $
                    766,655
                    
                    
                    $
                    3,742
                    
                    
                    $
                    5,535
                    
                    
                    $
                    —
                    
                    
                    $
                    775,932




18





(1)
            The
      following is a reconciliation of the reportable segments’ net operating
      income to the Trust’s consolidated loss before income taxes and
      discontinued operations for the nine months ended September
      30:





2010
                              
                              
                              2009Net
      operating income for reportable segments
                              
                              $
                              37,360
                              
                              
                              $
                              38,322Other
      unallocated general and administrative expenses
                              
                              
                              (4,092
                              )
                              
                              
                              (3,944
                              )Depreciation
      and amortization
                              
                              
                              (22,592
                              )
                              
                              
                              (21,501
                              )Loss
      on impairment
                              
                              
                              (33,610
                              )
                              
                              
                              —Interest
      expense
                              
                              
                              (16,653
                              )
                              
                              
                              (18,825
                              )Amortization
      of deferred financing costs
                              
                              
                              (974
                              )
                              
                              
                              (749
                              )Interest
      income
                              
                              
                              402
                              
                              
                              
                              334Gain
      on extinguishment of debt
                              
                              
                              —
                              
                              
                              
                              830Equity
      in losses of unconsolidated entities
                              
                              
                              (242
                              )
                              
                              
                              (6
                              )Income
      (loss) before income taxes and discontinued operations
                              
                              $
                              (40,401
                              )
                              
                              $
                              (5,539
                              )


(2)
            The
      decrease in segment assets related to student housing leasing is primarily
      related to the impairment charge of $33,610 taken in September of
      2010.  The increase in segment assets related to development
      consulting services is primarily due to an increase in cash related to the
      collection of reimbursable project
costs.





The
following table represents segment information for the three months ended
September 30, 2010 and 2009:





Three
      Months Ended September 30, 2010
                  
                  
                  Three
      Months Ended September 30, 2009Student
                  
                  
                  Development
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  Student
                  
                  
                  DevelopmentHousing
                  
                  
                  Consulting
                  
                  
                  Management
                  
                  
                  
                  
                  
                  
                  
                  
                  Housing
                  
                  
                  Consulting
                  
                  
                  ManagementLeasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Eliminations
                  
                  
                  Total
                  
                  
                  Leasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Eliminations
                  
                  
                  TotalSegment
      revenues:Student
      housing leasing revenue
                  
                  $
                  26,583
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  26,583
                  
                  
                  $
                  25,682
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  25,682Other
      leasing revenue
                  
                  
                  77
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  77
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Third-party
      development consulting services
                  
                  
                  —
                  
                  
                  
                  436
                  
                  
                  
                  —
                  
                  
                  
                  (102
                  )
                  
                  
                  334
                  
                  
                  
                  —
                  
                  
                  
                  2,559
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2,559Third-party
      management services
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  762
                  
                  
                  
                  —
                  
                  
                  
                  762
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  738
                  
                  
                  
                  —
                  
                  
                  
                  738Intersegment
      revenues
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,132
                  
                  
                  
                  (1,132
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  80
                  
                  
                  
                  1,103
                  
                  
                  
                  (1,183
                  )
                  
                  
                  —Operating
      expense reimbursements
                  
                  
                  —
                  
                  
                  
                  916
                  
                  
                  
                  —
                  
                  
                  
                  6,236
                  
                  
                  
                  7,152
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,523
                  
                  
                  
                  3,523Total
      segment revenues
                  
                  
                  26,660
                  
                  
                  
                  1,352
                  
                  
                  
                  1,894
                  
                  
                  
                  5,002
                  
                  
                  
                  34,908
                  
                  
                  
                  25,682
                  
                  
                  
                  2,639
                  
                  
                  
                  1,841
                  
                  
                  
                  2,340
                  
                  
                  
                  32,502Segment
      operating expenses:Student
      housing leasing operations
                  
                  
                  18,056
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  18,056
                  
                  
                  
                  18,392
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  18,392General
      and administrative
                  
                  
                  —
                  
                  
                  
                  451
                  
                  
                  
                  1,644
                  
                  
                  
                  (63
                  )
                  
                  
                  2,032
                  
                  
                  
                  —
                  
                  
                  
                  921
                  
                  
                  
                  1,809
                  
                  
                  
                  (15
                  )
                  
                  
                  2,715Intersegment
      expenses
                  
                  
                  1,132
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,132
                  )
                  
                  
                  —
                  
                  
                  
                  1,103
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,103
                  )
                  
                  
                  —Reimbursable
      operating expenses
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  6,236
                  
                  
                  
                  6,236
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,523
                  
                  
                  
                  3,523Total
      segment operating expenses
                  
                  
                  19,188
                  
                  
                  
                  451
                  
                  
                  
                  1,644
                  
                  
                  
                  5,041
                  
                  
                  
                  26,324
                  
                  
                  
                  19,495
                  
                  
                  
                  921
                  
                  
                  
                  1,809
                  
                  
                  
                  2,405
                  
                  
                  
                  24,630Net
      operating income (loss) (1)
                  
                  $
                  7,472
                  
                  
                  $
                  901
                  
                  
                  $
                  250
                  
                  
                  $
                  (39
                  )
                  
                  $
                  8,584
                  
                  
                  $
                  6,187
                  
                  
                  $
                  1,718
                  
                  
                  $
                  32
                  
                  
                  $
                  (65
                  )
                  
                  $
                  7,872




19




(1)
            The
      following is a reconciliation of the reportable segments’ net operating
      income to the Trust’s consolidated loss before income taxes and
      discontinued operations for the three months ended September
      30:





2010
                            
                            
                            2009Net
      operating income for reportable segments
                            
                            $
                            8,584
                            
                            
                            
                            7,872Other
      unallocated general and administrative expenses
                            
                            
                            (1,293
                            )
                            
                            
                            (1,188
                            )Depreciation
      and amortization
                            
                            
                            (7,701
                            )
                            
                            
                            (7,227
                            )Loss
      on impairment
                            
                            
                            (33,610
                            )
                            
                            
                            —Interest
      expense
                            
                            
                            (5,524
                            )
                            
                            
                            (6,323
                            )Amortization
      of deferred financing costs
                            
                            
                            (306
                            )
                            
                            
                            (230
                            )Interest
      income
                            
                            
                            174
                            
                            
                            
                            180Equity
      in losses of unconsolidated entities
                            
                            
                            (328
                            )
                            
                            
                            (152
                            )Income
      (loss) before income taxes and discontinued operations
                            
                            $
                            (40,004
                            )
                            
                            
                            (7,068
                            )





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.  On April 12, 2010, the DOJ inspected
the property and found violations in the construction and design of the property
as shown in the DOJ’s subsequent report filed with the court on May 12,
2010. At this stage, the DOJ has represented that no EDR entity is a target
of its investigation and that its action is limited to design and construction
defects created by the previous owner in the original construction of the
property. 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 September 30, 2010 and is secured by the Second Amended
Revolver.





On May
10, 2006, the Operating Partnership guaranteed $23,200 of construction debt held
by University Village-Greensboro LLC (“LLC”) in order to receive a 25% ownership
stake in the venture with College Park Apartments. Construction was completed,
and the student housing community was occupied in August 2007. The construction
loan was refinanced in June of 2010 and the Operating Partnership no longer
guarantees the debt. In October of 2007, the Operating Partnership entered into
a note receivable with the LLC in the amount of $845. 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. At December 31, 2009, the note had an
outstanding balance of $2,021, is reflected in other assets in the accompanying
condensed consolidated balance sheet and was subordinated to the construction
debt held by the LLC. In June of 2010, the note receivable was repaid in full
when the construction loan held by the LLC was refinanced as discussed
above.


20





The
Operating Partnership serves as non-recourse, carve-out guarantor, for secured
third party debt in the amount of $47,031, held by two unconsolidated joint
ventures. The Operating Partnership is liable to the lender for any loss,
damage, cost, expense, liability, claim or other obligation incurred by the
lender arising out of or in connection with certain non-recourse exceptions in
connection with the debt. Pursuant to the respective operating agreements, the
joint venture partners agreed to indemnify, defend and hold harmless the Trust
with respect to such obligations, except to the extent such obligations were
caused by the willful misconduct, gross negligence, fraud or bad faith of the
Operating Partnership or its employees, agents or affiliates. Therefore,
exposure under the guarantees for obligations not caused by the willful
misconduct, gross negligence, fraud or bad faith of the Operating Partnership or
its employees, agents or affiliates is not expected to exceed the Operating
Partnership’s proportionate interest in the related mortgage debt.





The Trust
has estimated the fair value of guarantees entered into to be immaterial. The
Trust’s estimated maximum exposure under the above guarantees is its equity
portion of the debt or approximately $8,363.





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 certain 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
September 30, 2010 and December 31, 2009, the Trust had reimbursable
predevelopment costs of $1,185 and $1,563, respectively, which are
reflected in other assets in the accompanying condensed consolidated balance
sheets.





In
connection with the development agreement entered into on July 14, 2010 for a
project at the Science + Technology Park at Johns Hopkins Medical Institute (see
Note 2), the Trust has committed to provide a guarantee of repayment of a
$42,000 third-party construction loan for a $3,000 fee.  The guarantee
fee will not be recognized until the second mortgage loan is repaid. The project
will have a $2,500 reserve to fund any operating or debt service shortfalls,
that is to be replenished annually by East Baltimore Development, Inc., until a
1.10 debt service coverage ratio is achieved for twelve consecutive months. The
second mortgage loan and related debt service are the first at risk if such
reserve is not adequate to cover operating expenses and debt service on the
construction loan.


