UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2007

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

For the transition period from to

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)

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 þ No o

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

Large accelerated filer o       Accelerated filer þ      Non-accelerated filer o

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

As of November 5, 2007, the latest practicable date, the Registrant had outstanding 28,506,966 shares of common stock, $.01 par value per share.

 

 

EDUCATION REALTY TRUST, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2007
TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements			2
Condensed Consolidated Balance Sheets of Education Realty Trust, Inc. and Subsidiaries as of September 30, 2007 and December 31, 2006			2
Condensed Consolidated Statements of Operations of Education Realty Trust, Inc. and Subsidiaries for the nine months ended September 30, 2007 and 2006			3
Condensed Consolidated Statements of Operations of Education Realty Trust, Inc. and Subsidiaries for the three months ended September 30, 2007 and 2006			4
Condensed Consolidated Statements of Cash Flows of Education Realty Trust, Inc. and Subsidiaries for the nine months ended September 30, 2007 and 2006			5
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			35
Item 4. Controls and Procedures			35
PART II — OTHER INFORMATION			36
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 3. Defaults Upon Senior Securities			36
Item 4. Submission of Matters to a Vote of Security Holders			36
Item 5. Other Information			36
Item 6. Exhibits			36
Signatures
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERTIFICATION OF CEO
EX-32.2 SECTION 906 CERTIFICATION OF CFO

Part I — Financial Information

Item 1. Financial Statements.

EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

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

		September 30, 2007				December 31, 2006
		(Unaudited)
Assets
Student housing properties, net		$	738,788			$	804,759
Assets under development			2,457				—
Corporate office furniture, net			1,782				752
Cash and cash equivalents			3,171				6,427
Restricted cash			9,534				9,154
Student contracts receivable, net			185				227
Receivable from affiliate			428				369
Management fee receivable from third party			630				669
Goodwill and other intangibles, net			3,540				3,649
Other assets			10,127				9,452
Total assets		$	770,642			$	835,458
Liabilities and stockholders’ equity
Liabilities:
Mortgage loans, net of unamortized premium/discount		$	422,071			$	423,933
Term loan			—				47,000
Revolving line of credit			2,200				22,400
Accounts payable and accrued expenses			14,423				10,764
Deferred revenue			10,997				9,073
Total liabilities			449,691				513,170
Minority interest			18,108				19,289
Commitments and contingencies			—				—
Stockholders’ equity:
Common stock, $.01 par value, 200,000,000 shares authorized, 28,422,849 and 26,810,552 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively			284				268
Preferred shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding			—				—
Additional paid-in capital			336,676				330,374
Warrants			—				375
Accumulated deficit			(34,117	)			(28,018	)
Total stockholders’ equity			302,843				302,999
Total liabilities and stockholders’ equity		$	770,642			$	835,458

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

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

(Unaudited)

		Nine months				Nine months
		ended				ended
		September 30,				September 30,
		2007				2006
Revenues:
Student housing leasing revenue		$	62,381			$	58,723
Student housing food service revenue			1,744				2,670
Other leasing revenue			10,377				10,577
Third-party development services			3,354				2,283
Third-party management services			2,447				2,051
Operating expense reimbursements			7,055				5,891
Total revenues			87,358				82,195
Operating expenses:
Student housing leasing operations			31,227				29,706
Student housing food service operations			1,683				2,427
General and administrative			10,789				9,037
Depreciation and amortization			24,009				25,904
Reimbursable operating expenses			7,055				5,891
Total operating expenses			74,763				72,965
Operating income			12,595				9,230
Nonoperating expenses:
Interest expense			20,676				21,682
Amortization of deferred financing costs			792				834
Loss on early repayment of debt			174				—
Interest income			(353	)			(439	)
Total nonoperating expenses			21,289				22,077
Loss before equity in earnings of unconsolidated entities, income taxes, minority interest and discontinued operations			(8,694	)			(12,847	)
Equity in earnings (losses) of unconsolidated entities			(245	)			573
Loss before income taxes, minority interest and discontinued operations			(8,939	)			(12,274	)
Income tax expense (benefit)			(103	)			463
Net loss before minority interest and discontinued operations			(8,836	)			(12,737	)
Minority interest			(341	)			(585	)
Loss from continuing operations			(8,495	)			(12,152	)
Discontinued operations:
Income from discontinued operations, net of minority interest of $35 and $36, respectively			817				669
Gain on sale of student housing property, net of minority interest of $65			1,579				—
Income from discontinued operations			2,396				669
Net loss		$	(6,099	)		$	(11,483	)
Earnings per share information
Income (loss) per share — basic and diluted:
Continuing operations		$	(0.30	)		$	(0.46	)
Discontinued operations			.08				0.02
Net loss per share		$	(0.22	)		$	(0.44	)
Weighted average common shares outstanding — basic and diluted			27,869,054				26,336,343
Distributions per common share		$	0.6150			$	0.8925

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

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

(Unaudited)

		Three months				Three months
		ended				ended
		September 30,				September 30,
		2007				2006
Revenues:
Student housing leasing revenue		$	19,378			$	18,166
Student housing food service revenue			642				895
Other leasing revenue			3,509				3,709
Third-party development services			1,287				856
Third-party management services			844				653
Operating expense reimbursements			2,672				2,146
Total revenues			28,332				26,425
Operating expenses:
Student housing leasing operations			12,803				12,344
Student housing food service operations			611				844
General and administrative			3,739				2,872
Depreciation and amortization			8,005				8,680
Reimbursable operating expenses			2,672				2,146
Total operating expenses			27,830				26,886
Operating income (loss)			502				(461	)
Nonoperating expenses:
Interest expense			6,290				7,551
Amortization of deferred financing costs			244				281
Interest income			(102	)			(101	)
Total nonoperating expenses			6,432				7,731
Loss before equity in earnings of unconsolidated entities, income taxes, minority interest and discontinued operations			(5,930	)			(8,192	)
Equity in earnings (losses) of unconsolidated entities			(247	)			148
Loss before income taxes, minority interest and discontinued operations			(6,177	)			(8,044	)
Income tax expense (benefit)			(54	)			381
Net loss before minority interest and discontinued operations			(6,123	)			(8,425	)
Minority interest			(337	)			(471	)
Loss from continuing operations			(5,786	)			(7,954	)
Loss from discontinued operations, net of minority interest of $0 and $(13), respectively			(16	)			(235	)
Net loss		$	(5,802	)		$	(8,189	)
Earnings per share information
Loss per share — basic and diluted:
Continuing operations		$	(0.20	)		$	(0.30	)
Discontinued operations			(0.00	)			(0.01	)
Loss per share		$	(0.20	)		$	(0.31	)
Weighted average common shares outstanding — basic and diluted			28,418,349				26,390,417
Distributions per common share		$	0.2050			$	0.2975

