<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange
Act of 1934
Date of Report: August 25, 1997
(Date of earliest event reported)
Commission File Number 1-12486
ASSOCIATED ESTATES REALTY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 34-1747603
(State or other Jurisdiction of (IRS
Incorporation or organization) Employer
Identification
Number)
5025 Swetland Court, Richmond Heights, Ohio 44143-1467
(Address of Principal Executive Offices) (Zip Code)
(216) 261-5000
(Registrant's telephone number, including area code)
<PAGE> 2
Item 5: Other Events
On August 25, August 28, and October 31, 1997, Associated
Estates Realty Corporation (the "Company") acquired certain
assets, consisting principally of the Multifamily Properties (the
"Acquired Properties") as further described below from the named
sellers (the "Acquired Properties"). The Acquired Properties
were as follows:
<TABLE>
<CAPTION>
Date of
Purchase Seller Name of Multifamily Property Suites
<S> <C> <C> <C>
08/25/97 OEPT Realty Holding Company Clinton Place Apartments 202
08/28/97 Embrey Partners Ltd. Waterstone Apartments 344
10/31/97 The Prudential Insurance Company Spring Valley Apartments 224
of America
</TABLE>
With respect to the Acquired Properties, the Company
purchased all of the above named sellers' rights, title and
interests in the apartment complex and land together with all
rights of way, easements, licenses, permits, fixtures,
furnishings, equipment, the right to manage, other intangible
assets, leases and tenancies, and all guaranties, warranties and
other intangible rights pertaining to the Acquired Properties.
Neither the Company nor any of its shareholders owned any
interests in the sellers prior to the acquisition of the Acquired
Properties by the Company. The purchase price of the Acquired
Properties was approximately $50.3 million, of which $0.4 million
represented liabilities assumed.
In determining the price paid for the Acquired Properties,
the Company considered the historical and expected cash flow from
the Acquired Properties, the nature of the occupancy trends and
terms of the leases in place, current operating costs and taxes,
the physical condition of the Acquired Properties, the potential
to increase their cash flow and other factors. The Company also
considered the capitalization rates at which it believes
apartment properties have recently sold, but determined the
prices it was willing to pay for the Acquired Properties
primarily based on the factors discussed above. No independent
appraisals were performed in connection with the acquisitions.
The Company, after investigation of the properties, is not aware
of any material factors, other than those enumerated above, that
would cause the financial information reported to not be
necessarily indicative of future expected operating results.
Certain other information concerning the Acquired Properties
is summarized below. The cash purchase price of the Acquired
Properties has been financed primarily with cash on hand made
available through the Company's revolving credit facility (the
"Line of Credit"). The Acquired Properties have been operated,
since construction, as rental properties. The Company will
manage all of the Acquired Properties.
<TABLE>
<CAPTION>
Number Number
Name of of of Type of Year
Property Location Suites Buildings Construction Constructed
<S> <C> <C> <C> <C> <C>
Clinton Place Clinton Twp, Michigan 202 23 Two story garden 1988
style apartments
with wood and
brick exteriors
Waterstone Apartments Indianapolis, Indiana 344 23 Two and three 1996-97
story garden
style apartments
with wood exteriors
Spring Valley Apartments Farmington Hills, MI 224 17 Two story garden 1987
style apartments
with brick and
aluminum exteriors
</TABLE>
<PAGE> 3
Item 7: Financial Statements and Exhibits
Financial Statements
This report includes (i) unaudited statements of revenue and
certain expenses of Clinton Place Apartments and Spring Valley
Apartments (together, "Certain Acquired Properties") for the
period ended September 30, 1997 or date of acquisition, whichever
is earlier, and (ii) audited statements of revenue and certain
expenses for the year ended December 31, 1996 for the Certain
Acquired Properties.
An audited statement of revenues and certain expenses for
the year ended December 31, 1996 for Waterstone Apartments is not
presented because the property was under development and in the
lease-up phase and, accordingly, the related operating
information of the property would not be meaningful.