21





7.
Acquisition and development of real estate investments





In July
2010, the University of Texas Board of Regents selected the Trust to be the
ground tenant to develop, own and manage a new high-rise apartment community
near the core of the University of Texas at Austin campus.  This will
be the Trust’s third wholly owned development and second project under the ONE
Plan. As of September 30, 2010, the Trust had incurred $420 in costs for the
project which is expected to open in July of 2013.  During the nine
months ended September 30, 2010, the Trust capitalized interest costs of $3
related to the development.





In
September of 2010, LeylandAlliance LLC and the Trust entered into an agreement
to develop the first two phases of Storrs Center, a mixed-use town center
project, adjacent to the University of Connecticut. Scheduled to be completed in
2012 and 2013, the first two phases of Storrs Center will include commercial and
residential offerings. EDR will develop, own and manage the student housing
communities in these first two phases. As of September 30, 2010, the Trust had
incurred $26 in predevelopment costs.





All costs
related to the development of student apartment communities are classified as
assets under development in the accompanying condensed consolidated balance
sheets until the community is completed and opens.





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





8.
Disposition of real estate investments and discontinued operations





On
April 7, 2009, the Trust sold the College Station student housing community
for a sales 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 until such debt is paid in
full.




The
results of operations of College Station are reflected as discontinued
operations in the accompanying condensed consolidated statement of operations
for the three and nine months ended September 30, 2009. The following table
summarizes the loss from discontinued operations, net of noncontrolling
interests, for the three and nine months ended September 30,
2009:


Three
      months
                  
                  
                  Nine
      monthsEnded
                    September
      30,
                  
                  
                  Ended
                    September
      30,2009
                  
                  
                  2009Student
      housing leasing revenue
                  
                  $
                  —
                  
                  
                  $
                  131Student
      housing leasing operating expenses
                  
                  
                  3
                  
                  
                  
                  127Depreciation
      and amortization
                  
                  
                  —
                  
                  
                  
                  25Redeemable
      noncontrolling interest
                  
                  
                  —
                  
                  
                  
                  (1
                  )Loss
      from discontinued operations attributable to Education Realty Trust,
      Inc.
                  
                  $
                  (3
                  )
                  
                  $
                  (20
                  )


22




9.
Incentive plan





The Trust
adopted the Education Realty Trust, Inc. 2004 Incentive Plan (the “Plan”)
effective January 31, 2005. The Plan provides for the grant of stock options,
restricted stock, restricted stock units, stock appreciation rights, other
stock-based incentive awards and PIUs to employees, directors and other key
persons providing services to the Trust.  As of September 30, 2010,
the Trust had 648,000 of its common stock reserved for issuance pursuant to the
Plan, subject to adjustments for changes in the Trust’s capital structure,
including share splits, dividends and recapitalizations. The number of shares
reserved under the Plan is also subject to an annual adjustment, beginning on
January 1, 2006, so that the total number of shares reserved under the Plan
is equal to 4% of the aggregate number of shares outstanding on the last
day of the preceding fiscal year; provided that such annual increase generally
may not exceed 80,000 shares.





A
restricted stock award is an award of the Trust’s common stock that is subject
to restrictions on transferability and other restrictions as the Trust’s
compensation committee determines in its sole discretion on the date of grant.
The restrictions may lapse over a specified period of employment or the
satisfaction of pre-established criteria as our compensation committee may
determine. Except to the extent restricted under the award agreement, a
participant awarded restricted shares will have all of the rights of a
stockholder as to those shares, including, without limitation, the right to vote
and the right to receive dividends or distributions on the shares. Restricted
stock is generally taxed at the time of vesting. At September 30, 2010 and
December 31, 2009, unearned compensation related to restricted
stock totaled $956 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 nine
months ended September 30, 2010 and 2009, compensation expense of $299 and $453,
respectively, was recognized in the accompanying condensed consolidated
statements of operations, related to the vesting of restricted
stock.





On
January 12, 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.  Additionally, on April 13,
2010, the Trust issued 30,000 shares of restricted common stock to an executive
pursuant to the Plan discussed above.  The restrictions on the shares
will lapse ratably over 5 years as long as the executive remains employed by the
Trust.





On March
11, 2010, the Trust adopted the 2010 Long-Term Incentive Plan (the
“LTIP”).  The purpose of the LTIP is 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.  On April 13, 2010,
the Trust issued 136,000 shares of time vested restricted stock and 204,000
performance vested restricted stock units (“RSUs”) to executives and key
employees under the LTIP pursuant to the Plan described above.  The
restricted stock will vest ratably over three years as long as the participants
remain employed with the Trust.  The RSUs will vest based upon the
Trust’s achievement of total stockholder returns at specified levels as compared
to the average total stockholder returns of a peer group of companies over the
period of time beginning January 1, 2010 to January 1, 2013 (the “Performance
Period”). At the end of the Performance Period, the compensation committee of
the Board will determine the level and the extent to which the performance goal
was achieved. RSUs that satisfy the performance goal will be converted into
fully-vested shares of the Trust’s common stock and the Trust will receive a tax
deduction for the compensation expense at the time of vesting.  Prior
to vesting, the participants are not eligible to vote or receive dividends or
distributions on the RSUs. At September 30, 2010, unearned compensation related
to RSUs totaled $527 and will be recorded as expense over the applicable vesting
period. The value was determined using a Monte Carlo simulation technique.
During the nine months ended September 30, 2010, compensation expense of $176
was recognized in the accompanying condensed consolidated statement of
operations, related to the vesting of RSUs.





PIUs were
units in a limited liability company controlled by the Trust that held a special
class of partnership interests in the Operating Partnership.  On June
3, 2010, the Trust redeemed all of the outstanding PIUs for $167 cash and 50,826
shares of the Trust’s common stock with a market value of $314.  For
purposes of the Plan, each PIU was deemed equivalent to an award of one share of
the Trust’s common stock and entitled the owner of such unit to receive the same
quarterly per unit distributions as one common unit of the Operating
Partnership. PIUs did not have full parity with Operating Partnership Units
with respect to liquidating distributions; therefore, the value of PIUs was less
than the value of the Trust’s common stock. The grant or vesting of PIUs was not
a taxable transaction to recipients. Conversely, the Trust did not receive any
tax deductions for compensation expense from the granting 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.


23





Total
noncash compensation cost recognized in general and administrative expense in
the accompanying condensed consolidated statements of operations for the nine
months ended September 30, 2010 and 2009, was $583 and $509, respectively.
During each of the nine months ended September 30, 2010 and 2009, the Trust
issued 4,000 shares of common stock to an executive officer pursuant to the Plan
and 30,000 and 4,000 shares to its independent directors pursuant to the Plan,
respectively.  Additionally, the Trust recorded $6 in noncash
compensation expense for the 15% discount on the shares purchased under the ESPP
during the nine months ended September 30, 2010 (See Note 2).





A summary
of the stock-based incentive plan activity as of and for the nine months ended
September 30, 2010 is as follows:





StockRSUs
                          
                          
                          PIUs
                          
                          
                          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
                          
                          
                          
                          482,500Granted
                          
                          
                          204,000
                          
                          
                          
                          —
                          
                          
                          
                          246,826
                          
                          
                          
                          450,826Redeemed
                          
                          
                          —
                          
                          
                          
                          (192,500
                          )
                          
                          
                          —
                          
                          
                          
                          (192,500
                          )Forfeited
                          
                          
                          —
                          
                          
                          
                          (20,000
                          )
                          
                          
                          —
                          
                          
                          
                          (20,000
                          )Outstanding
      at June 30, 2010
                          
                          
                          204,000
                          
                          
                          
                          —
                          
                          
                          
                          516,826
                          
                          
                          
                          720,826Granted
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —Redeemed
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —Outstanding
      at September 30, 2010
                          
                          
                          204,000
                          
                          
                          
                          —
                          
                          
                          
                          516,826
                          
                          
                          
                          720,826Vested
      at September 30, 2010
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          291,829
                          
                          
                          
                          291,829


(1)
              Includes
      restricted stock awards.





10.
Subsequent events





Our board
of directors declared a distribution of $0.05 per share of common stock for the
quarter ended on September 30, 2010. The distribution is payable on November 15,
2010 to stockholders of record at the close of business on October 29,
2010.





In
October 2010, the Trust completed the purchase of The Grandmarc at the Corner, a
641-bed student community at the University of Virginia (UVA) in
Charlottesville, Virginia. The purchase price was approximately $45,500 with
related acquisition costs of approximately $1,500 that will be expensed in the
fourth quarter of 2010.  The Trust funded the acquisition with
existing cash,including
cash proceeds generated by sales of the Trust’s common stock in its equity
distribution program, and a draw on the Second Amended Revolver of
$27,000.





In
October 2010, the Trust entered into two separate sales agreements to sell nine
student housing communities with a net carrying value of $83,499. The gross
sales price of the first four communities is $38,700 with expected net proceeds
of approximately $20,700 after repayment of related debt of $17,200 and other
closing costs.  The first agreement is expected to close before
year-end and consists of the following properties:





The
Gables, serving Western Kentucky University in Bowling Green,
Kentucky;


Western
Place, serving Western Kentucky University in Bowling Green,
Kentucky;


Berkeley
Place, serving Clemson University in Clemson, South Carolina; and


The
Pointe at Southern, serving Georgia Southern University in Statesboro,
Georgia.


