American Campus Communities, Inc. (NYSE:ACC) today announced the
following financial results for the quarter ended March 31,
2016.
Highlights
- Achieved quarterly FFOM of $78.2
million or $0.62 per fully diluted share compared to $76.1 million
or $0.67 per fully diluted share in the first quarter prior
year.
- Increased same store wholly-owned net
operating income ("NOI") 2.5 percent over the first quarter 2015
with revenues increasing 2.3 percent and operating expenses
increasing 2.1 percent.
- Achieved same store wholly-owned
average physical occupancy of 97.4 percent for the first quarter
2016 compared to 97.8 percent for the first quarter 2015. The
non-core properties targeted for disposition represented 37 basis
points of this 40 basis point decrease in same store wholly-owned
average physical occupancy.
- Preleased the same store wholly-owned
portfolio for the upcoming academic year to 83.3 percent applied
for and 77.4 percent leased as of April 22, 2016 with a current
projected rental rate increase of 3.0 percent. This compares to
82.4 percent applied for and 75.7 percent preleased for the same
date prior year. Excluding non-core properties targeted for
disposition, the same store wholly-owned portfolio is preleased to
an average of 80.0 percent versus 76.7 percent for the same date
prior year.
- As part of its strategic capital
recycling plan, focused on the disposition of the remaining
non-core assets, the company completed the sale of two non-core
properties for $73.8 million during the quarter. Totaling 1,324
beds, these two properties average over 21 years of age and over
0.6 miles from their respective campuses.
- Raised approximately $708 million in
net proceeds from a public offering of 17,940,000 shares of common
stock at a price of $41.25 per share on February 5, 2016, which
includes 2,340,000 shares issued as a result of the underwriters'
exercise of their over-allotment option in full at the
closing.
- Executed a predevelopment agreement for
an on-campus American Campus Equity (ACE®) transaction with
Virginia Commonwealth University for the replacement and expansion
of first-year student housing. The project, which continues to
undergo predevelopment activity, is expected to include
approximately 1,524 on-campus beds targeted for delivery in Fall
2018.
- Subsequent to quarter end, executed a
ground lease and commenced construction on an eighth phase
on-campus development with Prairie View A&M University. The
466-bed ACE community is slated for occupancy in Fall 2017.
- Subsequent to quarter end, commenced
construction on Suites at 3rd, a core off-campus development
located pedestrian to the University of Illinois. The community
will include 251 beds and efficiently share operations and
amenities with our existing asset, Tower at Third, upon delivery in
Fall 2017.
- Executed a pre-development agreement
for a proposed third-party development project on the campus of
Texas A&M University – San Antonio, and executed a third-party
consultant agreement with CHF – Collegiate Housing Island Campus to
provide advisory services related to their potential purchase of a
1,790-bed apartment community located on the campus of Texas
A&M University – Corpus Christi.
- Subsequent to quarter end, awarded the
right to begin pre-development services for a proposed third-party
development project on the campus of La Salle University.
- The company’s corporate credit rating
was upgraded to BBB from BBB- by Standard & Poor’s Ratings
Services.
- Recognized by the National Multifamily
Housing Council (NMHC) as a Top 50 Apartment Owner and Top 50
Apartment Manager via inclusion in the 2016 NMHC 50, the
authoritative ranking of the country’s largest apartment owners,
managers, developers and contractors.
- Won an industry leading five INNOVATOR
Awards at this year's Student Housing Business National Conference,
including three on-campus awards, increasing our cumulative total
to an industry leading 19 awards.
“As highlighted by the record number of attendees at the recent
Interface Student Housing Conference, including notable
participants from institutional and global capital, our sector
continues to flourish with consistent internal growth and
tremendous external growth opportunities,” said Bill Bayless,
American Campus CEO. “While our recent equity offering and the
strategic dispositions included in our guidance have a dilutive
impact to current year earnings, 2016 sets the stage for meaningful
value creation in 2017 and beyond in earnings per share and net
asset value, as we execute on our expanding, high-yielding
development pipeline and internally on our prospects for
accelerating same store NOI growth.”
