AEC Offers Shares on Forward Basis

Zacks

Richmond Heights, Ohio-based real estate investment trust (REIT), Associated Estates Realty Corp (AEC), announced an equity offering of 6.5 million shares on a forward basis. Moreover, the company plans to offer a 30-day option to underwriters for purchasing an additional 975,000 shares.

Associated Estates intends to use the proceeds for paying near-term debt maturities (due Oct 1, 2013) as well as for meeting other corporate needs. Citigroup Inc. (C), BofA Merrill Lynch of Bank of America Corp (BAC) and Wells Fargo & Co. (WFC) are serving as joint book-running managers for the transaction.

As a part of this offering, Associated Estates plans to ink a forward sale deal – concerning the 6.5 million shares – with Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, or their respective affiliates. These forward purchasers are expected to borrow and sell all shares offered by Associated Estates.

Though this equity offering will result in share dilution for the company, debt dissolution is encouraging as it will reduce interest expenses. Moreover, it will help Associated Estates to achieve financial flexibility and will advantageously position it for investment opportunities – which promise overall and long-term growth.

Notably, as of Mar 31, 2013, Associated Estates had cash and cash equivalents of $19.5 million, up from $4.7 million and total debt of $675.3 million, down from $716.8 million as of Dec 31, 2012.

Associated Estates primarily owns and manages apartment communities in the Midwest, Mid-Atlantic and Southeast regions of the U.S. As of Mar 31, 2013, the company’s portfolio comprised 51 properties, containing 13,107 units and located across 10 states.

Associated Estates currently carries a Zacks Rank #3 (Hold).

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