24





The gross
sales price of the second agreement is $46,100 with expected net proceeds of
approximately $29,600, after repayment of related debt of $16,100 and other
closing costs. Pursuant to the second agreement, the Trust obtained a $3,000
letter of credit in favor of the purchaser to ensure the closing of the sale of
the additional communities.The second
agreement is scheduled to close in the first quarter of 2011 and consists of the
following properties:





Troy
Place, serving Troy University in Troy, Alabama;


The
Reserve at Jacksonville, serving Jacksonville State University in Jacksonville,
Alabama;


The
Reserve at Martin, serving University of Tennessee at Martin in Martin,
Tennessee;


The Chase
at Murray, serving Murray State University in Murray, Kentucky; and


Clemson
Place, serving Clemson University in Clemson, South Carolina.




25





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 Management’s Discussion and Analysis of Financial Condition and Results of
Operations 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.





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,
development consulting services and management services. We evaluate each
segment’s performance based 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.


26


Student
housing leasing





Student
housing leasing revenue represented approximately 91.9% of our revenue,
excluding operating expense reimbursements, for the nine months ended September
30, 2010. Additionally, this segment includes other leasing revenue related to
the student housing community known as Collegiate Village located in Macon,
Georgia that was leased to Macon State College in August of 2010 (see Note 2 to
the condensed consolidated financial statements).





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
2010 and 2009, approximately 70.0% 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.





Development
consulting services





For the
nine months ended September 30, 2010, revenue from our development consulting
services represented approximately 1.9% 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:





•
            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.


27





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 communities for our ownership and we plan to increase
self-development activity going forward. We opened the first of these
self-developed communities 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. In July 2010, the University of Texas Board of Regents
selected the Trust to be the ground tenant to develop, own and manage a new
high-rise apartment community near the campus of the University of Texas at
Austin.  This will be the second project under the Trust’s ONE Plan
(SM) and its third wholly owned development. In September of 2010,
LeylandAlliance LLC and the Trust entered into an agreement to develop the first
two phases of Storrs Center, a mixed-use town center project, adjacent to the
University of Connecticut. Scheduled to be completed in 2012 and 2013,
respectively, the first two phases of Storrs Center will include commercial and
residential offerings. EDR will develop, own and manage the student housing
communities in these first two phases.  This will be the Trust’s
fourth wholly owned development.





Management
services





For the
nine months ended September 30, 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.





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
nine months ended September 30, 2010, same-community revenue per available bed
decreased to $368 and same-community physical occupancy increased to 88.8%
compared to revenue per available bed of $369 and physical occupancy of 87.5%
for the nine months ended September 30, 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.


28


The
average physical and economic occupancies on a Legacy-community basis (which are
the same-communities, excluding the Place-communities)  for the third
quarter of 2010 were 90.3% and 77.7%, respectively, compared to 89.0% and 76.4%,
respectively, for the same quarter in 2009.  The Place-communities,
excluding the housing community referred to as Collegiate Village which was
leased to Macon State College in August of 2010, had average physical and
economic occupancies of 84.7% and 73.8%, respectively, for the third quarter of
2010 compared to 82.4% and 71.4% in the third quarter of 2009.





On a
same-community basis, the 2010-2011 lease term opened with an occupancy of 92.2%
as measured at September 30, 2010 compared to 90.1% for the same date in 2009,
reflecting an occupancy increase of 2.3% while rental rates increased 2.0% from
the prior lease term.  The Legacy-communities opened with an occupancy
of 93.6% compared to 91.5% last year, reflecting a 2.3% increase in occupancy
with rental rates in the portfolio increasing 1.6% from the prior lease
term.  The Place-communities opened the fall lease term with an
occupancy of 87.1% compared to 85.3% last year, achieving a 2.1% improvement in
number of beds occupied while rental rates increased approximately 3.8% from the
prior lease term.





Development
consulting services





Third-party
development consulting services revenue experienced considerable growth from
2007 to 2009.  However, third-party development revenue declined 68.2%
to $1,675 for the nine months ended September 30, 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 the ground breaking of a project at
the Science + Technology Park at Johns Hopkins Medical Center in Baltimore,
Maryland and two other third party projects that obtained financing and broke
ground in September and October.





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.





Student
housing operating costs





Cost
reduction initiatives put in place in the fourth quarter of 2008 helped drive a
reduction in same community operating expenses for the year ended December 31,
2009. For the nine months ended September 30, 2010, same-community operating
expenses were down approximately 1% from the same period in 2009 as cost control
initiatives continued. Although we do not expect significant reductions in
same-community operating expenses going forward, we will continue to maintain
our focus to operate our properties as efficiently as possible.





General
and administrative costs





For the
year-ended December 31, 2009, general and administrative costs, before
development pursuit costs, remained relatively flat when compared to 2008.
Starting in 2010, we began a reorganization program and as a result have seen a
5.2% reduction in general and administrative expenses, before reorganization,
development pursuit and acquisition costs, when compared to the nine months
ended September 30, 2009.  We expect this trend to continue throughout
2010 and we will continue to focus on operating efficiencies in the
future.





Asset
Repositioning and Capital Recycling





In
October 2010 the Trust completed the following transactions that result in a
meaningful repositioning and improvement of its owned
portfolio.


29





The Trust
completed the purchase of The Grandmarc at the Corner, a 641-bed student
community at the University of Virginia (UVA) in Charlottesville,
Virginia.  UVA enrollment for the 2009/2010 academic year is
approximately 24,400.  The property was opened in 2006 and is located
within a short walking distance to campus and to “The Corner” a popular
destination for students due to the wide variety of restaurants, shopping and
entertainment venues.  The purchase price was approximately $45,500
with related acquisition costs of approximately $1,500 that will be expensed in
the fourth quarter of 2010.  The Trust funded the acquisition with
existing cash and a draw on its revolving credit facility.  As of
September 30, 2010, The Grandmarc was 90.8% occupied at an average monthly
rental rate per bed of approximately $670.





The Trust
entered into two separate sales agreements in October of 2010 to sell nine
communities, including eight of the former Place-communities, for a total of
$84,800 (see Note 10 to the condensed consolidated financial
statements).  The sale of the first four communities is scheduled to
close by the end of the fourth quarter 2010.  The gross sales price is
$38,700 with expected net proceeds of approximately $20,700 after repayment of
related debt of $17,200 and other closing costs.  The remaining five
communities are scheduled to close in the first quarter of 2011.  The
gross sales price is $46,100 with expected net proceeds of approximately
$29,600, after repayment of related debt of $16,100 and other closing
costs.





The Trust’s regular review of the
recoverability of asset carrying values, which included the consideration of
these pending sales transactions, identified asset impairments totaling $33,610
that were recognized during the three months ended September 30,
2010.





These
transactions help the Trust to recycle capital from non-strategic assets to
vibrant, younger collegiate communities at larger universities.  These
steps improve the quality of the Trust’s portfolio and create better long-term
growth potential.





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.


30


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
15 to 40 years, land improvements are depreciated over 15 years and
furniture, fixtures, and equipment are depreciated over 3 to 7 years.
Depreciation is computed using the straight-line method for financial reporting
purposes.




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.





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





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.


31


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.  The prior periods presented have also
been reclassified to conform to the current classification.


32


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 Nine Months Ended September 30, 2010 and 2009





The
following table presents the results of operations for Education Realty Trust,
Inc. for the nine months ended September 30, 2010 and 2009:


NineMonthsEndedSeptember30,2010
                  
                  
                  NineMonthsEndedSeptember30,2009Student
                  
                  
                  Development
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  Student
                  
                  
                  DevelopmentHousing
                  
                  
                  Consulting
                  
                  
                  Management
                  
                  
                  
                  
                  
                  
                  
                  
                  Housing
                  
                  
                  Consulting
                  
                  
                  ManagementLeasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Eliminations
                  
                  
                  Total
                  
                  
                  Leasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Eliminations
                  
                  
                  TotalSegmentrevenues:Student
      housing leasing revenue
                  
                  $
                  84,628
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  84,628
                  
                  
                  $
                  82,962
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  82,962Other
      leasing revenue
                  
                  
                  77
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  77
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Third-party
      development consulting services
                  
                  
                  —
                  
                  
                  
                  1,777
                  
                  
                  
                  —
                  
                  
                  
                  (102)
                  
                  
                  
                  1,675
                  
                  
                  
                  —
                  
                  
                  
                  5,275
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  5,275Third-party
      management services
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2,335
                  
                  
                  
                  —
                  
                  
                  
                  2,335
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2,370
                  
                  
                  
                  —
                  
                  
                  
                  2,370Intersegment
      revenues
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,328
                  
                  
                  
                  (3,328
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,128
                  
                  
                  
                  3,289
                  
                  
                  
                  (4,417
                  )
                  
                  
                  —Operating
      expense reimbursements
                  
                  
                  —
                  
                  
                  
                  916
                  
                  
                  
                  —
                  
                  
                  
                  10,101
                  
                  
                  
                  11,017
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  7,749
                  
                  
                  
                  7,749Total
      segment revenues
                  
                  
                  84,705
                  
                  
                  