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

(Amounts in thousands)

(Unaudited)

		Nine months				Nine months
		ended				ended
		September 30,				September 30,
		2007				2006
Operating activities:
Net loss		$	(6,099	)		$	(11,483	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			24,009				25,904
Depreciation included in discontinued operations			711				1,541
Deferred taxes			(631	)			249
Gain on disposal of assets			—				(10	)
Gain on sale of student housing property			(1,644	)			—
Loss on early repayment of debt			138				—
Amortization of deferred financing costs			792				834
Amortization of unamortized debt premiums/discounts			(407	)			(413	)
Distributions of earnings from unconsolidated entities			339				658
Noncash compensation expense related to PIUs and restricted stock			593				622
Equity in earnings of unconsolidated entities			245				(573	)
Minority interest in continuing operations			(341	)			(585	)
Minority interest in discontinued operations			100				35
Change in operating assets and liabilities (net of student housing acquisitions/disposals)			5,270				3,001
Net cash provided by operating activities			23,075				19,780
Investing activities:
Property acquisitions, net of cash acquired			—				(112,694	)
Deferred acquisition costs and earnest money deposits			—				(468	)
Purchase of corporate furniture and fixtures			(1,380	)			(63	)
Restricted cash			(380	)			(2,593	)
Insurance proceeds on property loss			—				184
Investment in student housing properties			(6,093	)			(3,669	)
Proceeds from sale of student housing property			48,942				—
Investment in assets under development			(2,457	)			—
Investment in joint ventures			(178	)			(1,021	)
Net cash provided by (used in) investing activities			38,454				(120,324	)
Financing activities:
Payment of mortgage notes			(59,204	)			(1,402	)
Borrowings of mortgage notes			57,800				—
Borrowing (repayment) of term loan			(47,000	)			50,000
Borrowing (repayment) of line of credit, net			(20,200	)			20,800
Debt issuance costs			(549	)			(1,350	)
Proceeds (payments) from issuance of common stock			22,428				(125	)
Dividends and distributions paid			(18,060	)			(25,133	)
Redemption of minority interest			—				(8	)
Net cash provided by (used in) financing activities			(64,785	)			42,782
Net decrease in cash and cash equivalents			(3,256	)			(57,762	)
Cash and cash equivalents, beginning of period			6,427				61,662
Cash and cash equivalents, end of period		$	3,171			$	3,900

See accompanying notes to the condensed consolidated financial statements.

		Nine months				Nine months
		ended				ended
		September 30,				September 30,
		2007				2006
Supplemental disclosure of cash flow information:
Interest paid		$	20,965			$	21,501
Income taxes paid		$	632			$	855
Supplemental disclosure of noncash activities:
Prepaid acquisition costs		$	—			$	4,718
Warrants expired			375				—
Redemption of minority interest to satisfy loan to unitholder			—				6,116
Common stock issued under the dividend reinvestment plan			78				—

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

(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 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 student housing management activities.
	•		Allen & O’Hara Development Company, LLC (“AODC”), a Delaware limited liability company providing development consulting services for third party student housing properties.

     The Trust is subject to the risks involved with the ownership and operations of residential real estate near major universities throughout the United States. These include, among others, the risks 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.

Reclassifications

     Certain prior period amounts in our segment information presented in Note 5 have been reclassified to conform to the current period presentation. Interest expense of $2,982 related to borrowings on our revolving line of credit that were used to acquire the Place Portfolio (see Note 7) was previously an unallocated corporate expense. This amount has been reclassified to the student housing leasing segment for the nine months ended September 30, 2006.

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, together with the Trust’s annual report on

Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission.

Use of estimates

     The preparation of financial statements in accordance with GAAP requires making estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities, as well as the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions are used by management in determining the 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, and in the recording of the allowance for doubtful accounts. Actual results could differ from those estimates.

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 consolidated statements of cash flows. The Trust maintains cash balances in various banks. At times, the amounts of cash may exceed the $100,000 amount the FDIC insures. The Trust does not believe it is exposed to any significant credit risk on cash and cash equivalents.

Restricted cash

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

Distributions

     The Trust pays regular quarterly cash distributions to shareholders. These distributions are determined quarterly by the Board based on the operating results, economic conditions, capital expenditure requirements, the Internal Revenue Code’s REIT annual distribution requirements, leverage covenants imposed by our revolving credit facility and other debt documents, and any other matters the Board deems relevant.

Student housing properties

     Land, land improvements, buildings and improvements, and furniture, fixtures and equipment are recorded at cost. Buildings and improvements are depreciated over 30 to 40 years, land improvements are depreciated over 15 years and furniture, fixtures, and equipment are depreciated over 3 to 7 years. Depreciation is computed using the straight-line method for financial reporting purposes over the estimated useful life.

     Acquisitions of student housing properties are accounted for utilizing the purchase method in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, and accordingly, the acquired student housing properties’ results of operations are included in the Trust’s results of operations from the respective dates of acquisition. Pre-acquisition costs, which include legal and professional fees and other third party costs related directly to the acquisition of the property, are accounted for as part of the purchase price. Independent 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.

