American Campus Communities, Inc. (NYSE:ACC), the largest owner,
manager and developer of high-quality student housing properties in
the U.S., today announced that it has entered into an agreement to
recapitalize and ultimately acquire seven select student housing
properties totaling 3,776 beds for an aggregate $590.6 million,
including an exclusive option to acquire a 248-bed property in
Seattle, Washington, from affiliates of Core Spaces and DRW Real
Estate Investments. The portfolio investment focuses on strategic
growth in seven key Power-5 conference and state flagship
university markets, and offers the potential for multi-asset market
efficiencies in five existing ACC markets. The transaction includes
the acquisition of two existing communities, two communities
opening in Fall 2017, and three projects under-construction
scheduled for completion in Fall 2018, with closing and funding
events scheduled to occur in a staged manner over approximately two
years, allowing for optimal integration and funding.
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American Campus Communities believes these seven assets
represent some of the best purpose-built student housing properties
in their respective markets, combining market leading unit and
amenity packages with excellent locations, with the portfolio
averaging only 0.2 miles to campus. Additionally, the seven
strategic growth markets offer strong student housing fundamentals
with average enrollment in excess of 35,000 students and existing
purpose-built student housing supply serving only 13 percent of
total enrollment, as compared to an average of 22 percent for the
company’s current portfolio.
As previously noted, in aggregate, the $590.6 million
transaction is expected to include closing and funding events over
approximately two years. The company intends to fund a substantial
portion of the total transaction through the monetization of select
existing core assets via disposition or joint venture, thereby
taking advantage of the current cap rate environment for core
pedestrian student housing in tier one university markets, where
private market transactions in the 4.0 to 4.75 percent cap rate
range are frequently occurring. After investment of $7.9 million of
upfront capital improvements, the portfolio targets a stabilized
cap rate of 5.4 percent nominal and 5.2 percent economic for the
2019-2020 academic year, with multiple property market efficiencies
offering the potential for additional yield above the going-in cap
rates for five of the seven assets.
“Core Spaces and DRW have developed some of the finest student
housing properties in the country,” said Bill Bayless, American
Campus Communities CEO. “The properties we have strategically
selected in this portfolio are located in Power-5 conference and
state flagship university markets that meet the highest levels of
our investment criteria of differentiated products in close
proximity to campus in submarkets with high barriers to entry. With
the implementation of our operating platform across the portfolio,
we should achieve meaningful accretion in asset value as well as
additional operational efficiencies within the five markets where
we have existing properties.”
Portfolio Overview
Two Existing Properties
Hub Eugene, built in 2015, contains 513 beds located pedestrian
to the University of Oregon and offers potential operational
synergies with the company’s existing property, 2125 Franklin, as
well as diversifying the company’s product offering, location and
price points within the market. State, built in 2013 and
significantly upgraded in 2017, contains 665 beds located adjacent
to Colorado State University, a state flagship university which
continues to exhibit high levels of enrollment growth. The company
acquired these two existing assets in August for an aggregate of
$146.1 million.
Two Properties Opening Fall 2017
The James and Hub U District Seattle represent the two projects opening in Fall
2017, both located in Power-5 conference markets. The James, with
850 beds, is located two blocks from the University of Wisconsin in
the preferred State Street submarket and marks the company’s
strategic entry into the University of Wisconsin market. Hub at U
District Seattle, which the company has an exclusive option to
acquire, contains 248 beds located pedestrian to the University of
Washington. Assuming exercise of the company’s option in October
2017, the acquisition of this asset is in concert with the
company’s recently announced strategy to expand its presence in the
University of Washington market, one of the most underserved
Power-5 markets in the country. The company is acquiring an initial
interest in the two properties through a joint venture with Core
Spaces/DRW Real Estate Investments in September and October of
2017, for an aggregate of $135.7 million. The remaining interest in
both properties are subject to further purchase options exercisable
in the fourth quarter of 2019 for an amount to be determined by
fair market value, expected to approximate $68.8 million in
aggregate.
Three Fall 2018 Presale Development Properties
Hub Ann Arbor, Hub West Lafayette, and Hub Flagstaff represent
the three under-construction projects scheduled for delivery in
Fall 2018, totaling 1,500 beds. The assets are located pedestrian
to the University of Michigan, Purdue University and Northern
Arizona University, respectively, representing two Power-5
conference markets and an existing ACE campus - all university
markets in which the company has extensive history. The company
funded an initial investment of $24.2 million through a joint
venture with Core Spaces/DRW Real Estate Investments in August and
expects to increase its investment by $130.6 million upon delivery
of the assets in Fall 2018, with an option to purchase the
remaining interests in the third quarter of 2019 for an amount to
be determined by fair market value, expected to approximate $85.2
million in aggregate, subject to satisfactory completion and
delivery of such properties.
Upon the initial funding of each property, American Campus
Communities assumes sole operational control, while Core Spaces/DRW
Real Estate Investments will retain certain limited decision making
abilities including responsibility for the development and delivery
of the in-process development properties. The acquisition is
subject to adjustment to total consideration based on stabilized
property tax assessments, various earn-out adjustments and closing
conditions including satisfactory completion of the properties
currently under construction by Core Spaces/DRW Real Estate
Investments. Therefore, there can be no assurance with respect to
the timing of the closing of any of these transactions or whether
these transactions will be completed.
For additional information, please refer to an investor
presentation posted in the Investor Relations section of the
company’s website.
About American Campus Communities
American Campus Communities, Inc. is the largest owner, manager
and developer of high-quality student housing communities in the
United States. The company is a fully integrated, self-managed and
self-administered equity real estate investment trust (REIT) with
expertise in the design, finance, development, construction
management and operational management of student housing
properties. As of June 30, 2017, American Campus Communities owned
160 student housing properties containing approximately 99,000
beds. Including its owned and third-party managed properties, ACC's
total managed portfolio consisted of 197 properties with
approximately 128,700 beds. Visit www.americancampus.com.
Forward-Looking Statements
In addition to historical information, this press release
contains forward-looking statements under the applicable federal
securities law. These statements are based on management’s current
expectations and assumptions regarding markets in which American
Campus Communities operates, operational strategies, anticipated
events and trends, the economy, and other future conditions.
Forward-looking statements are not guarantees of future performance
and involve certain risks and uncertainties, which are difficult to
predict. For discussions of some risks and uncertainties that could
cause actual results to differ materially from those expressed or
implied by the forward-looking statements, please refer to our
filings with the Securities and Exchange Commission, including our
Annual Report on Form 10-K for the year ended December 31, 2016
under the heading “Risk Factors” and under the heading “Business -
Forward-looking Statements” and subsequent quarterly reports on
Form 10-Q. We undertake no obligation to publicly update any
forward-looking statements, including our expected 2017 operating
results, whether as a result of new information, future events, or
otherwise.
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American Campus Communities, Inc., AustinRyan Dennison,
512-732-1000Investor Relations
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