Strong core performance
Capital recycling continues to improve
portfolio quality and fund high yielding development
American Campus Communities, Inc. (NYSE:ACC) today announced the
following financial results for the quarter ended June 30,
2015.
Highlights
- Reported quarterly FFOM of $0.57 per
fully diluted share or $65.2 million, versus $0.58 per fully
diluted share or $62.3 million for the second quarter prior
year.
- Increased same store wholly-owned net
operating income ("NOI") by 4.7 percent over the second quarter
2014.
- Achieved same store wholly-owned
occupancy of 88.9 percent as of June 30, 2015 compared to 87.8
percent for the same date prior year.
- Preleased the same store wholly-owned
portfolio for the upcoming academic year to 100.8 percent applied
for and 94.6 percent leased as of July 24, 2015 with a current
projected rental rate increase of 2.9 percent. This compares to
101.9 percent applied for and 94.6 percent leased for the same date
prior year.
- Awarded the right to negotiate two new
on-campus development projects with the University of Kansas. The
projects remain subject to feasibility analysis and transaction
structuring.
- Commenced construction on two
previously announced wholly-owned developments, Merwick Stanworth
Phase II, a $48.3 million ACE on-campus development consisting of
198 units serving faculty and staff members of Princeton
University, and U Club Sunnyside, a 536-bed, $46.3 million
community located adjacent to West Virginia University. Both
communities are slated for delivery in Fall 2016.
- Acquired Crest at Pearl, a 343-bed
community located pedestrian to the University of Texas at Austin,
in the West Campus submarket. Also during the quarter, completed
the acquisition of UP at Metroplex, a 710-bed community located
pedestrian to Binghamton University, a State University of New York
System (SUNY) campus, along with a development site adjacent to UP
at Metroplex which is planned as a 560-bed townhome community
targeting delivery in Fall 2017.
- Continued capital recycling efforts
with the previously announced sale of seven non-core properties in
a portfolio for $173.6 million. The sale included the defeasance of
$18.1 million in secured mortgage debt. Additionally, subsequent to
quarter end, completed the sale of three non-core properties in a
portfolio for $32.1 million. Containing 1,200 beds, the three
assets average 14 years old and 1.0 miles from campus.
- Closed on financing and commenced
construction on a third-party on-campus development project at
Northeastern Illinois University with $2.1 million in development
fees expected to be earned during the construction period which is
scheduled for completion in Fall 2016.
“We are very pleased with our core value creation driven by 4.7%
same store NOI growth this quarter,” said Bill Bayless, American
Campus CEO. “In addition, the vibrant transaction market has
enabled us to accretively recycle non-core assets into our high
yielding core development pipeline, thus improving our overall
portfolio quality and positioning the company to continue to drive
long-term NOI growth.”
Second Quarter Operating Results
Revenue for the 2015 second quarter totaled $177.9 million, a
3.4 percent increase from $172.0 million in the second quarter 2014
and operating income for the quarter decreased $1.0 million or 2.8
percent over the prior year second quarter. The increase in
revenues was primarily due to growth resulting from increased
rental rates and occupancy for the 2014-2015 academic year,
recently completed development properties, and property
acquisitions. The decrease in operating income was primarily due to
an increase in depreciation and amortization expense and the loss
of operating income associated with recently sold properties. Net
income for the 2015 second quarter totaled $15.6 million, or $0.14
per fully diluted share, compared with net income of $13.4 million,
or $0.12 per fully diluted share, for the same quarter in 2014. The
increase in net income as compared to the prior year quarter is
primarily due to nonoperating gains from the disposition of real
estate. FFO for the 2015 second quarter totaled $63.1 million,
or $0.55 per fully diluted share, as compared to $61.6 million, or
$0.58 per fully diluted share for the same quarter in 2014. FFOM
for the 2015 second quarter was $65.2 million, or $0.57 per fully
diluted share as compared to $62.3 million, or $0.58 per fully
diluted share for the same quarter in 2014. A reconciliation of FFO
and FFOM to net income is shown in Table 3.