                  2,693
                  
                  
                  
                  5,663
                  
                  
                  
                  6,671
                  
                  
                  
                  99,732
                  
                  
                  
                  82,962
                  
                  
                  
                  6,403
                  
                  
                  
                  5,659
                  
                  
                  
                  3,332
                  
                  
                  
                  98,356Segment
      operating expenses:Student
      housing leasing operations
                  
                  
                  44,702
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  44,702
                  
                  
                  
                  44,491
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  44,491General
      and administrative
                  
                  
                  —
                  
                  
                  
                  2,071
                  
                  
                  
                  5,561
                  
                  
                  
                  (63
                  )
                  
                  
                  7,569
                  
                  
                  
                  —
                  
                  
                  
                  2,402
                  
                  
                  
                  5,488
                  
                  
                  
                  (96
                  )
                  
                  
                  7,794Intersegment
      expenses
                  
                  
                  3,328
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (3,328
                  )
                  
                  
                  —
                  
                  
                  
                  3,289
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (3,289
                  )
                  
                  
                  —Reimbursable
      operating expenses
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  10,101
                  
                  
                  
                  10,101
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  7,749
                  
                  
                  
                  7,749Total
      segment operating expenses
                  
                  
                  48,030
                  
                  
                  
                  2,071
                  
                  
                  
                  5,561
                  
                  
                  
                  6,710
                  
                  
                  
                  62,372
                  
                  
                  
                  47,780
                  
                  
                  
                  2,402
                  
                  
                  
                  5,488
                  
                  
                  
                  4,364
                  
                  
                  
                  60,034Net
      operating income (loss) (1)
                  
                  $
                  36,675
                  
                  
                  $
                  622
                  
                  
                  $
                  102
                  
                  
                  $
                  (39
                  )
                  
                  $
                  37,360
                  
                  
                  $
                  35,182
                  
                  
                  $
                  4,001
                  
                  
                  $
                  171
                  
                  
                  $
                  (1,032
                  )
                  
                  $
                  38,322





(1)
            The
      following is a reconciliation of the reportable segments’ net operating
      income to the Trust’s consolidated loss before income taxes and
      discontinued operations for the nine months ended September
      30:


33





2010
                      
                      
                      2009Net
      operating income for reportable segments
                      
                      $
                      37,360
                      
                      
                      $
                      38,322Other
      unallocated general and administrative expenses
                      
                      
                      (4,092
                      )
                      
                      
                      (3,944
                      )Depreciation
      and amortization
                      
                      
                      (22,592
                      )
                      
                      
                      (21,501
                      )Loss
      on impairment
                      
                      
                      (33,610
                      )
                      
                      
                      —Interest
      expense
                      
                      
                      (16,653
                      )
                      
                      
                      (18,825
                      )Amortization
      of deferred financing costs
                      
                      
                      (974
                      )
                      
                      
                      (749
                      )Interest
      income
                      
                      
                      402
                      
                      
                      
                      334Gain
      on extinguishment of debt
                      
                      
                      —
                      
                      
                      
                      830Equity
      in losses of unconsolidated entities
                      
                      
                      (242
                      )
                      
                      
                      (6
                      )Loss
      before income taxes and discontinued operations
                      
                      $
                      (40,401
                      )
                      
                      $
                      (5,539
                      )





Student
housing leasing





Student
housing operating statistics for the nine months ended September 30, 2010 and
2009 were as follows:





Nine months
                                                
                                                
                                                Nine monthsended
                                                
                                                
                                                endedSeptember 30,
                                                
                                                
                                                September 30,
                                                
                                                
                                                Favorable2010 (10)
                                                
                                                
                                                2009 (9)(10)
                                                
                                                
                                                (Unfavorable)Wholly-ownedcommunities:OccupancyPhysical
      (1)
                                                
                                                
                                                88.1
                                                %
                                                
                                                
                                                87.6
                                                %
                                                
                                                
                                                50
                                                bpsEconomic
      (2)
                                                
                                                
                                                82.8
                                                %
                                                
                                                
                                                82.9
                                                %
                                                
                                                
                                                (10
                                                )bpsNARPAB
      (3)
                                                
                                                $
                                                349
                                                
                                                
                                                $
                                                347
                                                
                                                
                                                $
                                                2Other
      income per avail. bed (4)
                                                
                                                $
                                                22
                                                
                                                
                                                $
                                                24
                                                
                                                
                                                $
                                                (2
                                                )RevPAB
      (5)
                                                
                                                $
                                                371
                                                
                                                
                                                $
                                                371
                                                
                                                
                                                $
                                                —Operating
      expense per bed (6)
                                                
                                                $
                                                196
                                                
                                                
                                                $
                                                198
                                                
                                                
                                                $
                                                2Operating
      margin (7)
                                                
                                                
                                                47.3
                                                %
                                                
                                                
                                                46.5
                                                %
                                                
                                                
                                                80
                                                bpsDesign
      beds (8)
                                                
                                                
                                                226,066
                                                
                                                
                                                
                                                221,376
                                                
                                                
                                                
                                                4,690Same
      communities:OccupancyPhysical
      (1)
                                                
                                                
                                                88.8
                                                %
                                                
                                                
                                                87.5
                                                %
                                                
                                                
                                                130
                                                bpsEconomic
      (2)
                                                
                                                
                                                83.8
                                                %
                                                
                                                
                                                83.1
                                                %
                                                
                                                
                                                70
                                                bpsNARPAB
      (3)
                                                
                                                $
                                                345
                                                
                                                
                                                $
                                                345
                                                
                                                
                                                $
                                                —Other
      income per avail. bed (4)
                                                
                                                $
                                                23
                                                
                                                
                                                $
                                                24
                                                
                                                
                                                $
                                                (1
                                                )RevPAB
      (5)
                                                
                                                $
                                                368
                                                
                                                
                                                $
                                                369
                                                
                                                
                                                $
                                                (1
                                                )Operating
      expense per bed (6)
                                                
                                                $
                                                195
                                                
                                                
                                                $
                                                196
                                                
                                                
                                                $
                                                1Operating
      margin (7)
                                                
                                                
                                                47.0
                                                %
                                                
                                                
                                                46.7
                                                %
                                                
                                                
                                                30
                                                bpsDesign
      beds (8)
                                                
                                                
                                                215,266
                                                
                                                
                                                
                                                215,280
                                                
                                                
                                                
                                                (14
                                                )




34





(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
      operating income divided by
revenue.





(8)
            Represents
      the sum of the monthly design beds in the portfolio during the
      period.





(9)
            This
      information excludes property information related to College Station
      (discontinued operations).





(10)
            This
      information excludes property information related to Collegiate Village
      which was leased to Macon State College in August
  2010.





Total
revenue in the student housing leasing segment was $84,705 for the nine
months ended September 30, 2010. This represents an increase of $1,743, or 2.1%,
from the same period in 2009. This increase includes $2,110 related to the
new communities, University Village on Colvin (Syracuse) and The Reserve at
Saluki Pointe (Carbondale), that opened in the third quarter of
2009.  Revenue at the Place-communities increased 5.5%, or $797, on a
4.2% improvement in occupancy, an increase in rental rates of approximately 0.7%
and a 0.6% increase in other rental revenue.  These increases were
offset by a 1.6%, or $1,036, decline in Legacy-community revenue, which was the
result of a 1.6% decline in rental rates, a 0.6% decline in other rental revenue
and a 0.6% improvement in occupancies. Furthermore, revenue declined $205
related to Collegiate Village which was leased to Macon State College in August
of 2010. This decrease is offset by $77 of other leasing revenue related to the
new lease.





Operating
expenses in the student housing leasing segment increased $211, or 0.5%, to
$44,702 for the nine months ended September 30, 2010 as compared to the same
period in 2009.  The new communities that opened in the third quarter
of 2009 contributed $704 of the increase from the prior year.  The
Place-community operating expenses increased $202, or 2.3% due to higher
utilities and maintenance costs. These increases were offset by a decline in
Legacy-community operating expenses of $531, or 1.6% which was primarily
attributable to a decline in the cost of amenities, real estate taxes and
insurance offset by higher utilities. Furthermore, operating expenses related to
Collegiate Village declined $165 or 26.6% as Macon State College is responsible
for operating costs under the lease discussed above.