Pro Forma Financial Information (Unaudited)
Unaudited pro forma financial information of the Company and
the Certain Acquired Properties is presented as follows:
. Condensed balance sheet as of September 30, 1997;
. Condensed statement of operations for the nine months
ended September 30, 1997 and for the year ended December
31, 1996, and;
. Estimated twelve-month pro forma statement of taxable net
operating income and operating funds available.
<PAGE> 4
Exhibits:
23.01 Consent of Independent Accountants.
<PAGE> 5
ASSOCIATED ESTATES REALTY CORPORATION
Certain Acquired Properties
FINANCIAL STATEMENTS
<PAGE> F-1
ASSOCIATED ESTATES REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Certain Acquired Properties
<S> <C>
Report of Independent Accountants F-2,3
Statements of Revenue and Certain Expenses for
the period ended September 30, 1997 or date of
acquisition, whichever is earlier (unaudited) and
for the year ended December 31, 1996 F-4
Notes to Statements of Revenue and Certain Expenses F-5
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA FINANCIAL INFORMATION (unaudited)
Condensed Balance Sheet as of September 30, 1997 F-6
Condensed Statement of Operations for the nine
months ended September 30, 1997 F-8
Condensed Statement of Operations for the year
ended December 31, 1996 F-11
Estimated Twelve-Month Pro Forma Statement of Taxable
Net Operating Income and Operating Funds Available F-14
</TABLE>
<PAGE> F-2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Associated Estates Realty Corporation
We have audited the accompanying statement of revenue and certain
expenses of Clinton Place Apartments for the year ended December
31, 1996. This historical statement is the responsibility of
management. Our responsibility is to express an opinion on this
historical statement based upon our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the historical statement is free of material misstatement. An
audit includes examining on a test basis, evidence supporting the
amounts and disclosures in the historical statement, assessing
the accounting principles used and the significant estimates made
by management, as well as evaluating the overall presentation of
the historical statement. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying historical statement is prepared on the basis
described in Note 2, for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission (for
inclusion in the Current Report on Form 8-K of Associated Estates
Realty Corporation) and is not intended to be a complete
presentation of the revenues and expenses of Clinton Place
Apartments.
In our opinion, the historical statement referred to above
presents fairly, in all material respects, the revenue and
certain expenses of Clinton Place Apartments on the basis
described in Note 2 for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
------------------------
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
July 3, 1997
<PAGE> F-3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Associated Estates Realty Corporation
We have audited the accompanying statement of revenue and certain
expenses of Spring Valley Apartments for the year ended December
31, 1996. This historical statement is the responsibility of
management. Our responsibility is to express an opinion on this
historical statement based upon our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the historical statement is free of material misstatement. An
audit includes examining on a test basis, evidence supporting the
amounts and disclosures in the historical statement, assessing
the accounting principles used and the significant estimates made
by management, as well as evaluating the overall presentation of
the historical statement. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying historical statement is prepared on the basis
described in Note 2, for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission (for
inclusion in the Current Report on Form 8-K of Associated Estates
Realty Corporation) and is not intended to be a complete
presentation of the revenues and expenses of Spring Valley
Apartments.