First Quarter Operating Results
Revenue for the 2016 first quarter totaled $200.0 million, an
increase of 3.9 percent from $192.5 million in the first quarter
2015. Operating income for the quarter increased $2.9 million or
5.7 percent over the prior year first quarter. The increase in
revenues and operating income was primarily due to growth resulting
from recently completed development properties, increased rental
rates for the 2015-2016 academic year, and property acquisitions
completed in 2015, offset by the loss of revenue and operating
income associated with the sale of 22 non-core properties during
2015 and 2016. Net income for the 2016 first quarter totaled $45.6
million, or $0.36 per fully diluted share, compared with net income
of $70.2 million, or $0.62 per fully diluted share for the same
quarter in 2015. Compared to the prior year, the decrease in net
income is primarily due to a $26.8 million decrease in gains from
disposition of real estate driven by the sale of two properties in
the current quarter as compared to ten properties in the first
quarter of 2015. FFO for the 2016 first quarter totaled $81.8
million, or $0.65 per fully diluted share, as compared to $77.0
million, or $0.68 per fully diluted share for the same quarter in
2015. FFOM for the 2016 first quarter was $78.2 million, or $0.62
per fully diluted share as compared to $76.1 million, or $0.67 per
fully diluted share for the same quarter in 2015. A reconciliation
of FFO and FFOM to net income is provided in Table 3.
NOI for same store wholly-owned properties was $95.5 million in
the quarter, an increase of 2.5 percent from $93.1 million in the
2015 first quarter. Same store wholly-owned property revenues
increased by 2.3 percent over the 2015 first quarter due to an
increase in average rental rates for the 2015-2016 academic
year. Same store wholly-owned property operating expenses
increased by 2.1 percent over the prior year quarter. NOI for
the total wholly-owned portfolio increased 5.8 percent to $107.7
million for the quarter from $101.7 million in the comparable
period of 2015.
Portfolio Update
Developments
The company is progressing on the construction of 14
owned-development and presale development projects with expected
deliveries in Fall 2016 and 2017. The developments total
approximately $724.1 million, are all core Class A assets located
on or pedestrian to campus in their respective markets - averaging
less than 0.1 miles to campus, and are on track to achieve a
stabilized development yield in the range of 6.5 - 7.0 percent.
The seven development and presale development projects scheduled
to open in Fall 2016 totaling $307.4 million are preleased to an
average of 67.2 percent for the upcoming academic year as of April
22, 2016. When excluding Merwick Stanworth Phase II, a community
which will serve faculty and staff members of Princeton University
and is expected to stabilize in a manner consistent with a
multi-family property during the first academic session, consistent
with the first phase Merwick Stanworth development, the company’s
2016 new development deliveries are preleased to an average of 76.3
percent.
American Campus Equity (ACE)
Subsequent to quarter end, the company executed a ground lease
and commenced construction on our eighth on-campus development at
Prairie View A&M University. Upon delivery in Fall 2017, the
$26.8 million ACE development will contain 466 beds, and will join
the existing on-campus housing which has achieved occupancy in
excess of 98 percent in each of the past five years.
Subsequent to quarter end, the company executed a predevelopment
agreement for a previously announced ACE transaction located on the
campus of Virginia Commonwealth University for the replacement and
expansion of first-year student housing. The estimated $92.0
million project, which is continuing in predevelopment, is expected
to include 1,524 on-campus beds, and is targeting delivery in Fall
2018.
Off-Campus Owned
Subsequent to quarter end, the company commenced construction on
Suites at 3rd, a 251-bed development located pedestrian to the
University of Illinois in the popular Campustown submarket. The
$25.0 million LEED Gold certified project will serve as a new phase
of our existing Tower at Third property, efficiently sharing
amenities and operations upon delivery in Fall 2017.
Dispositions
The company continues to strategically target its remaining
non-core assets for disposition, representing as much as $600
million in total sales in 2016. As part of these efforts, the
company completed the sale of two non-core properties for $73.8
million during the quarter. These two properties contain 1,324
beds, average over 21 years of age, and are located an average of
0.6 miles from their respective campuses. The properties were sold
at an average economic cap rate of 5.6 percent based on in-place
rental revenue, escalated trailing-12 operating expenses and
historical average capital expenditures.