Development
consulting services





The
following table represents the development consulting projects that were active
during the nine months ended September 30, 2010 and 2009:





EarningsProject
                                        
                                        Beds
                                        
                                        Fee
      Type
                                        
                                        2010
                                        
                                        2009
                                        
                                        DifferenceUniversity
      of Michigan
                                        
                                        896
                                        
                                        Development
      fee
                                        
                                        $
                                        1
                                        
                                        
                                        $
                                        178
                                        
                                        
                                        $
                                        (177
                                        )Fontainebleu
      Renovation Project
                                        
                                        435
                                        
                                        Development
      fee
                                        
                                        
                                        —
                                        
                                        
                                        
                                        68
                                        
                                        
                                        
                                        (68
                                        )West
      Chester— Phase I
                                        
                                        1,197
                                        
                                        Development
      fee
                                        
                                        
                                        —
                                        
                                        
                                        
                                        1,366
                                        
                                        
                                        
                                        (1,366
                                        )West
      Chester— Phase II
                                        
                                        1,467
                                        
                                        Development
      fee
                                        
                                        
                                        —
                                        
                                        
                                        
                                        65
                                        
                                        
                                        
                                        (65
                                        )Indiana
      University of Pennsylvania — Phase III
                                        
                                        1,084
                                        
                                        Development
      fee
                                        
                                        
                                        —
                                        
                                        
                                        
                                        1,946
                                        
                                        
                                        
                                        (1,946
                                        )Indiana
      University of Pennsylvania — Phase IV
                                        
                                        596
                                        
                                        Development
      fee
                                        
                                        
                                        604
                                        
                                        
                                        
                                        220
                                        
                                        
                                        
                                        384Colorado
      State University — Pueblo I
                                        
                                        253
                                        
                                        Development
      fee
                                        
                                        
                                        —
                                        
                                        
                                        
                                        568
                                        
                                        
                                        
                                        (568
                                        )Colorado
      State University — Pueblo II
                                        
                                        500
                                        
                                        Development
      fee
                                        
                                        
                                        530
                                        
                                        
                                        
                                        682
                                        
                                        
                                        
                                        (152
                                        )Auraria
      Higher Education System
                                        
                                        685
                                        
                                        Development
      fee
                                        
                                        
                                        —
                                        
                                        
                                        
                                        182
                                        
                                        
                                        
                                        (182
                                        )SUNY
      College of Environmental Science and Forestry
                                        
                                        454
                                        
                                        Development
      fee
                                        
                                        
                                        280
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        280East
      Stroudsburg University
                                        
                                        969
                                        
                                        Development
      fee
                                        
                                        
                                        35
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        35Miscellaneous
      consulting fees
                                        
                                        —
                                        
                                        Consulting
      fee
                                        
                                        
                                        225
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        225Third-party
      development consulting services
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,675
                                        
                                        
                                        
                                        5,275
                                        
                                        
                                        
                                        (3,600
                                        )Participating
      project- Science + Technology Park at Johns Hopkins
                                        
                                        572
                                        
                                        Development
      fee
                                        
                                        
                                        102
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        102Third-party
      development consulting services plus participating
projects
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,777
                                        
                                        
                                        
                                        5,275
                                        
                                        
                                        
                                        (3,498
                                        )Southern
      Illinois University— Carbondale
                                        
                                        768
                                        
                                        Construction oversight fee
                                        
                                        
                                        —
                                        
                                        
                                        
                                        99
                                        
                                        
                                        
                                        (99
                                        )Syracuse
      University
                                        
                                        432
                                        
                                        Development
      fee
                                        
                                        
                                        —
                                        
                                        
                                        
                                        1,029
                                        
                                        
                                        
                                        (1,029
                                        )Intersegment
      development services
                                        
                                        
                                        
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        1,128
                                        
                                        
                                        
                                        (1,128
                                        )Development
      consulting services
                                        
                                        
                                        
                                        
                                        
                                        $
                                        1,777
                                        
                                        
                                        $
                                        6,403
                                        
                                        
                                        $
                                        (4,626
                                        )


35


Development
consulting services revenue decreased $4,626, or 72.2%, to $1,777 for the nine
months ended September 30, 2010 as compared to the same period in
2009.  Third-party development consulting revenue declined $3,600 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
four active third-party development jobs for the nine months ended September 30,
2010 compared to seven active projects in 2009.  However, the decrease
in active third-party development consulting revenue was offset by $225 in
revenue related to consulting services that were unrelated to an active
development project and $102 of fees related to the participating property at
the Science + Technology Part at Johns Hopkins (see Note 2 to the accompanying
condensed consolidated financial statements). Due to the fact the Trust is
guaranteeing the construction loan and extending a second mortgage to the
development, all revenue on the project is being deferred in the accompanying
condensed consolidated financial statements until the second mortgage is repaid
and the Trust no longer guarantees the debt. As such the fees are deferred in
the eliminations column of the segment financial statements.  During
the quarter the Trust was reimbursed $916 for operating expenses related to the
Johns Hopkins project that the Trust had incurred in prior years. This resulted
in a difference between operating expense reimbursement revenue and operating
expense reimbursement expenses, which typically have no markup, and an increase
in net operating income in the quarter. Total development consulting service
revenue was also impacted by a decline in intersegment revenue related to two
internal developments that were completed in the third quarter of 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 decreased $331, or 13.8%, for the nine months ended
September 30, 2010. This decrease is primarily due to a decline in third-party
development pursuit costs and marketing and advertising expenses.





Management
services





Total
management services revenue remained relatively flat for the nine months ended
September 30, 2010 when compared to the same period in 2009 due to a
consistent number of management contracts each period and relatively flat
revenue at those projects.


36


General
and administrative costs increased $73 as compared to the same period in 2009
due to $634 of severance costs incurred in 2010.  Excluding the
severance costs, general and administrative costs in the management services
segment have been reduced by 10.2% from the prior year due mostly to the
reduction in salary related to the reorganization program.





Loss
on impairment





During
the nine months ended September 30, 2010, management determined that the
carrying value of nine different student housing communities may not be
recoverable due to a decline in estimated net operating income or due to the
negotiated sales price on the potential sale of the assets. The fair value of
these properties was estimated and management recorded an impairment loss in the
accompanying condensed consolidated statement of operations of
$33,610.





Interest
expense





For the
nine months ended September 30, 2010, interest expense declined $2,172 or 11.5%
when compared to the same period in the prior year. This decrease is primarily
attributable to a decline in interest expense of $3,144 related to the repayment
of the Amended Revolver and the repayment of mortgage debt on certain
Place-communities in the fourth quarter of 2009 offset by the decline in the
value of the interest rate cap of $495 discussed in Note 4 to the accompanying
condensed consolidated financial statements and a decrease of $472 in the
capitalization of interest on owned developments in the prior year.





Gain
on extinguishment of debt





During
the nine months ended September 30, 2009, the Trust received a refund of
defeasance costs resulting in an $830 gain on the extinguishment of debt related
to the reduction in mortgage debt on certain Place-communities.





Equity
in earnings of unconsolidated entities





Equity in
earnings of unconsolidated entities represents our share of the net income or
loss related to four investments in unconsolidated entities that own student
housing communities. For the nine months ended September 30, 2010, equity in
earnings was a loss of $242 compared to a loss of $6 in the prior year. The
main drivers of the decrease were a $137 loss on the sale of the assets of our
joint venture property in Goleta, California and the decline in occupancy and
increase in interest expense on our joint venture property in Greensboro, North
Carolina.





Results
of Operations for the Three Months Ended September 30, 2010 and
2009





The
following table presents the results of operations for Education Realty Trust,
Inc. for the three months ended September 30, 2010 and 2009:


ThreeMonthsEndedSeptember30,2010
                  
                  
                  ThreeMonthsEndedSeptember30,2009Student
                  
                  
                  Development
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  Student
                  
                  
                  DevelopmentHousing
                  
                  
                  Consulting
                  
                  
                  Management
                  
                  
                  
                  
                  
                  
                  
                  
                  Housing
                  
                  
                  Consulting
                  
                  
                  ManagementLeasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Eliminations
                  
                  
                  Total
                  
                  
                  Leasing
                  
                  
                  Services
                  
                  
                  Services
                  
                  
                  Eliminations
                  
                  
                  TotalSegment
      revenues:Student
      housing leasing revenue
                  
                  $
                  26,583
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  26,583
                  
                  
                  $
                  25,682
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  25,682Other
      leasing revenue
                  
                  
                  77
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  77
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Third-party
      development consulting services
                  
                  
                  —
                  
                  
                  
                  436
                  
                  
                  
                  —
                  
                  
                  
                  (102
                  )
                  
                  
                  334
                  
                  
                  
                  —
                  
                  
                  
                  2,559
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2,559Third-party
      management services
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  762
                  
                  
                  
                  —
                  
                  
                  
                  762
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  738
                  
                  
                  
                  —
                  
                  
                  
                  738Intersegment
      revenues
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,132
                  
                  
                  
                  (1,132
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  80
                  
                  
                  
                  1,103
                  
                  
                  
                  (1,183
                  )
                  
                  
                  —Operating
      expense reimbursements
                  
                  
                  —
                  
                  
                  
                  916
                  
                  
                  
                  —
                  
                  
                  
                  6,236
                  
                  
                  
                  7,152
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,523
                  
                  
                  
                  3,523Total
      segment revenues
                  
                  
                  26,660
                  
                  
                  
                  1,352
                  
                  
                  
                  1,894
                  
                  
                  
                  5,002
                  
                  
                  
                  34,908
                  
                  
                  
                  25,682
                  
                  
                  
                  2,639
                  
                  
                  
                  1,841
                  
                  
                  
                  2,340
                  
                  
                  
                  32,502Segment
      operating expenses:Student
      housing leasing operations
                  
                  
                  18,056
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  18,056
                  
                  
                  
                  18,392
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  18,392General
      and administrative
                  
                  
                  —
                  
                  
                  
                  451
                  
                  
                  
                  1,644
                  
                  
                  
                  (63
                  )
                  
                  
                  2,032
                  
                  
                  
                  —
                  
                  
                  
                  921
                  
                  
                  
                  1,809
                  
                  
                  
                  (15
                  )
                  
                  
                  2,715Intersegment
      expenses
                  
                  
                  1,132
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,132
                  )
                  
                  
                  —
                  
                  
                  
                  1,103
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,103
                  )
                  
                  
                  —Reimbursable
      operating expenses
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  6,236
                  
                  
                  