     Management assesses impairment of long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment and Disposal of Long-lived Assets. SFAS No. 144 requires that long-lived assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In accordance with SFAS No. 144, management uses an estimate of future undiscounted cash flows of the related asset over the remaining life in measuring whether the assets are recoverable. As of September 30, 2007, management determined that no indicators of impairment existed.

     Certain student housing properties are classified as held for sale based on the criteria within SFAS No. 144. When a student housing property is identified as held for sale, the net realizable value of such asset is estimated. If the net realizable value of 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 property has met the held for sale criteria. Operations of student housing properties that are sold or classified as held for sale are recorded as part of discontinued operations for all periods presented. For the nine months ended September 30, 2007, no impairment loss on student housing properties held for sale was recognized.

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 joint ventures, limited liability companies, and limited partnerships

     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.

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.

Issuance costs

     Specific incremental costs directly attributable to the issuance of common stock are charged against the gross proceeds. Accordingly, underwriting commissions and other stock issuance costs are reflected as a reduction of additional paid-in capital.

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 adjustment to interest using the effective interest method.

Income taxes

     The Trust qualifies as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). The Trust is generally not subject to federal income tax to the extent that it distributes at least 90% of its taxable income for each tax year to its shareholders. 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 income tax (including any applicable alternative minimum tax) on its taxable income and property and to federal income and excise taxes on its undistributed income.

     The Trust has elected to treat its management company, AOES, as a taxable REIT subsidiary (“TRS”). The TRS is subject to federal, state and local income taxes. AOES manages the Trust’s non-REIT activities. The Trust follows SFAS No. 109, Accounting for Income Taxes, which requires the use of the asset and liability method. 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 bases. 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.

Earnings per share

     The Trust calculates earnings per share in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share is calculated by dividing net earnings available to common shares by weighted average common shares outstanding. Diluted earnings per share is calculated similarly, except that it includes the dilutive effect of the assumed exercise of potentially dilutive securities. At September 30, 2007, 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:

Operating Partnership units			913,738
University Towers Operating Partnership units			269,757
Restricted Stock (unvested shares)			84,117
Profits Interest Units			275,000
Total potentially dilutive securities			1,542,612

     A reconciliation of the numerators and denominators for the basic and diluted earnings per share computations is not required 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.

Goodwill and other intangible assets

     The Trust accounts for its goodwill and other intangible assets under SFAS No. 142, Goodwill and Other Intangible Assets. Goodwill is tested annually for impairment, 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.

Minority interests

     Minority interests in the Operating Partnership represent limited partnership interests in the form of operating partnership units and profits interest units. Income is allocated to minority interests based on weighted average percentage ownership each month.

Comprehensive Income

     The Trust follows SFAS No. 130, Reporting Comprehensive Income, which established standards for reporting and display of comprehensive income and its components. For all periods presented, comprehensive income (loss) is equal to net income (loss).

Revenue recognition

     The Trust recognizes revenue related to leasing activities at the student housing properties owned by the Trust, management fees related to managing third party student housing properties, development consulting fees related to the general oversight of third party student housing development and construction and operating expense reimbursements for payroll and related expenses incurred for third party student housing properties 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 properties and includes revenues from leasing apartments by the bed, from parking lot rentals, and from 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 nonrefundable application and service fees and a signed parental guarantee. Receivables are recorded when billed. Revenues and related lease incentives and nonrefundable application and service fees are recognized on a straight-line basis over the term of the contracts. The Trust has no contingent rental contracts except as noted below related to other leasing revenue. At certain student housing facilities, the Trust offers parking lot rentals to the tenants. The related revenues are recognized on a straight-line basis over the term of the related agreement.

     Student housing food service revenue — The Trust maintains a dining facility at University Towers, which offers meal plans to the tenants as well as dining to other third party customers. The meal plans typically require upfront payment by the tenant covering the school semester and the related revenue is recognized on a straight-line basis over the corresponding semester.

     Other leasing revenue — Other leasing revenue relates to our leasing of the 13 properties we acquired from Place Properties (“Place”). Simultaneous with the acquisition of the 13 properties, the Trust leased the assets to Place and receives base monthly rent of $1,145 and has the right to receive “Additional Rent” annually if the properties exceed certain criteria defined in the lease agreement. Base rent is recognized on a straight line basis over the lease term and Additional Rent is recognized only upon satisfaction of the defined criteria.

     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.

    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 we typically receive a portion of the fees up front. These fees, including the upfront 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.

     Operating expense reimbursements — The Trust pays certain payroll and related costs to operate third-party student housing properties 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 in accordance with Emerging Issues Task Force No. 01-14, Income Statement Characterization of Reimbursements Received for “Out of Pocket” Expenses Incurred.

Recent accounting pronouncements

     In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in

Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation also provides guidance on description, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 became effective on January 1, 2007. The Trust has no unrecognized tax benefits as of September 30, 2007. The Trust, or its subsidiaries, file income tax returns in the U.S. Federal jurisdiction and various states’ jurisdictions. Open tax years generally include tax years 2004-2006 as of the date of adoption. The adoption of FIN 48 did not have a material impact on the Trust’s consolidated financial condition or results of operations taken as a whole.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 does not address “what” to measure at fair value; instead, it addresses “how” to measure fair value. SFAS 157 applies (with limited exceptions) to existing standards that require assets or liabilities to be measured at fair value. SFAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires new disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Trust is currently evaluating the impact of adopting SFAS 157 on its consolidated financial condition and results of operations.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which permits the option to measure financial instruments and certain other items at fair value, with changes in fair value recorded in earnings. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Trust is currently evaluating the impact of adopting SFAS 159 on its consolidated financial condition and results of operations.