Third-Party Services
During the quarter, the company was awarded the right to begin
pre-development services for a proposed third-party on-campus
development project at Texas A&M University – San Antonio,
which targets delivery in Fall 2017 or Fall 2018. Also during the
quarter, the company executed a third-party consultant agreement
with CHF to oversee, manage and review their potential purchase of
a 1,790-bed apartment community located on the campus of Texas
A&M University – Corpus Christi. Finally, subsequent to quarter
end, the company was awarded the right to begin pre-development
services for a proposed third-party on-campus development project
at La Salle University. ACC anticipates providing management
services for these projects upon completion although the full
scope, feasibility, fees and timing have not been finalized.
Capital Markets
In January, the company entered into a $150 million unsecured
term loan agreement which matures March 29, 2021 and used the
proceeds to repay an equal amount outstanding on an existing term
loan agreement which matures in January 2017. The new loan is
expandable by $50 million upon the satisfaction of certain
conditions and bears interest at a variable rate with a spread
reflecting current market terms which included a reduction in the
LIBOR spread, as compared to the prior term loan, of approximately
10 to 15 basis points.
On February 5, 2016, the company raised approximately $708
million in net proceeds from a public offering of 17,940,000 shares
of common stock at a price of $41.25 per share, which includes
2,340,000 shares issued as a result of the underwriters' exercise
of their over-allotment option in full at the closing. Proceeds
were used to repay the outstanding balance on the company’s
revolving credit facility and to repay a $250 million unsecured
term loan which was scheduled to mature in March 2019. The company
intends to use the remaining proceeds for potential repayment of
other maturing debt, to fund the company’s development pipeline,
potential acquisitions of student housing properties and for
general corporate purposes. The offering further strengthens the
balance sheet and positions the company to continue to execute on
the significant accretive core development opportunities both on
and off campus.
With the application of a portion of the proceeds from the
company’s issuance of common stock to fully repay the outstanding
balance on the revolving credit facility and the $250 million
unsecured term loan which was scheduled to mature in March 2019,
all of the company’s remaining variable rate debt is hedged with
floating-to-fixed interest rate swaps to January 2017.
During the quarter, Standard & Poor’s Ratings Services
(S&P) upgraded its corporate credit rating on the company from
BBB- to BBB. In its report, S&P noted, “We are raising our
corporate credit rating on ACC to ‘BBB,’ based on the recent
deleveraging and strong recent operating performance.” Further, the
report states that ACC’s “outlook is stable” and “reflects our view
that ACC will achieve modest growth in its same-store portfolio
while delivering fully occupied new development projects currently
in process.”
At-The-Market (ATM) Share Offering Program
The company did not sell any shares under the ATM Share Offering
Program during the first quarter, or subsequent to quarter end.
2016 Outlook
The company is maintaining its previously stated guidance range
for the fiscal year 2016, anticipating that FFO will be in the
range of $2.19 to $2.35 per fully diluted share and FFOM will be in
the range of $2.14 to $2.30 per fully diluted share. For additional
details regarding the company’s 2016 outlook, please see pages
16-17 of the Supplemental Analyst Package 1Q 2016. All guidance is
based on the current expectations and judgment of the company’s
management team.
Supplemental Information and Earnings Conference Call
Supplemental financial and operating information, as well as
this release, are available in the investor relations section of
the American Campus Communities website, www.americancampus.com. In
addition, the company will host a conference call to discuss first
quarter results and the 2016 outlook on Tuesday, April 26, 2016 at
10 a.m. EDT (9:00 a.m. CDT). Participants from within the U.S. may
dial 888-317-6003 passcode 5420837, and participants outside the
U.S. may dial 412-317-6061 passcode 5420837 at least five minutes
prior to the call.
To listen to the live broadcast, go to www.americancampus.com at
least 15 minutes prior to the call so that required audio software
can be downloaded. Informational slides in the form of the
supplemental analyst package can be accessed via the website. A
replay of the conference call will be available beginning one hour
after the end of the call until May 10, 2016 by dialing
877-344-7529 or 412-317-0088 conference number 10082317. The replay
also will be available for one year at www.americancampus.com. The
call will also be available as a podcast on www.REITcafe.com and on the company’s website
shortly after the call.