                  6,236
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,523
                  
                  
                  
                  3,523Total
      segment operating expenses
                  
                  
                  19,188
                  
                  
                  
                  451
                  
                  
                  
                  1,644
                  
                  
                  
                  5,041
                  
                  
                  
                  26,324
                  
                  
                  
                  19,495
                  
                  
                  
                  921
                  
                  
                  
                  1,809
                  
                  
                  
                  2,405
                  
                  
                  
                  24,630Net
      operating income (loss) (1)
                  
                  $
                  7,472
                  
                  
                  $
                  901
                  
                  
                  $
                  250
                  
                  
                  $
                  (39
                  )
                  
                  $
                  8,584
                  
                  
                  $
                  6,187
                  
                  
                  $
                  1,718
                  
                  
                  $
                  32
                  
                  
                  $
                  (65
                  )
                  
                  $
                  7,872





(1)
            The
      following is a reconciliation of the reportable segments’ net operating
      income to the Trust’s consolidated loss before income taxes and
      discontinued operations for the three months ended September
      30:


37





2010
                        
                        
                        2009Net
      operating income for reportable segments
                        
                        $
                        8,584
                        
                        
                        
                        7,872Other
      unallocated general and administrative expenses
                        
                        
                        (1,293
                        )
                        
                        
                        (1,188
                        )Depreciation
      and amortization
                        
                        
                        (7,701
                        )
                        
                        
                        (7,227
                        )Loss
      on impairment
                        
                        
                        (33,610
                        )
                        
                        
                        —Interest
      expense
                        
                        
                        (5,524
                        )
                        
                        
                        (6,323
                        )Amortization
      of deferred financing costs
                        
                        
                        (306
                        )
                        
                        
                        (230
                        )Interest
      income
                        
                        
                        174
                        
                        
                        
                        180Equity
      in losses of unconsolidated entities
                        
                        
                        (328
                        )
                        
                        
                        (152
                        )Loss
      before income taxes and discontinued operations
                        
                        $
                        (40,004
                        )
                        
                        
                        (7,068
                        )





Student
housing leasing





Student
housing operating statistics for wholly-owned communities and same-communities
for the three months ended September 30, 2010 and 2009 were as
follows:





Three months
                                    
                                    
                                    Three monthsended
                                    
                                    
                                    endedSeptember 30,
                                    
                                    
                                    September 30,
                                    
                                    
                                    Favorable2010(10)
                                    
                                    
                                    2009(9)(10)
                                    
                                    
                                    (Unfavorable)Wholly-owned communities:OccupancyPhysical
      (1)
                                    
                                    
                                    88.5
                                    %
                                    
                                    
                                    87.2
                                    %
                                    
                                    
                                    130
                                    bpsEconomic
      (2)
                                    
                                    
                                    76.2
                                    %
                                    
                                    
                                    74.7
                                    %
                                    
                                    
                                    150
                                    bpsNARPAB
      (3)
                                    
                                    $
                                    324
                                    
                                    
                                    $
                                    313
                                    
                                    
                                    $
                                    11Other
      income per avail. bed (4)
                                    
                                    $
                                    27
                                    
                                    
                                    $
                                    27
                                    
                                    
                                    $
                                    —RevPAB
      (5)
                                    
                                    $
                                    351
                                    
                                    
                                    $
                                    340
                                    
                                    
                                    $
                                    11Operating
      expense per bed (6)
                                    
                                    $
                                    238
                                    
                                    
                                    $
                                    243
                                    
                                    
                                    $
                                    5Operating
      margin (7)
                                    
                                    
                                    32.2
                                    %
                                    
                                    
                                    28.6
                                    %
                                    
                                    
                                    360
                                    bpsDesign
      Beds (8)
                                    
                                    
                                    75,358
                                    
                                    
                                    
                                    74,682
                                    
                                    
                                    
                                    676Same-communities:OccupancyPhysical
      (1)
                                    
                                    
                                    89.0
                                    %
                                    
                                    
                                    87.5
                                    %
                                    
                                    
                                    150
                                    bpsEconomic
      (2)
                                    
                                    
                                    76.9
                                    %
                                    
                                    
                                    75.4
                                    %
                                    
                                    
                                    150
                                    bpsNARPAB
      (3)
                                    
                                    $
                                    320
                                    
                                    
                                    $
                                    311
                                    
                                    
                                    $
                                    9Other
      income per avail. bed (4)
                                    
                                    $
                                    27
                                    
                                    
                                    $
                                    27
                                    
                                    
                                    $
                                    —RevPAB
      (5)
                                    
                                    $
                                    347
                                    
                                    
                                    $
                                    338
                                    
                                    
                                    $
                                    9Operating
      expense per bed (6)
                                    
                                    $
                                    235
                                    
                                    
                                    $
                                    241
                                    
                                    
                                    $
                                    6Operating
      margin (7)
                                    
                                    
                                    32.3
                                    %
                                    
                                    
                                    28.8
                                    %
                                    
                                    
                                    350
                                    bpsDesign
      Beds (8)
                                    
                                    
                                    71,758
                                    
                                    
                                    
                                    71,754
                                    
                                    
                                    
                                    4




38







(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
      operating income divided by revenue.


(8)
            Represents
      the sum of the monthly design beds in the portfolio during the
      period.


(9)
              This
      information excludes property information related to College Station
      (discontinued operations).


(10)
            This
      information excludes property information related to Collegiate Village
      which was leased to Macon State College in August
  2010.





Total
revenue in the student housing leasing segment was $26,660 for the three months
ended September 30, 2010. This represents an increase of $978, or 3.8%, from the
same period in 2009. The increase in student housing leasing revenue included
$443 related to the new communities, University Village on Colvin (Syracuse) and
The Reserve at Saluki Pointe (Carbondale).  In addition revenue at
Place-communities increased 6.9%, or $321, on a 3.0% improvement in occupancies,
a 3.0% improvement in rental rates and a 0.9% increase in other rental
revenue.  Revenue for the Legacy-communities increased by $306, or
1.6%, which was the result of a 0.4% increase in rental rates, a 0.3% decline in
other rental revenue and a 1.4% increase in occupancy.  In addition,
revenue declined $170 related to Collegiate Village which was leased to Macon
State College in August of 2010. This decrease is offset by $77 of other leasing
revenue related to the new lease.





Operating
expenses in the student housing leasing segment decreased $336, or 1.8%, to
$18,056 for the three months ended September 30, 2010 as compared to the same
period in 2009. Operating expenses for the Legacy-communities decreased $454 or
3.3% due to a decline in the cost of amenities, turn costs and real estate taxes
offset by an increase in utilities. Operating expenses related to Collegiate
Village declined $146 or 55.2% as Macon State College is responsible for
operating costs under the lease discussed above. The new communities, University
Village on Colvin and The Reserve at Saluki Pointe, contributed an increase in
operating expenses of $230, while operating expenses at the Place-communities
were flat.


39


Development
consulting services





The
following table represents the development consulting projects that were active
during the three months ended September 30, 2010 and 2009:





RecognizedEarningsProject
                              
                              Beds
                              
                              FeeType
                              
                              2010
                              
                              2009
                              
                              DifferenceUniversity
      of Michigan
                              
                              896
                              
                              Development
      fee
                              
                              $
                              —
                              
                              
                              $
                              23
                              
                              
                              $
                              (23
                              )SUNY
      College of Environmental Science & Forestry
                              
                              454
                              
                              Development
      Fee
                              
                              
                              214
                              
                              
                              
                              —
                              
                              
                              
                              214Fontainebleu
      Renovation Project
                              
                              435
                              
                              Development
      fee
                              
                              
                              —
                              
                              
                              
                              17
                              
                              
                              
                              (17
                              )West
      Chester— Phase I
                              
                              1,197
                              
                              Development
      fee
                              
                              
                              —
                              
                              
                              
                              378
                              
                              
                              
                              (378
                              )West
      Chester— Phase II
                              
                              1,467
                              
                              Development
      fee
                              
                              
                              —
                              
                              
                              
                              65
                              
                              
                              
                              (65
                              )Indiana
      University of Pennsylvania — Phase III
                              
                              1,084
                              
                              Development
      fee
                              
                              
                              —
                              
                              
                              
                              1,207
                              
                              
                              
                              (1,207
                              )Indiana
      University of Pennsylvania — Phase IV
                              
                              596
                              
                              Development
      fee
                              
                              
                              68
                              
                              
                              
                              168
                              
                              
                              
                              (100
                              )Colorado
      State University — Pueblo I
                              
                              253
                              
                              Development
      fee
                              
                              
                              —
                              
                              
                              
                              215
                              
                              
                              
                              (215
                              )Colorado
      State University — Pueblo II
                              
                              500
                              
                              Development
      fee
                              
                              
                              17
                              
                              
                              
                              486
                              
                              
                              
                              (469
                              )East
      Stroudsburg University
                              
                              969
                              
                              Development
      fee
                              
                              
                              35
                              
                              
                              
                              —
                              
                              
                              
                              35Third-party
      development consulting services
                              
                              
                              
                              
                              
                              
                              334
                              
                              
                              
                              2,559
                              
                              
                              
                              (2,225
                              )Participating
      project- Science + Technology Park at Johns Hopkins
                              
                              572
                              
                              Development
      fee
                              
                              
                              102
                              
                              
                              
                              —
                              
                              
                              