3. Investments in unconsolidated entities

     As of September 30, 2007, the Trust had investments, directly or indirectly, in the following active unconsolidated joint ventures, limited liability companies and limited partnerships that are accounted for under the equity method:

	•		University of Louisville Apartment Developers LLC, a Kentucky limited liability company, 50% owned by AOES
	•		National Development/Allen & O’Hara CUPA, LLC, a Pennsylvania limited liability company, 50% owned by AODC
	•		University Village-Greensboro LLC, a Delaware limited liability company, 25% owned by the Operating Partnership
	•		AODC/CPA, LLC, a Delaware limited liability company, 50% owned by AODC
	•		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, 2007 and 2006:

		2007				2006
Results of Operations:
Revenues		$	8,871			$	1,418
Net income (loss)			(3,590	)			1,104
Equity in earnings (losses) of unconsolidated entities		$	(245	)		$	573

     These entities provide development consulting services to third party student housing owners in an agency capacity or own student housing communities which are managed by the Trust.

4. Debt

Term loan and revolving credit facility

     On March 31, 2006, the Operating Partnership amended and restated the revolving credit facility (the “Amended Revolver”) dated January 31, 2005 in the amount of $100,000 and entered into a senior unsecured term loan facility (the “Term Loan”) in the amount of $50,000. On June 8, 2007, the Trust prepaid the entire balance outstanding on the Term Loan with the proceeds received from the sale of the student housing property discussed in Note 8. In conjunction with this prepayment, the Trust recognized a loss from early extinguishment of debt totaling $174 consisting of the write-off of unamortized deferred financing costs.

     The Trust serves as the guarantor for any funds borrowed by the Operating Partnership under the Amended Revolver. Additionally, the Amended Revolver is secured by a cross-collateralized, first mortgage lien on six unmortgaged properties. The Amended Revolver has a term of three years and matures on March 31, 2009, provided that the Operating Partnership may extend the maturity date for one year subject to certain conditions. At September 30, 2007, there was $2,200 outstanding on the Amended Revolver. The interest rate per annum applicable to the 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 (7.57% at September 30, 2007).

     Availability under the Operating Partnership’s Amended Revolver is limited to a “borrowing base availability” equal to the lesser of (i) 65% of the property asset value (as defined in the amended credit agreement) of the properties securing the facility and (ii) the loan amount which would produce a debt service coverage ratio of no less than 1.30, with debt service based on the greater of two different sets of conditions specified in the amended credit agreement.

     The Operating Partnership’s 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. During January 2007, the Trust determined it would be in violation of its interest coverage ratio covenant related to the Amended Revolver. On February 27, 2007, the Trust entered into an amendment to the Amended Revolver (“First Amendment”), whereby the interest coverage ratio was adjusted from 1.85:1.00, to not less than 1.70:1.00 at all times from December 31, 2006 until March 31, 2008. However, the First Amendment states that if the Trust attains an interest coverage ratio greater than 1.85:1.00 during the effective period of the First Amendment, the interest coverage ratio reverts back to 1.85:1.00 on a prospective basis. At September 30, 2007, the Trust attained an interest coverage ratio of 1.87:1.00. Accordingly, the interest coverage ratio covenant will revert back to 1.85:1.00 on a prospective basis.

     The Trust is prohibited from making distributions that exceed $1.20 per share unless prior to and after giving effect to such action the total leverage ratio is less than or equal to 60%. The amount of restricted payments permitted may be increased as long as either of the following conditions is met: (a) after giving effect to the increased restricted payment, the total leverage ratio shall remain less than or equal to 60%; or (b) the increased restricted payment, when considered along with all other restricted payments for the last 3 quarters, does not exceed (i) 100% of funds from operations for the applicable period through and including September 30, 2007, and (ii) 95% of funds from operations for the applicable period thereafter.

     During the nine months ended September 30, 2007, the Trust issued 1,571,692 shares of common stock under the direct stock purchase plan, raising net proceeds of approximately $22,530 which were primarily used to pay down the Amended Revolver.   

Mortgage debt

     At September 30, 2007, the Trust had outstanding mortgage indebtedness of $422,071 (net of unamortized debt premium of $1,849). During the nine months ended September 30, 2007, the Trust refinanced $29,900 of maturing mortgage debt bearing interest at 6.63% and $26,500 of maturing mortgage debt bearing interest at 3.49%. In connection with the refinancing, the Trust incurred $549 of financing costs. The new mortgages are interest only at a fixed rate of 5.55% through March 1, 2012 and 5.59% through May 1, 2014, respectively. The scheduled maturities of outstanding mortgage indebtedness at September 30, 2007 are as follows:

Fiscal Year Ending
2007 (3 months ended December 31, 2007)		$	954
2008			26,481
2009			285,050
2010			888
2011			947
Thereafter			105,902
Total			420,222
Unamortized debt premium/discounts			1,849
Outstanding at September 30, 2007, net of unamortized premiums/discounts		$	422,071

     At September 30, 2007, the outstanding mortgage debt had a weighted average interest rate of 5.90% and carried an average term to maturity of 2.72 years.

5. Segments

     Business segments are defined by their distinct customer base and service provided. Three reportable segments have been identified: student housing leasing, third-party development consulting services and third-party management services. Management

evaluates each segment’s performance based on pretax income and net operating income, which is defined as income before depreciation, amortization, interest expense, interest income and equity in earnings of unconsolidated entities. Discontinued operations are not included in segment reporting as management addresses these items on a corporate level. Intercompany fees are reflected at the contractually stipulated amounts. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The following table represents segment information for the nine months ended September 30, 2007 and 2006:

		Nine months ended September 30, 2007																				Nine months ended September 30, 2006
						Third-Party																				Third-Party
		Student				Development				Third-Party												Student				Development				Third-Party
		Housing				Consulting				Management												Housing				Consulting				Management
		Leasing				Services				Services				Adjustments				Total				Leasing				Services				Services				Adjustments				Total
Revenues:
Student housing leasing revenue		$	62,381			$	—			$	—			$	—			$	62,381			$	58,723			$	—			$	—			$	—			$	58,723
Student housing food service revenue			1,744				—				—				—				1,744				2,670				—				—				—				2,670
Other leasing revenue			10,377				—				—				—				10,377				10,577				—				—				—				10,577
Third-party development consulting services			—				3,354				—				—				3,354				—				2,283				—				—				2,283
Third-party management revenue			—				—				2,447				—				2,447				—				—				2,051				—				2,051
Intersegment revenues			—				—				2,545				(2,545	)			—				—				—				2,470				(2,470	)			—
Operating expense reimbursements			—				—				—				7,055				7,055				—				—				—				5,891				5,891
Total revenues			74,502				3,354				4,992				4,510				87,358				71,970				2,283				4,521				3,421				82,195
Operating Expenses:
Student housing leasing operations			31,227				—				—				—				31,227				29,706				—				—				—				29,706
Student housing food service operations			1,683				—				—				—				1,683				2,427				—				—				—				2,427
General and administrative			102				1,985				4,976				—				7,063				4				1,601				3,653				—				5,258
Intersegment expenses			2,545				—				—				(2,545	)			—				2,470				—				—				(2,470	)			—
Reimbursable operating expenses			—				—				—				7,055				7,055				—				—				—				5,891				5,891
Total operating expenses			35,557				1,985				4,976				4,510				47,028				34,607				1,601				3,653				3,421				43,282
Net operating income			38,945				1,369				16				—				40,330				37,363				682				868				—				38,913
Nonoperating expenses(1)			43,803				—				—				—				43,803				47,133				—				—				—				47,133

		Nine months ended September 30, 2007																				Nine months ended September 30, 2006
						Third-Party																				Third-Party
		Student				Development				Third-Party												Student				Development				Third-Party
		Housing				Consulting				Management												Housing				Consulting				Management
		Leasing				Services				Services				Adjustments				Total				Leasing				Services				Services				Adjustments				Total
Income (loss) before equity in earnings of unconsolidated entities, income taxes, minority interest and discontinued operations			(4,858	)			1,369				16				—				(3,473	)			(9,770	)			682				868				—				(8,220	)
Equity in earnings of unconsolidated entities			(466	)			221				—				—				(245	)			(14	)			587				—				—				573
Income (loss) before taxes, minority interest and discontinued operations(3)		$	(5,324	)		$	1,590			$	16			$	—			$	(3,718	)		$	(9,784	)		$	1,269			$	868			$	—			$	(7,647	)
Total segment assets, as of September 30, 2007 and December 31, 2006 (2)		$	755,685			$	3,873			$	7,645			$	—			$	767,203			$	818,832			$	2,082			$	5,567			$	—			$	826,481

		2007				2006
Net loss before income taxes, minority interest and discontinued operations for reportable segments		$	(3,718	)		$	(7,647	)
Other unallocated corporate expenses (4)			(5,221	)			(4,627	)
Net loss before income taxes, minority interest and discontinued operations		$	(8,939	)		$	(12,274	)

The following table represents segment information for the three months ended September 30, 2007 and 2006:

		Three months ended September 30, 2007																				Three months ended September 30, 2006
						Third-Party																				Third-Party
		Student				Development				Third-Party												Student				Development				Third-Party
		Housing				Consulting				Management												Housing				Consulting				Management
		Leasing				Services				Services				Adjustments				Total				Leasing				Services				Services				Adjustments				Total
Revenues:
Student housing leasing revenue		$	19,378			$	—			$	—			$	—			$	19,378			$	18,166			$	—			$	—			$	—			$	18,166
Student housing food service revenue			642				—				—				—				642				895				—				—				—				895
Other leasing revenue			3,509				—				—				—				3,509				3,709				—				—				—				3,709
Third-party development consulting services			—				1,287				—				—				1,287				—				856				—				—				856
Third-party management revenue			—				—				844				—				844				—				—				653				—				653
Intersegment revenues			—				—				851				(851	)			—				—				—				814				(814	)			—
Operating expense reimbursements			—				—				—				2,672				2,672				—				—				—				2,146				2,146
Total revenues			23,529				1,287				1,695				1,821				28,332				22,770				856				1,467				1,332				26,425
Operating Expenses:
Student housing leasing operations			12,803				—				—				—				12,803				12,344				—				—				—				12,344
Student housing food service operations			611				—				—				—				611				844				—				—				—				844
General and administrative			16				714				1,629				—				2,359				—				547				1,141				—				1,688
Intersegment expenses			851				—				—				(851	)			—				814				—				—				(814	)			—
Reimbursable operating expenses			—				—								2,672				2,672				—				—				—				2,146				2,146
Total operating expenses			14,281				714				1,629				1,821				18,445				14,002				547				1,141				1,332				17,022
Net operating income			9,248				573				66				—				9,887				8,768				309				326				—				9,403
Nonoperating expenses(1)			14,041				—				—				—				14,041				16,037				—				—				—				16,037
Income (loss) before equity in earnings of unconsolidated entities, income taxes, minority interest and discontinued operations			(4,793	)			573				66				—				(4,154	)			(7,269	)			309				326				—				(6,634	)

		Three months ended September 30, 2007																				Three months ended September 30, 2006
						Third-Party																				Third-Party
		Student				Development				Third-Party												Student				Development				Third-Party
		Housing				Consulting				Management												Housing				Consulting				Management
		Leasing				Services				Services				Adjustments				Total				Leasing				Services				Services				Adjustments				Total
Equity in earnings of unconsolidated entities			(261	)			14				—				—				(247	)			(14	)			162				—				—				148
Income (loss) before taxes, minority interest and discontinued operations(2)		$	(5,054	)		$	587			$	66			$	—			$	(4,401	)		$	(7,283	)		$	471			$	326			$	—			$	(6,486	)

		2007				2006
Net loss before income taxes, minority interest and discontinued operations for reportable segments		$	(4,401	)		$	(6,486	)
Other unallocated corporate expenses (3)			(1,776	)			(1,558	)
Net loss before income taxes, minority interest and discontinued operations		$	(6,177	)		$	(8,044	)

6. Commitments and contingencies

    In connection with one of the Trust’s student housing portfolio acquisitions, the Trust became aware of a June 2001 notification from the United States Department of Justice of an on-going investigation regarding possible violations of the American Disabilities Act of 1990 and the Fair Housing Amendments Act of 1988 related to one of the student housing properties. In October 2002, the investigations were delayed for an undetermined period of time and therefore such has not been fully resolved. Management does not believe the resolution of this matter will result in a material adverse effect on the Trust’s consolidated financial condition or results of operations.