In our opinion, the historical statement referred to above
presents fairly, in all material respects, the revenue and
certain expenses of Spring Valley Apartments on the basis
described in Note 2 for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
------------------------
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
September 19, 1997
<PAGE> F-4
ASSOCIATED ESTATES REALTY CORPORATION
Certain Acquired Properties
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
For the period For the nine month
January 1, 1997 period ending
to August 25, 1997 September 30, 1997
Clinton Place Spring Valley
Apartments Apartments
(Unaudited) (Unaudited)
---------- ---------
<S> <C> <C>
Revenue
Rental income $ 1,070,565 $ 1,572,880
Other income 19,785 7,600
1,090,350 1,580,480
Certain expenses
Personnel 92,164 121,042
Advertising 30,663 19,856
Utilities 40,617 49,508
Building and grounds repair and
maintenance 65,628 184,392
Real estate taxes and insurance 85,022 177,030
Other operating expenses 22,252 35,683
336,346 587,511
Revenue in excess of certain expenses $ 754,004 $ 992,969
</TABLE>
<TABLE>
<CAPTION>
For the year ended
December 31, 1996
Clinton Place Spring Valley
Apartments Apartments
<S> <C> <C>
Revenue
Rental income $ 1,561,521 $ 2,058,333
Other income 10,068 6,395
1,571,589 2,064,728
Certain expenses
Personnel 137,622 174,475
Advertising 47,165 26,117
Utilities 51,647 64,545
Building and grounds repair and
maintenance 187,132 422,385
Real estate taxes and insurance 128,717 230,786
Other operating expenses 32,912 70,845
585,195 989,153
Revenue in excess of certain expenses $ 986,394 $ 1,075,575
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE> F-5
ASSOCIATED ESTATES REALTY CORPORATION
Certain Acquired Properties
NOTES TO THE STATEMENTS OF REVENUE AND CERTAIN EXPENSES
1. OPERATING PROPERTIES
T h e properties presented herein, referred to as the
"Acquisition Properties," are summarized as follows:
<TABLE>
<CAPTION>
Property Location Suites Year Built
<S> <C> <C> <C>
Clinton Place Apartments Clinton Township, Michigan 202 1988
Spring Valley Apartments Farmington Hills, Michigan 224 1987
</TABLE>
Clinton Place Apartments and Spring Valley Apartments were
acquired by Associated Estates Realty Corporation (the "Company")
on August 25 and October 31, 1997, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying statements of revenue and certain expenses
have been prepared on the accrual basis of accounting.
The accompanying financial statements are not representative
of the actual operations for the periods presented, because
certain expenses which may not be comparable to the expenses to
be incurred by the Company in the future operations of the
properties have been excluded. Expenses excluded consist of
depreciation on the building and improvements and amortization of
organization costs and other intangible assets, interest expense
and other general and administrative expenses not directly
related to the future operations of the Acquisition Properties.
Income Recognition
Rental income attributable to residential leases is recorded
when due from tenants.
Repair and Maintenance
Expenditures for maintenance and repairs are charged to
operations as incurred. Betterments that improve or extend the
life of the asset beyond its original condition are capitalized.
Costs incurred in connection with resident turnover are charged
to operations.
Unaudited Financial Information
The financial data for the period ended September 30, 1997
or date of acquisition, whichever is earlier, is unaudited;
however, in the opinion of the Company, the interim data includes
adjustments consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim
period. The results for the interim periods presented are not
necessarily indicative of the results for the full year.
<PAGE> F-6
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
September 30, 1997
(Unaudited)
(Dollars in Thousands)
The following unaudited pro forma condensed balance sheet is
presented as if the acquisitions by the Company of Spring Valley
Apartments had been consummated on September 30, 1997. Such pro
forma information is based upon the historical consolidated
balance sheet of the Company as of that date, giving effect to
the transactions described above. This pro forma condensed
balance sheet should be read in conjunction with the pro forma
condensed statement of operations of the Company and the
historical financial statements and notes thereto of the Company
included in the Associated Estates Realty Corporation Form 10-Q
for the three months ended September 30, 1997.
This unaudited pro forma condensed balance sheet is not
necessarily indicative of what the actual financial position of
the Company would have been at September 30, 1997 nor does it
purport to represent the future financial position of the
Company.
<TABLE>
<CAPTION>
Company Pro Forma Company
Historical Adjustments Pro Forma
<S> <C> <C> <C>
Assets
Real estate, net $ 501,184 $ 14,800 (a) $ 515,984
Cash and cash equivalents 1,852 - 1,852
Receivables and other assets 21,149 77 (a) 21,226
Restricted cash 4,912 - 4,912
$ 529,097 $ 14,877 $ 543,974
Liabilities
Secured debt $ 58,056 $ - $ 58,056
Unsecured debt 238,536 14,734 (b) 253,270
Other liabilities 25,125 143 (b) 25,268
Accumulated losses of equity
investees in excess of investment
and advances 12,329 - 12,329
334,046 14,877 348,923
Shareholders' equity
Class A cumulative preferred shares 56,250 - 56,250
Common shares 1,707 - 1,707
Paid in capital 171,728 - 171,728
Accumulated dividends in excess
of net income (34,634) - (34,634)
195,051 - 195,051
$ 529,097 $ 14,877 $ 543,974
<PAGE> F-7
<FN>
(a) Represents the assets purchased of Spring Valley Apartments,
which was acquired subsequent to September 30, 1997.
