Forward-looking statements refer only to expectations as of the date on which they are made. Education Realty Trust assumes no obligation to update or revise such statements as a result of new information, future developments or otherwise.It is now my pleasure to turn the call over to Randy Churchey, President and Chief Executive Officer. Randy? Randy Churchey Good afternoon. Thank you for joining us for the Education Realty Trust Third Quarter 2010 Earnings Call. I’m joined by our Chief Financial Officer, Randy Brown, and by our Chief Investment Officer, Tom Trubiana. I hope you had an opportunity to review our press release. I’m very pleased with our progress during the first three quarters of the year. We are showing tangible, positive results on each of our lines of business. First I’ll speak to property operations. Throughout the year, we completed many changes to our community management processes, procedures, and tools which have enabled our regional community managers to better focus on their three top priorities; pleasing our customers, generating increases in net operating income, and pre-leasing for Fall 2010. For the Fall 2010 leasing term, we achieved a same store 3.2% increase in occupancy and a 2% improvement in net rates. This combined improvement in occupancy and net rate should result in an approximate 4% increase in same store revenues for the next 12 months. Our portfolio begins the school year 92.2% occupied, versus 90.1% last year. In addition to the superior pre-leasing results, our property operations team was also able to control expenses, and deliver an increase in operating margins; overall, an outstanding nine month performance. We achieved these great leasing results and margins expansions concurrent with making changes in management processes and procedures. We’re probably 70% finished with implementing the restructuring improvements that we highlighted at the beginning of the year.
Two of the more significant items in process are the completion of centralized revenue yield management tools and filling our open corporate leasing and marketing positions. Even with these two items to be completed, we enter this coming leasing season in much better shape than the previous year. As a result, we expect that we will be able to achieve market leading results in the next leasing cycle, as well.Now to acquisitions and capital recycling. Earlier this week, we announced the acquisition of a community at the University of Virginia, and the sale of nine communities, including eight of the former Place communities. The UVA community acquisition meets all of our investment criteria. The community is of sufficient size, within two blocks of campus, has formidable barriers to entry, had bed/bath and bed/parking parity, is recently built, and commands a relatively high monthly rental rate per bed, of approximately $670. UVA is a top tier university, with an enrollment that continues to grow, and finally, we expect the unleveraged ten year yield to be in the low double digits. We are well positioned to capitalize on new acquisition opportunities and are well aware that finding assets like UVA, that meet our underlying criteria will not be easy, but is one of the reasons we are focusing our efforts on creating and further building our industry relationships in order to find new, maybe off market opportunities, both for acquisition and development. We are funding the UVA acquisition with cash on hand and through our capital recycling program. We have consistently communicated that we anticipate disposing of the 30 to 40% of our beds that do not meet our current acquisition criteria, when we find the exit cap rates to be attractive. The sales of the nine core assets we announced earlier this week were an application of this disposition strategy.
We are selling nine communities which have an average age of 11 years, an average monthly rental rate per bed of $358, and average distance to the edge of campus of 0.7 miles, and serve smaller universities with an average enrollment of 15,500. These sells are occurring much quicker than we had anticipated. This timing was influenced by the rapid decreases in cap rates during 2010.Read the rest of this transcript for free on seekingalpha.com