                              102Third-party
      development consulting services plus participating
projects
                              
                              
                              
                              
                              
                              
                              436
                              
                              
                              
                              2,559
                              
                              
                              
                              (2,123
                              )Southern
      Illinois University— Carbondale
                              
                              768
                              
                              Construction oversight fee
                              
                              
                              —
                              
                              
                              
                              13
                              
                              
                              
                              (13
                              )Syracuse
      University
                              
                              432
                              
                              Development
      fee
                              
                              
                              —
                              
                              
                              
                              67
                              
                              
                              
                              (67
                              )Intersegment
      development services
                              
                              
                              
                              
                              
                              
                              —
                              
                              
                              
                              80
                              
                              
                              
                              (80
                              )Development
      consulting services
                              
                              
                              
                              
                              
                              $
                              436
                              
                              
                              $
                              2,639
                              
                              
                              $
                              (2,203
                              )





Development
consulting services revenue decreased $2,203, or 83.5%, to $436 for the three
months ended September 30, 2010 as compared to the same period in
2009.  Third-party development consulting revenue declined $2,225 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
four active third-party development jobs in the third quarter of this year
compared to six active development projects in the third quarter of 2009.
However, the decrease in active third-party development consulting revenue was
offset by $102 of fees related to the participating property at the Science +
Technology Part at Johns Hopkins (see Note 2 to the accompanying condensed
consolidated financial statements). Due to the fact the Trust is guaranteeing
the construction loan and extending a second mortgage to the development, all
revenue on the project is being deferred in the accompanying condensed
consolidated financial statements until the second mortgage is repaid and the
Trust no longer guarantees the debt. As such the fees are deferred in the
eliminations column of the segment financial statements.  During the
quarter the Trust was reimbursed $916 for operating expenses related to the
Johns Hopkins project that the Trust had incurred in prior years. This resulted
in a difference between operating expense reimbursement revenue and operating
expense reimbursement expenses, which typically have no markup, and an increase
in net operating income in the quarter.Total development
consulting service revenue was also impacted by a decline in intersegment
revenue related to two internal developments that were completed in the third
quarter of 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 decreased $470 or 51.0% for the three months ended
September 30, 2010 compared to the same period in the prior year. This decrease
is primarily due to a decline in third-party development pursuit
costs.





Management
services





Total
management services revenue remained essentially flat for the three months ended
September 30, 2010 when compared to the same period in 2009 due to a consistent
number of management contracts each period and relatively flat revenue at those
projects.





General
and administrative costs for our management services segment decreased $165 or
9.1% for the three months ended September 30, 2010 as compared to the same
period in 2009 primarily due to a reduction in payroll and benefits. Excluding
restructuring costs taken in the third quarter general and administrative
expenses were reduced 16.0% from the prior year due mostly to the reduction in
salary related to the reorganization program.


40





Loss
on impairment





During
the three months ended September 30, 2010, management determined that the
carrying value of nine different student housing communities may not be
recoverable due to a decline in estimated net operating income or due to the
negotiated sales price on the potential sale of the assets. The fair value of
these properties was estimated and management recorded an impairment loss in the
accompanying condensed consolidated statement of operations of
$33,610.





Interest
expense





For the
three months ended September 30, 2010, interest expense declined $799 or 12.6%
when compared to the same period in the prior year. This decrease is primarily
due to the repayment of the Amended Revolver and the repayment of mortgage debt
on certain Place-communities in the fourth quarter of 2009.





Equity
in earnings of unconsolidated entities





Equity in
earnings of unconsolidated entities represents our share of the net income or
loss related to four investments in unconsolidated entities that own student
housing communities. For the three months ended September 30, 2010, equity in
earnings was a loss of $328 compared to a loss of $152 in the prior
year. The main driver of the decrease was a $137 loss recognized on the
sale of the assets of our joint venture property in Goleta,
California.





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. We believe that net
income is the most directly comparable GAAP measure to FFO available to
stockholders and unitholders. 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.


41




The
following table presents a reconciliation of FFO available to our stockholders
and unitholders to net income for the three and nine months ended September 30,
2010 and 2009:





Three
      Months Ended September 30,
                        
                        
                        Nine Months Ended September
    30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Net
      loss attributable to Education Realty Trust, Inc.
                        
                        $
                        (39,820
                        )
                        
                        $
                        (7,384
                        )
                        
                        $
                        (40,240
                        )
                        
                        $
                        (6,720
                        )Student
      housing property depreciation and amortization of lease
      intangibles
                        
                        
                        7,593
                        
                        
                        
                        7,056
                        
                        
                        
                        22,276
                        
                        
                        
                        21,015Equity
      portion of real estate depreciation and amortization on equity
      investees
                        
                        
                        120
                        
                        
                        
                        129
                        
                        
                        
                        368
                        
                        
                        
                        373Depreciation
      and amortization of discontinued operations
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        25Equity
      portion of loss on sale of student housing property on equity
      investee
                        
                        
                        137
                        
                        
                        
                        —
                        
                        
                        
                        137
                        
                        
                        
                        —Noncontrolling
      interests
                        
                        
                        (628
                        )
                        
                        
                        (200
                        )
                        
                        
                        (429
                        )
                        
                        
                        (43
                        )Funds
      from operations
                        
                        $
                        (32,598
                        )
                        
                        $
                        (399
                        )
                        
                        $
                        (17,888
                        )
                        
                        $
                        14,650





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 “Amended Revolver”). The previous
facility 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 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 September 30, 2010, our borrowing base was $43,347, 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
$41,847.Subsequent to
the end of the quarter the Trust drew $27,000 on the Second Amended
Revolver to partially fund the acquisition of The Grandmarc at the
Corner. This asset will be the only community the Trust will have after the
dispositions discussed above that is unencumbered by debt and eligible for
inclusion in the Second Amended Revolver. If the community were included,
the Trust estimates that the borrowing base availability would be approximately
$70,000.





At
September 30, 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. As of September 30, 2010, the Trust was in compliance with all covenants
discussed above.





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 three quarters, does not exceed
90% of funds from operations for the applicable period.


42





At
September 30, 2010, the Trust had outstanding mortgage and construction
indebtedness of $397,588 (excluding unamortized debt premium of
$499).  $132,078 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 $241,716 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”).  $48,816 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. This variable rate debt had a weighted average
interest rate of 3.64% as of September 30, 2010. The remaining outstanding
balance of $192,900 bears interest at a weighted average fixed rate of
5.88%.  $23,794 relates to construction debt that is discussed
below.





At
September 30, 2010, we had borrowed $10,688 and $4,281 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 in the accompanying condensed consolidated
financial statements). The loans bear interest equal to LIBOR plus 110 and 200
basis point margins, respectively, and were interest only through June 14, 2010.
On June 14, 2010, the Trust paid down $5,013 of the outstanding construction
debt and extended the maturity date until June 28, 2012. Going forward,
annually, a debt service coverage ratio calculated on a rolling 12 months
basis, of not less than 1.25 to 1, must be maintained with principal and
interest being repaid on a monthly basis.





At
September 30, 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 the 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.





Liquidity
outlook and capital requirements





During
the nine months ended September 30, 2010, we generated $25,997 of cash from
operations, received proceeds of $2,078 related to notes receivable and received
proceeds of $10,385 from equity offerings. When combined with $31,169 of
existing cash, we were able to invest $14,518 of capital into existing
communities, invest $446 in assets under development, distribute $9,173 to our
stockholders and unitholders, repay $5,113 in construction debt, fund $7,231 of
the second mortgage to East Baltimore Development, Inc. for the Johns Hopkins
project and end the quarter with $27,960 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 nine months ended September 30, 2010 totaled $9,173 or $0.16 per
weighted average share/unit, compared to cash provided by operations of $25,997,
or $0.45 per weighted average share/unit.  Our current targeted annual
dividend rate is $0.20 per share/unit.





Based on
our closing share price of $7.15 on September 30, 2010, our total enterprise
value was $795,971.  With net debt (total debt less cash) of $369,628
at September 30, 2010, our debt to enterprise value was 46.4% compared to 57.2%
at December 31, 2009.  With gross assets of $933,358, which excludes
accumulated depreciation of $163,592, our debt to gross assets was 42.6% at
September 30, 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 suitable growth opportunities by way of acquisition and development, both on
and off campus.


43





As
discussed in Note 2 to the condensed consolidated financial statements, the
Trust implemented an at-the-market equity distribution program during the second
quarter.  The Trust may sell shares of its common stock having an
aggregate offering amount of up to $50,000.  As of September 30, 2010,
the Trust has sold 1,502,400 shares of common stock under the equity
distribution program for net proceeds of $10,347.





An
additional source of capital, subject to appropriate market conditions, is the
targeted disposition of non-strategic properties. We continually assess all of
our communities, 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 and possibly
finance acquisition/development growth or other operational needs.





The Trust
entered into two separate sales agreements in October of 2010 to sell nine
communities, including eight of the former Place communities, for a total of
$84,800 (see Note 10 to the condensed consolidated financial
statements).  The sale of the first four communities is scheduled to
close by the end of the fourth quarter 2010.  The gross sales price is
$38,700 with expected net proceeds of approximately $20,700 after repayment of
related debt of $17,200 and other closing costs.  The remaining five
communities are scheduled to close in the first quarter of 2011.  The
gross sales price is $46,100 with expected net proceeds of approximately
$29,600, after repayment of related debt of $16,100 and other closing
costs.