(b) The utilization of the Line of Credit represents the
assumption of other liabilities to finance the acquisition
of Spring Valley Apartments.
</FN>
</TABLE>
<PAGE> F-8
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Nine Months ended September 30, 1997
(Unaudited)
(In Thousands, except per share amounts)
The unaudited pro forma condensed statement of operations
for the nine months ended September 30, 1997 is presented as if
the following transactions had occurred on January 1, 1997, (i)
the acquistion of the Gables at White River, Remington Place, Saw
Mill Village and Hawthorne Hills Apartments as reported on the
Company's Form 8-K dated February 6, 1997 (the "Previously
Reported Acquisitions"), (ii) the the acquisition by the Company
of the Certain Acquired Properties as reported herein and (iii)
the offering of 1,750,000 shares of common stock on July 2, 1997
and the use of the net proceeds to repay borrowings on the line
of credit.
This pro forma condensed statement of operations is based
upon the historical results of operations of the Company for the
nine months ended September 30, 1997 and should be read in
conjunction with the proforma condensed balance sheet of the
Company set forth elsewhere herein and the historical financial
statements and notes thereto of the Company included in the
Associated Estates Realty Corporation Form 10-Q for the nine
months ended September 30, 1997.
The unaudited pro forma condensed statement of operations is
not necessarily indicative of what the actual results of
o p e rations of the Company would have been assuming the
transactions had been completed as set forth above, nor does it
purport to represent the results of operations of future periods
of the Company.
<PAGE> F-9
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------
Previously Certain
Company Reported Follow-on Acquired Company
Historical Acquisitions (a) Offering Properties (c) Pro Forma
<S> <C> <C> <C> <C> <C>
Revenues
Rental $ 74,258 $ 1,701 $ - $ 2,643 $ 78,602
Painting services revenue 1,304 - - - 1,304
Management fees and other
income 4,116 34 - 27 4,177
79,678 1,735 - 2,670 84,083
Expenses
Property operating and
maintenance expenses
exclusive of depreciation
and amortization 31,005 711 - 924 32,640
Depreciation - real estate
assets 12,734 341 - 566 13,641
- other 438 - - - 438
Amortization of deferred
financing fees 509 - - - 509
Painting services 1,154 - - - 1,154
General and administrative 4,402 - - - 4,402
Interest expense 13,570 778 (1,897) (b) 1,267 13,718
Total expenses 63,812 1,830 (1,897) 2,757 66,502
Income before equity in net
income of joint ventures
and extraordinary Item 15,866 (95) 1,897 (87) 17,581
Equity in net income of joint
ventures 492 - - - 492
Net income before extra-
extraordinary items $ 16,358 $ (95) $1,897 $ (87) $ 18,073
Net income applicable to common
shares $ 13,269 $ 14,984
Per share data:
Net income applicable to
common shares $ .83 $ 0.88
Weighted average number of
shares 15,906 17,072
</TABLE>
<PAGE> F-10
ASSOCIATED ESTATES REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Nine Months ended September 30, 1997
(In Thousands, except per share amounts)
(a) Reflects the revenues and expenses of the Previously
Reported Acquisitions for the period January 1, 1997 through
the date of acquisiton or September 30, 1997, whichever is
earlier.
Interest expense assumes interest at the weighted average
rate of the MTN Notes or at the rate of the Company's line
of credit, as applicable.
(b) Reflects the reduction of interest expense from using the
proceeds of the 1,750,000 Common Share offering completed on
July 2, 1997.
(c) Reflects the revenues and expenses of Certain Acquired
Properties for the period January 1, 1997 through the date
of acquisition or September 30, 1997, whichever is earlier.
Interest expense assumes interest at the weighted average
rate of the MTN Notes or at the rate of the Company's line
of credit, as applicable.