     The Operating Partnership entered into a letter of credit agreement in conjunction with the closing of the acquisition of a student housing property at the University of Florida. The letter of credit remains outstanding in the amount of $1,500 at September 30, 2007 and is secured by the Operating Partnership’s existing revolving credit facility.

     On May 10, 2006, the Operating Partnership guaranteed $23,200 of construction debt held by University Village-Greensboro LLC in order to receive a 25% ownership stake in the venture with College Park Apartments. The construction debt is expected to be refinanced in September of 2008 after construction is complete and the student housing community is occupied. The Operating Partnership has determined that it will not guarantee the debt after the construction loan is refinanced.

     The Trust also has various operating lease commitments for corporate office space, furniture and technology equipment.

     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 properties 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.

7. Acquisition of real estate investments

     During 2005, the Trust completed a private placement of 4,375,000 shares of its common stock which raised net proceeds of approximately $67,000. These shares were registered with the Securities and Exchange Commission on January 25, 2006. The proceeds were used to acquire 13 student housing properties from Place Properties L.P. (“Place Portfolio”) in January 2006. Consideration for the acquisition included cash of $95,800, issuance of 36,954 partnership units and the assumption of interest only mortgage debt of $98,700. The results of operations for the acquisition have been included in the accompanying consolidated statements of operations from the date of acquisition (January 1, 2006).

     On June 28, 2007, the Trust completed the acquisition of land in Carbondale, Illinois for $1,946 in order to develop a wholly owned student apartment community near Southern Illinois University. Since the acquisition we have incurred an additional $511 in costs to develop the community. All costs are classified as assets under development on the condensed consolidated balance sheet.

8. Disposition of real estate investments and discontinued operations

     On June 5, 2007, the Trust sold the Village on Tharpe (“Tharpe”) student housing property for a purchase price of $50,000, resulting in net proceeds of approximately $48,942. The net proceeds where used to pay off the Term Loan (see Note 4). The resulting gain on disposition of approximately $1,579, net of minority interest, is included in discontinued operations in the accompanying condensed consolidated statement of operations for the nine months ended September 30, 2007. Accordingly, the results of operations of Tharpe are included in discontinued operations for all periods presented. In accordance with the provisions of SFAS No. 144, the Trust ceased depreciation on the property when it met the held for sale criteria.

     The following table summarizes income from discontinued operations, net of minority interest, and the related realized gains on sales of real estate from discontinued operations, net of minority interest, for the nine months ended September 30, 2007 and 2006:

		2007				2006
Student housing leasing revenue		$	2,692			$	4,699
Student housing leasing operating expenses			(1,129	)			(2,453	)
Depreciation and amortization			(711	)			(1,541	)
Minority interest in Operating Partnership			(35	)			(36	)
Income from discontinued operations (net of minority interest)		$	817			$	669
Gain on sale of student housing property		$	1,644			$	—
Minority interest in Operating Partnership			(65	)			—
Gain on sale of student housing property (net of minority interest)		$	1,579			$	—

9. Incentive plan

     The Trust adopted the Education Realty Trust, Inc. 2004 Incentive Plan (the “Plan”) effective upon the closing of the Offering. The Plan provides for the grant of stock options, restricted stock units, stock appreciation rights, other stock-based incentive awards, and profits interest units to employees, directors and other key persons providing services to the Trust. The Trust has reserved 800,000 shares of its common stock 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.

     During the year ended December 31, 2006, the Trust issued 4,000 shares to its executive officers and 2,000 shares to its independent directors. The 2006 issuances vested immediately. During the nine months ended September 30, 2007, the Trust issued 4,000 shares to its executive officers and 4,000 shares to its independent directors, which vested immediately. 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, 2007 and December 31, 2006, unearned compensation totaled $1,412 and $1,866, 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 the nine months ended September 30, 2007 and 2006, compensation expense of $453 and $500, respectively, was recognized during each period in the accompanying condensed consolidated statements of operations, related to the vesting of restricted stock.

     Profits interest units, or PIUs, are units in a limited liability company controlled by the Trust that holds a special class of partnership interests in the Operating Partnership. Each PIU will be deemed equivalent to an award of one share of the Trust’s

common stock and will entitle the owner of such unit to receive the same quarterly per unit distributions as one common unit of the Operating Partnership. This treatment with respect to quarterly distributions is similar to the expected treatment of restricted stock awards, which will generally receive full dividends whether vested or not. PIUs will not initially have full parity with common units of the Operating Partnership with respect to liquidating distributions. Upon the occurrence of specified capital equalization events, PIUs may, over time, achieve full or partial parity with common units of the Operating Partnership for all purposes, and could accrete to an economic value equivalent to the Trust’s common stock on a one-for-one basis. If such parity is reached, vested PIUs may be exchanged into an equal number of the Trust’s shares of common stock at any time. However, there are circumstances under which full parity would not be reached. Until such parity is reached, the value that may be realized for vested PIUs will be less than the value of an equal number of shares of the Trust’s common stock, if there is any value at all. The grant or vesting of PIUs is not expected to be a taxable transaction to recipients. Conversely, we will not receive any tax deduction for compensation expense from the grant of PIUs. PIUs are treated as minority 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.

     Effective January 1, 2006, the Trust adopted the provisions of SFAS No. 123 (R) using the modified prospective transition method. This pronouncement requires that compensation costs related to share-based payments be recognized in the financial statements. Prior to January 1, 2006, the Trust applied the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The adoption of SFAS No. 123 (R) had no impact on the accompanying financial statements other than the reclassification of unearned compensation to additional paid-in capital.