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.





In
October 2010, the Trust completed the purchase of The Grandmarc at the Corner, a
641-bed student community at the University of Virginia (UVA) in
Charlottesville, Virginia.  The purchase price was approximately
$45,500 with related acquisition costs of approximately $1,500.  The
Trust funded the acquisition with existing cash and a draw on the Second Amended
Revolver of $27,000.





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 depending on market conditions and
terms.  As of September 30, 2010, $200,000 of securities registered
remains available for issuance.





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.


44


In 2007,
we began developing projects for the Trust’s ownership.  In 2009 we
established the ONE Plan (SM), under which the Company uses its equity and
financial stability to fund and own projects on university land.  We
plan to utilize both 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.  In July 2010, the University of Texas Board of Regents
selected the Trust to be the ground tenant to develop, own and manage a new
high-rise apartment community near the core of the University of Texas at Austin
campus.  This will be the Trust’s third wholly-owned development and
second project under the ONE Plan (SM). In September of 2010, the Trust entered
into an agreement to develop the first two phases of Storrs Center, a mixed-use
town center project, adjacent to the University of Connecticut, which are
scheduled to be completed in 2012 and 2013, respectively. This will be the
Trust’s fourth wholly owned development. As opposed to our third-party
development services, all exposure to risks 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 of financing 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 September 30,
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)
                
                $
                1,112
                
                
                $
                96,434
                
                
                $
                133,143
                
                
                $
                166,899
                
                
                $
                397,588Contractual
      Interest Obligations(2)
                
                
                5,448
                
                
                
                39,422
                
                
                
                26,502
                
                
                
                24,746
                
                
                
                96,118Operating
      Lease and Future Purchase Obligations (3)
                
                
                1,986
                
                
                
                9,417
                
                
                
                3,376
                
                
                
                203
                
                
                
                14,982Capital
      Reserve Obligations(4)
                
                
                449
                
                
                
                3,523
                
                
                
                2,861
                
                
                
                3,052
                
                
                
                9,885Total
                
                $
                8,995
                
                
                $
                148,796
                
                
                $
                165,882
                
                
                $
                194,900
                
                
                $
                518,573





(1)
            Includes
      required monthly principal amortization and amounts due at maturity on
      first mortgage debt secured by student housing properties, amounts due
      under the Second Amended Revolver and construction loan agreements. The
      first mortgage debt does not include $499 of unamortized debt
      premium.





(2)
            Includes
      contractual fixed-rate interest payments as well as estimates of variable
      rate interest payments based on variable interest rates effective as of
      September 30, 2010.  The Trust has $72,610 of variable rate debt
      as of September 30, 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.


45





In
conjunction with our follow-on common stock offering in July of 2009, the board
of directors 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 third quarter distribution of $0.05 per share of common
stock for the quarter ending on September 30, 2010. The distribution is payable
on November 15, 2010 to stockholders of record at the close of business on
October 29, 2010.





Off-Balance
Sheet Arrangements





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 September 30, 2010 and is secured by the Second Amended
Revolver.





On
May 10, 2006, the Operating Partnership guaranteed $23,200 of construction
debt held by University Village-Greensboro LLC and received a 25% ownership
stake in the joint venture with College Park Apartments.  Construction
was completed and the student housing community was occupied in
August 2007.  In June of 2010 the construction loan was
refinanced and the Operating Partnership no longer guarantees the
debt.





The
Operating Partnership serves as non-recourse, carve-out guarantor, for secured
third party debt in the amount of $47,031, held by two unconsolidated joint
ventures. The Operating Partnership is liable to the lender for any loss,
damage, cost, expense, liability, claim or other obligation incurred by the
lender arising out of or in connection with certain non-recourse exceptions in
connection with the debt. Pursuant to the respective operating agreements, the
joint venture partners agreed to indemnify, defend and hold harmless the Trust
with respect to such obligations, except to the extent such obligations were
caused by the willful misconduct, gross negligence, fraud or bad faith of the
Operating Partnership or its employees, agents or affiliates.  Therefore,
exposure under the guarantees for obligations not caused by the willful
misconduct, gross negligence, fraud or bad faith of the Operating Partnership or
its employees, agents or affiliates is not expected to exceed the Operating
Partnership’s proportionate interest in the related mortgage debt.





In
connection with the development agreement entered into on July 14, 2010 for a
project at the Science + Technology Park at Johns Hopkins Medical Institute (see
Note 2 to the condensed consolidated financial statements) the Trust has
committed to provide a guarantee of repayment of a $42,000 third-party
construction loan for a $3,000 fee.  The guarantee fee will not be
recognized until the second mortgage loan is repaid. The project will have a
$2,500 reserve to fund any operating or debt service shortfalls, that is to be
replenished annually by East Baltimore Development, Inc., until a 1.10 debt
service coverage ratio is achieved for twelve consecutive months. The second
mortgage loan and related debt service are the first at risk if such reserve is
not adequate to cover operating expenses and debt service on the construction
loan.





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.


46


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 September 30, 2010, we had fixed rate debt of $324,978.
Holding other variables constant a 100 basis point increase in interest rates
would cause a $12,869 decline in the fair value for our fixed rate debt.
Conversely, a 100 basis point decrease in interest rates would cause a $13,711
increase in the fair value of our fixed rate debt. At September 30, 2010, 81.7%
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 4.86 years.





At
September 30, 2010, we had borrowed $10,688 and $4,281 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 in the accompanying condensed consolidated
financial statements). The loans bear interest equal to LIBOR plus 110 and 200
basis point margins, respectively, and were interest only through June 14, 2010.
On June 14, 2010, the Trust paid down $5,013 of the outstanding construction
debt and extended the maturity date until June 28, 2012. Going forward,
annually, a debt service coverage ratio calculated on a rolling 12 months
basis, of not less than 1.25 to 1, must be maintained with principal and
interest being repaid on a monthly basis.





At
September 30, 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 the 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.





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.  At September 30, 2010, $48,816 remained outstanding on this
variable rate debt.  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.





Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the design and operation
of the Trust’s disclosure controls and procedures pursuant to
Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on their
evaluation as of September 30, 2010, our management, including our Chief
Executive Officer and Chief Financial Officer, has concluded that the Trust’s
disclosure controls and procedures were effective.





Changes
in Internal Control Over Financial Reporting





There
were no changes in the Trust’s internal control over financial reporting that
materially affected, or are reasonably likely to materially affect, the Trust’s
internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) of the Exchange Act).


47





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 in Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2009 and in Part II, Item 1A of our Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010
which describe 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.


48





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





Issuer Purchases of Equity
Securities





During
the three months ended September 30, 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 362 shares of our
common stock for approximately $3 in the open market pursuant to the dividend
reinvestment component of the plan with respect to our dividend for the third
quarter of 2010.  We also directed the plan administrator to purchase
790 shares of our common stock for approximately $5 in the open market for
investors pursuant to the direct stock purchase component of the
plan.  The following chart summarizes these purchases of our common
stock for the three months ended September 30, 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
      ProgramsJuly
      1-31, 2010
                  
                  
                  318
                  
                  
                  $
                  6.34
                  
                  
                  
                  ―
                  
                  
                  
                  ―August
      1-31, 2010
                  
                  
                  603
                  
                  
                  
                  6.96
                  
                  
                  
                  ―
                  
                  
                  
                  ―September
      1-30, 2010
                  
                  
                  231
                  
                  
                  
                  7.24
                  
                  
                  
                  ―
                  
                  
                  
                  ―Total
                  
                  
                  1,152
                  
                  
                  $
                  6.85
                  
                  
                  
                  ―
                  
                  
                  
                  ―





(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.


49





Item 3.
Defaults upon Senior Securities.





None.





Item 4.
[Removed and Reserved.]





Item 5.
OtherInformation.





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.




50




SIGNATURES





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





EDUCATION REALTY TRUST, INC.Date: November 4, 2010
            
            By /s/ Randy ChurcheyRandy ChurcheyPresident, Chief Executive Officer andDirector (Principal Executive Officer)Date: November 4, 2010
            
            By /s/ Randall H. BrownRandall H. BrownExecutive Vice President, Chief FinancialOfficer, Treasurer and Secretary(Principal Financial Officer)Date: November 4, 2010
            
            By /s/ J. Drew KoesterJ. Drew KoesterVice President, Assistant Secretary and Chief
              Accounting Officer(Principal Accounting Officer)


51


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
            
            Purchase
      and Sale Agreement, dated as of October 8, 2010, by and between EDR
      Berkeley Place Limited Partnership, Western Place, LLC, Statesboro Place,
      LLC, and EDR BG, LP and KAREP REIT I, Inc (filed
  herewith).10.2
            
            Purchase
      and Sale Agreement, made as of October 8, 2010 by and between Troy Place
      (DE), LLC, Jacksonville Place (DE), LLC, Martin Place (DE), LLC, Murray
      Place (DE), LLC and EDR Clemson Place Limited Partnership and KAREP REIT
      I, Inc (filed herewith).10.3
            
            Second
      Mortgage, dated as of July 2010 by and between 929 N. WOLFE STREET LLC and
      Education Realty Operating Partnership, LP (filed
    herewith).10.4
            
            Guarantee
      Agreement, dated as of July 14, 2010 by and between 929 N. WOLFE STREET
      LLC and Education Realty Operating Partnership, LP (filed
      herewith).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).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).


52