<PAGE> F-11
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Year ended December 31, 1996
(Unaudited)
(In Thousands, except per share amounts)
The unaudited pro forma condensed statement of operations
for the year ended December 31, 1996 and 1,750,000 shares issued
on July 2, 1997 is presented as if the following transactions had
occurred on January 1, 1996: (i) the offering of 1,450,000 shares
of common stock on December 11, 1996 and the use of the net
proceeds to repay borrowings on the line of credit, (ii) the
acquisition by the Company of the five properties acquired during
1996 as previously reported in the Company's Form 8-K dated
February 1, 1996 and one acquisition consummated on September 20,
1996, (iii) the acquisition by the Company of the three
properties acquired during 1997 as previously reported in the
Company's Form 8-K/A-1 dated February 6, 1997 and one acquisition
consummated on May 14, 1997, (iv) the acquisition of the Certain
Acquired Properties as reported herein, and (v) the offering of
1,750,000 shares of common stock on July 2, 1997 and the use of
the net proceeds to repay borrowings on the line of credit. The
six properties acquired in 1996 and the four properties acquired
in 1997 are collectively referred to herein as the "Previously
Reported Acquistions."
This pro forma condensed statement of operations is based
upon the historical results of operations of the Company for the
year ended December 31, 1996 and should be read in conjunction
with the pro forma condensed balance sheet of the Company as of
September 30, 1997 included elsewhere herein and the historical
financial statements and notes thereto of the Company included in
the Associated Estates Realty Corporation Form 10-K for the year
ended December 31, 1996.
The unaudited pro forma condensed statement of operations is
not necessarily indicative of what the actual results of
o p e rations of the Company would have been assuming the
transactions had been completed as set forth above, nor does it
purport to represent the results of operations of future periods
of the Company.
<PAGE> F-12
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------
Previously Certain
Company Reported Follow-on Acquired Company
Historical Acquisitions (a) Offerings Properties (c) Pro Forma
<S> <C> <C> <C> <C> <C>
Revenues
Rental $ 87,975 $ 9,791 $ - $ 3,620 $ 101,386
Painting services revenue 1,634 - - - 1,634
Management fees and other
income 4,824 110 - 16 4,950
94,433 9,901 - 3,636 107,970
Expenses
Property operating and
maintenance expenses
exclusive of depreciation
and amortization 37,056 4,180 - 1,574 42,810
Depreciation - real estate
assets 14,611 2,106 - 804 17,521
- other 316 - - - 316
Amortization of deferred
financing fees 609 - - - 609
Painting services 1,427 - - - 1,427
General and administrative 5,921 - - - 5,921
Interest expense 15,494 2,664 (3,678) (b) 1,817 16,297
Total expenses 75,434 8,950 (3,678) 4,195 84,901
Income before equity in
net income of joint
ventures 18,999 951 3,678 (559) 23,069
Equity in net income of
joint ventures 305 - - - 305
Net income $ 19,304 $ 951 $3,678 $ (559) $ 23,374
Net income applicable to
common shares $ 13,820 $ 17,890
Per share data:
Net income applicable to
common shares $ .99 $ 1.05
Weighted average number of
shares 13,932 17,072
</TABLE>
<PAGE> F-13
ASSOCIATED ESTATES REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Year ended December 31, 1996
(In Thousands, except per share amounts)
(a) Reflects the revenues and expenses of the Previously
Reported Acquisitions. The pro forma adjustment includes
the revenues and expenses for each of the properties for the
period January 1, 1996 through the earlier of the date of
acquisition or December 31, 1996.
Interest expense assumes interest at fair value with respect
to the mortgages assumed, at the rate of the Company's line
of credit or at the rate of the MTN Notes, as applicable.
(b) Reflects the reduction of interest expense from using the
proceeds of the 1,450,000 Common Share offering completed on
December 11, 1996 and the 1,750,000 Common Share offering
completed on July 2, 1997.
(c) Reflects the revenues and expenses of the Acquisition
Properties. The pro forma adjustment includes the revenues
and expenses for each of the properties for the period
January 1, 1996 through the December 31, 1996.
Interest expense assumes interest at fair value with respect
to the mortgages assumed, at the rate of the Company's line
of credit or at the rate of the MTN Notes, as applicable.