     A summary of incentive plan activity for the nine months ended September 30, 2007 is as follows:

						Restricted
		PIU’s				Stock				Total
Outstanding at December 31, 2006			265,000				192,000				457,000
Granted			7,500				4,000				11,500
Redeemed			(2,500	)			—				(2,500	)
Outstanding at March 31, 2007			270,000				196,000				466,000
Granted			—				4,000				4,000
Redeemed			(2,500	)			—				(2,500	)
Outstanding at June 30, 2007			267,500				200,000				467,500
Granted			7,500				—				7,500
Redeemed			—				—				—
Outstanding at September 30, 2007			275,000				200,000				475,000
Vested at September 30, 2007			275,000				115,883				390,883

     Total compensation cost recognized in general and administrative expense in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2007 and 2006 was approximately $595 and $600, respectively.

10. Subsequent events

     On October 9, 2007, our board of directors declared a third quarter distribution of $0.205 per share of common stock for the quarter ending on September 30, 2007. The distribution is payable on November 6, 2007 to shareholders of record at the close of business on October 23, 2007.

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. Certain statements contained in this filing 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 Quarterly 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, 2006. 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.

Overview

     We are a self-managed and self-advised real estate investment trust (“REIT”) engaged in the ownership, acquisition and management of high quality student housing communities. We also provide student housing development consulting services to universities, charitable foundations and others. We believe that we are one of the largest private owners, developers and managers of high-quality 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 properties. We also earn income by performing property management services and development consulting services for third parties through our Management Company and Development Company, respectively. While we manage 67% of the properties we own, we will not recognize any fee income from their management on a consolidated basis. 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, third-party management services and third-party development consulting services. We evaluate each segment’s performance based on net operating income, which is defined as income before depreciation, amortization, interest expense, interest income, equity in earnings of unconsolidated entities and discontinued operations. The accounting policies of the reportable segments are described in more detail in the summary of significant accounting policies in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2006. Intercompany fees are reflected at the contractually stipulated amounts.

     Student Housing Leasing

     Student housing leasing revenue represented approximately 92.8% of our revenue, excluding operating expense reimbursements, for the nine months ended September 30, 2007. Our revenue related to food service operations is included in this segment. Additionally, this segment includes other leasing revenue related to the Place Portfolio lease.

     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. A parent or guardian is required to execute each lease as a guarantor unless the resident provides adequate proof of income. The number of lease contracts that we administer is therefore equivalent to the number of beds occupied instead of the number of apartment units.

     Due to our predominantly private bedroom accommodations, the high level of student-oriented amenities offered at our communities and the individual lease liability, we believe our properties can typically command higher per-unit and per-square foot rental rates than most multi-family properties 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 property in its entirety each year, resulting in significant turnover in our tenant population from year to year. In 2007 and 2006, approximately 68.5% and 68.3%, respectively, of our beds were leased to students who were first-time residents at our properties. 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 February and ends in August of each year. Our properties’ 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, during Turn we incur significant expenses making our units ready for occupancy, which we recognize immediately. This lease Turn period results in seasonality in our operating results during the third quarter of each year.

     Third-Party Management Services

     Revenue from our third-party management services, excluding operating expense reimbursements, represented approximately 3.0% of our revenue for the nine months ended September 30, 2007. These revenues are typically derived from multi-year management agreements, under which management fees are typically 3-5% of leasing revenue. These agreements typically have an initial term of five to ten years with a renewal option for an additional five years. As part of the management agreements, there are certain payroll and related expenses we pay on behalf of the third-party property owners. These costs are included in reimbursable operating expenses and are required to be reimbursed to us by the third-party 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 our management when analyzing the operating performance of our third-party management services business.

     Third-Party Development Consulting Services

     Revenue from our third-party development consulting services, excluding operating expense reimbursements, represented approximately 4.2% of our revenue for the nine months ended September 30, 2007. Fees for these services are typically 3-5% of the total project cost and are payable over the life of the project, which is typically one to two years in length. We incur expenses that are reimbursable by a project when awarded. We recognize the expenses when incurred, while the reimbursement revenue is not recognized until the consulting contract is awarded. These operating expenses are wholly reimbursable and therefore not considered by our management when analyzing the operating performance of our third-party development consulting services business. Also at times we will pay pre-development project expenses such as architectural fees and permits if such are required prior to the project’s financing being in place. We typically obtain a guarantee from the owner for repayment.

     We 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 as equity in earnings of unconsolidated entities after net operating income in our statement of operations. Our revenue and operating expenses could fluctuate from period to period based on the extent we utilize joint venture arrangements to provide third-party development consulting services.

     The amount and timing of future revenues from development consulting services will be contingent upon our ability to successfully compete in public 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, all of our third-party development projects have completed construction in time for their targeted occupancy dates.

Trends and Outlook

     Rents and Occupancy

     We expect the general trends of increased university enrollment and limited availability of on-campus housing to continue for the foreseeable future, providing us with continued opportunities to maximize revenues through increased occupancy and/or rental rates in our owned portfolio. We manage our properties to maximize revenues, which are primarily determined by two components: rental rates and occupancy rates. For the nine months ended September 30, 2007, same community revenue per available bed increased to $376 and same community physical occupancy increased to 93.3% compared to revenue per available bed of $359 and physical occupancy of 92.4% for the nine months ended September 30, 2006.

     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 revenues from the property. As a result, a decrease in occupancy rates may be offset by an increase in rental rates and may not be material to our operations.

     General and Administrative Costs

     In 2006, we experienced additional payroll costs related to growth and costs associated with formulating and documenting our internal control systems to comply with the Sarbanes Oxley Act of 2002. In 2007, we have continued to experience increases in salaries and staffing costs primarily related to the growth of each business segment.