Non-GAAP Financial Measures
The National Association of Real Estate Investment Trusts
("NAREIT") currently defines Funds from Operations ("FFO") as net
income or loss attributable to common shares computed in accordance
with generally accepted accounting principles ("GAAP"), excluding
gains or losses from depreciable operating property sales,
impairment charges and real estate depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint
ventures. We present FFO because we consider it an important
supplemental measure of our operating performance and believe it is
frequently used by securities analysts, investors and other
interested parties in the evaluation of REITs, many of which
present FFO when reporting their results. We also believe it is
meaningful to present a measure we refer to as FFO-Modified, or
FFOM, which reflects certain adjustments related to the economic
performance of our on-campus participating properties and excludes
property acquisition costs and other non-cash items, as we
determine in good faith. FFO and FFOM should not be considered as
alternatives to net income or loss computed in accordance with GAAP
as an indicator of our financial performance or to cash flow from
operating activities computed in accordance with GAAP as an
indicator of our liquidity, nor are these measures indicative of
funds available to fund our cash needs, including our ability to
pay dividends or make distributions.
The company defines property NOI as property revenues less
direct property operating expenses, excluding depreciation, but
including allocated corporate general and administrative
expenses.
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 March 31, 2016, American Campus Communities owned
163 student housing properties containing approximately 100,600
beds. Including its owned and third-party managed properties, ACC's
total managed portfolio consisted of 203 properties with
approximately 131,100 beds. Visit www.americancampus.com.
Forward-Looking Statements
In addition to historical information, this press release
contains forward-looking statements under the federal securities
law. These statements are based on current expectations, estimates
and projections about the industry and markets in which American
Campus operates management's beliefs, and assumptions made by
management. Forward-looking statements are not guarantees of future
performance and involve certain risks and uncertainties, which are
difficult to predict.
Table 1 American Campus Communities, Inc.
and Subsidiaries Consolidated Balance Sheets (dollars
in thousands) March 31, 2016
December 31, 2015 (unaudited) Assets
Investments in real estate: Wholly-owned properties, net $
5,574,096 $ 5,522,271 Wholly-owned properties held for sale —
55,354 On-campus participating properties, net 88,990
90,129 Investments in real estate, net 5,663,086
5,667,754 Cash and cash equivalents 387,273 16,659
Restricted cash 40,312 33,675 Student contracts receivable, net
7,024 18,475 Other assets1 2 269,842 269,685
Total assets $ 6,367,537
$ 6,006,248 Liabilities and
equity Liabilities: Secured mortgage, construction and
bond debt2 $ 1,087,716 $ 1,094,962 Unsecured notes2 1,187,175
1,186,700 Unsecured term loans2 348,376 597,719 Unsecured revolving
credit facility — 68,900 Accounts payable and accrued expenses
49,306 71,988 Other liabilities3 155,033
144,811
Total liabilities 2,827,606
3,165,080 Redeemable noncontrolling interests
66,133 59,511 Equity:
American Campus Communities, Inc. and
Subsidiaries stockholders’ equity:
Common stock 1,304 1,124 Additional paid in capital 4,026,045
3,325,806 Treasury stock (405 ) (403 ) Accumulated earnings and
dividends (557,427 ) (550,501 ) Accumulated other comprehensive
loss (7,240 ) (5,830 )
Total American Campus Communities, Inc.
and Subsidiaries stockholders’ equity
3,462,277 2,770,196 Noncontrolling interests – partially owned
properties 11,521 11,461
Total
equity 3,473,798 2,781,657
Total liabilities and equity $
6,367,537 $ 6,006,248 1.
As of March 31, 2016, other assets include approximately $3.6
million related to net deferred financing costs on our revolving
credit facility and the net value of in-place leases. 2. Beginning
in 2016, deferred financing costs associated with secured mortgage,
construction and bond debt, unsecured notes, and unsecured term
loans are subject to new accounting guidance and are presented as a
direct reduction to the carrying value of the debt. Prior period
amounts have been reclassified to conform to the current period
presentation. 3. As of March 31, 2016, other liabilities include
approximately $40.7 million in deferred revenue and fee income.