<PAGE> F-14
ASSOCIATED ESTATES REALTY CORPORATION
ESTIMATED TWELVE-MONTH PRO FORMA STATEMENT OF
TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
(Unaudited)
The following unaudited statement is a pro forma estimate
for a twelve-month period of taxable income and funds available
from operations of the Company. The unaudited pro forma
statement is based on the Company's historical operating results
for the year ended December 31, 1996 adjusted as if the following
transactions had occurred on January 1, 1996: (i) the offering of
1,450,000 shares of common stock on December 11, 1996 and the use
of the net proceeds to repay borrowings on the line of credit,
(ii) the acquisition by the Company of the five properties
acquired during 1996 as previously reported in the Company's Form
8-K dated February 1, 1996 and one acquisition consummated on
September 26, 1996, (iii) the acquisition by the Company of the
Certain Acquired Properties as reported herein, and (iv) the
offering of 1,750,000 shares of common stock on July 2, 1997 and
the use of the net proceeds to repay borrowings on the line of
credit.
This statement should be read in conjunction with (i) the
historical financial statements and notes thereto of the Company
and (ii) the pro forma financial statements of the Company.
<TABLE>
<CAPTION>
ESTIMATE OF TAXABLE NET OPERATING INCOME (IN THOUSANDS):
<S> <C>
Historical earnings from operations, exclusive of depreciation and
amortization (Note 1) $ 29,356
Previously Reported Acquisitions historical earnings from operations,
as adjusted, exclusive of depreciation (Note 2) 3,057
Certain Acquired Properties historical earnings from operations, as
adjusted, exclusive of depreciation (Note 2) 245
32,658
Estimated tax basis depreciation and amortization (Note 3)
AERC (11,254)
Previously Reported Acquisitions (1,605)
Certain Acquired Properties (719)
Pro Forma taxable operating income before dividends deduction 19,080
Estimated dividends deduction (Note 4) 31,754
$(12,674)
Pro Forma taxable operating income $ -
ESTIMATE OF PRO FORMA OPERATING FUNDS AVAILABLE
(NOTE 5) (IN THOUSANDS):
Pro Forma taxable operating income before dividends deduction $ 32,658
Add pro forma tax basis depreciation and amortization 13,578
Estimate of pro forma operating funds available $ 32,658
<FN>
Note 1 - The historical earnings from operations represents the
Company's net income applicable to common shares as
adjusted for depreciation and amortization for the year
ended December 31, 1996 as reflected in the historical
financial statements.
Note 2 - The historical earnings from operations represents the
p r o f orma results of the Previously Reported
Acquisitions and the Certain Acquired Properties since
January 1, 1996 as referred to in the pro forma
condensed consolidated statement of operations for the
year ended December 31, 1996 included elsewhere in this
report.
<PAGE> F-15
Note 3 - The tax basis depreciation of the Company is based upon
the original purchase price allocated to the buildings,
equipment and personal property, depreciated on a
straight-line basis over a 40-, 12-, and 10-year life,
respectively.
Note 4 - Estimated dividends deduction is based on the estimated
dividend rate of $1.86 per share. Shares outstanding,
on a pro forma basis are 17,072,456.
Note 5 - Operating funds available does not represent cash
generated from operating activities in accordance with
generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash
needs.
</FN>
</TABLE>
<PAGE> F-16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
Associated Estates Realty
Corporation
---------------------
Date: December 2, 1997 /s/ Dennis W. Bikun
Dennis W. Bikun
Chief Financial Officer & Treasurer
Chief Accounting Officer
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (No. 333-27429 and
No. 33-88430) and in the Prospectus constituting part of the
Registration Statement on Form S-3 (No. 333-22419) of Associated
Estates Realty Corporation of our reports dated July 3, 1997
and September 19, 1997 relating to the statements of revenue
and certain expenses of each of the Certain Acquired Properties,
which appears in the current report on Form 8-K of Associated
Estates Realty Corporation dated August 25, 1997.
/s/ Price Waterhouse LLP
------------------------
PRICE WATERHOUSE LLP
Cleveland, Ohio
December 2, 1997