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 properties and includes revenues from the leasing of space, parking lot rentals and certain ancillary services. Revenue from our food service operations is also included in this segment. Additionally, we include other leasing revenue related to the Place Portfolio lease in this segment.

     Students are required to execute lease contracts with payment schedules that vary from annual to monthly payments. Generally, a nonrefundable application fee, a nonrefundable service fee and a notarized parental guarantee must accompany each executed contract. Receivables are recorded when due. Leasing revenues and related lease incentives 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.

     Student Housing Food Service Revenue Recognition

     In 2006, we provided food service to an unaffiliated secondary boarding school through a contract covering a nine-month period. The contract required a flat weekly fee and the related revenues were recognized on a straight-line basis over the contract period. This contract was terminated effective December 31, 2006. Additionally, we maintain a dining facility at University Towers, which offers meal plans to the tenants as well as dining to other third-party customers. The meal plans typically require upfront payment by the tenant covering the school semester and the related revenue is recognized on a straight-line basis over the corresponding semester.

     Other Leasing Revenue Recognition

     Other leasing revenue relates to our leasing of 13 properties we acquired from Place Properties (“Place”) on January 1, 2006. Simultaneous with the acquisition of the 13 properties, the Trust leased the assets to Place and receives base monthly rent of $1,145 and has the right to receive “Additional Rent” annually if the properties exceed certain criteria defined in the lease agreement. Base rent is recognized on a straight-line basis over the lease term and Additional Rent is recognized only upon satisfaction of the defined criteria.

     Revenue and Cost Recognition of Third-Party 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 near the end of the construction period. 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 from financial reporting purposes. Because as a REIT, we are required to distribute 90% of our 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 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 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 we utilize joint venture arrangements to provide third-party development consulting services.

     Student Housing Property Acquisitions and Dispositions

     Land, land improvements, buildings and improvements, and furniture, fixtures and equipment are recorded at cost. Buildings and improvements are depreciated over 30 to 40 years, land improvements are depreciated over 15 years and furniture, fixtures, and equipment are depreciated over 3 to 7 years. Depreciation is computed using the straight-line method for financial reporting purposes.

     Property acquisitions are accounted for utilizing the purchase method in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and accordingly, the results of operations are included from the respective dates of acquisition. Pre-acquisition costs, including legal and professional fees and other third party costs related directly to the acquisition of the property, are accounted for as part of the purchase price. Independent 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 other identifiable intangibles such as amounts related to in-place leases.

     Certain student housing properties are classified as held for sale based on the criteria within SFAS No. 144. When a student housing property is identified as held for sale, the net realizable value of such asset is estimated. If the net realizable value of 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 property has met the held for sale criteria. Operations of student housing properties that are sold or classified as held for sale are recorded as part of discontinued operations for all periods presented. For the nine months ended September 30, 2007, no impairment loss on student housing properties held for sale was recognized.

     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.

     Long Lived Assets — Impairment

     Management is required to assess whether there are any indicators that our real estate properties may be impaired in accordance with SFAS No. 144, Accounting for the Impairment and Disposal of Long Lived Assets. A property’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 property is less than the carrying value of the property. These estimates of cash flows are based on factors such as 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 property over the fair value of the property, thereby reducing our net income.

Recently Issued Accounting Pronouncements

     In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation also provides guidance on description, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 became effective on January 1, 2007. The Trust has no unrecognized tax benefits as of September 30, 2007. The Trust, or its subsidiaries, file income tax returns in the U.S. Federal jurisdiction and various states’ jurisdictions. Open tax years generally include tax years 2004-2006 as of the date of adoption. The adoption of FIN 48 did not have a material impact on the Trust’s consolidated financial condition or results of operations taken as a whole.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 does not address “what” to measure at fair value; instead, it addresses “how” to measure fair value. SFAS 157 applies (with limited exceptions) to existing standards that require assets or liabilities to be measured at fair value. SFAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lower priority in unobservable data and requires new disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Trust is currently evaluating the impact of adopting SFAS 157 on its consolidated financial position and results of operations.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159”), which permits the option to measure financial instruments and certain other items at fair value, with changes in fair value recorded in earnings. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Trust is currently evaluating the impact of adopting SFAS 159 on its consolidated financial condition and results of operations.

Results of Operations for the Nine Months Ended September 30, 2007 and 2006

     The following table presents the results of operations for Education Realty Trust, Inc. for the nine months ended September 30, 2007 and 2006:

		Nine months ended September 30, 2007																				Nine months ended September 30, 2006
						Third-Party																				Third-Party
		Student				Development				Third-Party												Student				Development				Third-Party
		Housing				Consulting				Management												Housing				Consulting				Management
		Leasing				Services				Services				Adjustments				Total				Leasing				Services				Services				Adjustments				Total
Revenues:
Student housing leasing revenue		$	62,381			$	—			$	—			$	—			$	62,381			$	58,723			$	—			$	—			$	—			$	58,723
Student housing food service revenue			1,744				—				—				—				1,744				2,670				—				—				—				2,670
Other leasing revenue			10,377				—				—				—				10,377				10,577				—				—				—				10,577
Third-party development consulting services			—				3,354				—				—				3,354				—				2,283				—				—				2,283
Third-party management revenue			—				—				2,447				—				2,447				—				—				2,051				—				2,051
Intersegment revenues			—				—				2,545				(2,545	)			—				—				—				2,470				(2,470	)			—
Operating expense reimbursements			—				—				—				7,055				7,055				—				—				—				5,891				5,891
Total revenues			74,502				3,354				4,992				4,510				87,358				71,970				2,283				4,521				3,421				82,195
Operating Expenses:
Student housing leasing operations			31,227				—				—				—				31,227				29,706				—				—				—				29,706
Student housing food service operations			1,683				—				—				—				1,683				2,427				—				—				—				2,427
General and administrative			102				1,985				4,976				—				7,063				4				1,601				3,653				—				5,258
Intersegment expenses			2,545				—				—				(2,545	)			—				2,470				—				—				(2,470	)			—