Table 2 American Campus Communities, Inc.
and Subsidiaries Consolidated Statements of Comprehensive
Income (unaudited, dollars in thousands, except share and
per share data) Three Months Ended
March 31, 2016
2015 Revenues: Wholly-owned properties
$ 185,702 $ 179,898 On-campus participating properties 10,046 9,200
Third-party development services 1,035 564 Third-party management
services 2,410 2,001 Resident services 802 830
Total revenues 199,995 192,493
Operating expenses: Wholly-owned properties 78,851 79,010
On-campus participating properties 3,042 2,668 Third-party
development and management services 3,738 3,139 General and
administrative 5,309 4,751 Depreciation and amortization 53,716
50,651 Ground/facility leases 2,304 2,098
Total operating expenses 146,960
142,317 Operating income 53,035
50,176 Nonoperating income and (expenses):
Interest income 1,279 1,112 Interest expense (22,627 ) (21,988 )
Amortization of deferred financing costs (2,542 ) (1,379 ) Gain
from disposition of real estate 17,409 44,252 Loss from early
extinguishment of debt — (595 )
Total
nonoperating (expense) income (6,481 )
21,402 Income before income taxes
46,554 71,578 Income tax provision (345 ) (311 )
Net income 46,209 71,267 Net income
attributable to noncontrolling interests and other (622 )
(1,070 )
Net income attributable to ACC, Inc.
and Subsidiaries common stockholders
$ 45,587 $ 70,197
Other comprehensive loss Change in fair value of interest
rate swaps (1,410 ) (1,868 )
Comprehensive
income $ 44,177 $ 68,329
Net income per share attributable to
ACC, Inc. and Subsidiaries common shareholders
Basic $ 0.37 $ 0.63
Diluted $ 0.36 $
0.62 Weighted-average common shares
outstanding: Basic 123,445,985
110,955,099 Diluted
124,266,312 112,974,505
Table 3 American Campus Communities, Inc. and
Subsidiaries Consolidated Statements of Funds from
Operations (unaudited, dollars in thousands, except share
and per share data) Three Months Ended
March 31, 2016
2015
Net income attributable to ACC, Inc. and
Subsidiaries common stockholders
$ 45,587 $ 70,197 Noncontrolling interests 622 1,070 Gain from
disposition of real estate (17,409 ) (44,252 ) Real estate related
depreciation and amortization 53,046 50,024
Funds from operations ("FFO")
attributable to common stockholders and OP unitholders
81,846 77,039 Elimination of operations of
on-campus participating properties: Net income from on-campus
participating properties (3,164 ) (2,668 ) Amortization of
investment in on-campus participating properties (1,823 )
(1,716 ) 76,859 72,655 Modifications to reflect operational
performance of on-campus participating properties: Our share of net
cash flow1 850 875 Management fees 459 427
Impact of on-campus participating properties 1,309 1,302
Property acquisition costs — 1,530 Elimination of loss from
early extinguishment of debt2 — 595
Funds from operations-modified ("FFOM")
attributable to common stockholders and OP unitholders
$ 78,168 $ 76,082
FFO per share – diluted $ 0.65 $
0.68 FFOM per share – diluted $
0.62 $ 0.67 Weighted
average common shares outstanding - diluted
125,679,948 112,974,505 1.
50% of the properties’ net cash available for distribution
after payment of operating expenses, debt service (including
repayment of principal) and capital expenditures. Represents
amounts accrued for the interim periods, which is included in
ground/facility leases expense in the consolidated statements of
comprehensive income (refer to Table 2). 2. Represents losses
associated with the early pay-off of mortgage loans for two
properties sold during the three months ended March 31, 2015. Such
costs are excluded from gains from disposition of real estate
reported in accordance with GAAP. However, we view the losses from
early extinguishment of debt associated with the sales of real
estate as an incremental cost of the sale transactions because we
extinguished the debt in connection with the consummation of the
sale transactions and we had no intent to extinguish the debt
absent such transactions. We believe that adjusting FFOM to exclude
these losses more appropriately reflects the results of our
operations exclusive of the impact of our disposition transactions.
Table 4 American Campus Communities, Inc.
and Subsidiaries 2016 Outlook (dollars in thousands,
except share and per share data)
Low High Net income
$ 90,800 $ 101,000 Noncontrolling
interests 900 1,100 Depreciation and amortization 195,700
206,100
Funds from operations ("FFO")
$ 287,400 $ 308,200 Elimination
of operations from on-campus participating properties (11,000 )
(11,400 )
Modifications to reflect operational
performance of on-campus participating properties
3,800 4,400
Funds from operations -
modified ("FFOM") $ 280,200 $
301,200 Net income per share - diluted
$ 0.69 $ 0.77
FFO per share - diluted $ 2.19 $
2.35 FFOM per share - diluted $
2.14 $ 2.30
Weighted-average common shares outstanding - diluted
130,950,000 130,950,000
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