NOI for same store wholly-owned properties was $80.8 million in
the quarter, an increase of 4.7 percent over $77.2 million in the
2014 second quarter. Same store wholly-owned property revenues
increased by 3.3 percent over the 2014 second quarter due to an
increase in occupancy and average rental rates for the 2014-2015
academic year. Same store wholly-owned property operating
expenses increased by 1.8 percent over the prior year quarter. NOI
for the total wholly-owned portfolio increased 3.8 percent to $90.9
million for the quarter from $87.6 million in the comparable period
of 2014.
Portfolio Update
As of July 24, 2015, the company’s same store wholly-owned
portfolio was 100.8 percent applied for and 94.6 percent leased for
the upcoming academic year compared to 101.9 percent applied for
and 94.6 percent leased for the same date prior year, with a 2.9
percent current projected rental rate increase over the in-place
rent.
Developments
The company is progressing on the construction of its $550.5
million owned development pipeline with expected delivery in Fall
2015 and 2016. The owned developments are all core Class A assets
pedestrian to campus in their respective markets and are on track
to achieve stabilized development yields in the range of 6.5 - 7.0
percent. The four new owned development projects scheduled to open
Fall 2015, totaling $313.7 million, are preleased at an average of
82.0 percent for the upcoming academic year as of July 24, 2015
with two assets preleased to 99.0 percent and above.
During the quarter, University Crossings, a 1927-built asset
which was acquired by the company in the 2008 GMH transaction and
was converted to an ACE community with Drexel University in 2013,
was taken out of service to begin the substantial renovations that
were contemplated as part of the ACE conversion. The property will
resume operations with partial occupancy in Fall 2015 and is
expected to fully re-stabilize in Fall 2016.
American Campus Equity (ACE)
During the quarter, the company commenced construction on
University Pointe, an ACE development in the heart of the
University of Louisville campus, under a full reimbursement
agreement with the University. Pending a successful resolution of
final administrative matters, the company anticipates completion of
the final ground lease in August 2015, thus paving the way for a
Fall 2016 delivery of the 532-bed, $44.2 million, apartment
community which is replacing 324 beds in three existing residence
halls that have been demolished.
Also during the quarter, the company commenced construction on
Merwick Stanworth Phase II, a $48.3 million ACE on-campus
development at Princeton University which is slated for delivery in
Fall 2016. The 198-unit pedestrian community is located less than
one-half mile from core campus, is intended to serve and house
primarily faculty and staff members of Princeton University, and
unlike student housing communities, this property is expected to
stabilize in a manner consistent with a multi-family development
during the first academic session.
Off-Campus Owned
The company commenced construction on its 100th development, U
Club Sunnyside, a $46.3 million community serving students
attending West Virginia University. The 536-bed development, which
is targeting a Fall 2016 delivery, will be located less than 0.1
miles from campus on the previous site of Sunnyside Commons, a
prior ACC acquisition property which has been demolished to
facilitate the new development.
Acquisitions
In June, the company acquired Crest at Pearl, a 343-bed core
property located pedestrian to the University of Texas at Austin,
and UP at Metroplex, a 710-bed property serving students attending
Binghamton University, a SUNY campus. Totaling $109.1 million, the
acquisitions expand the company’s presence in multiple property
markets with Crest at Pearl increasing the company’s dominant
market position in Austin to seven properties serving approximately
5,000 students. After investment of $3.7 million of upfront capital
improvements, the two acquisitions target an average year one cap
rate of 5.5 percent nominal and 5.3 percent economic. The
acquisition of UP at Metroplex is complemented by the purchase of
an adjacent development parcel which targets a $51.3 million,
560-bed, community with delivery slated for Fall 2017.
Dispositions
As previously announced, in May, the company completed the sale
of a seven property portfolio for $173.6 million. The sale included
the defeasance of $18.1 million in secured mortgage debt. The seven
non-core assets contain 5,096 beds, average 1.1 miles from their
respective campuses and average 18 years old. The portfolio was
sold at an economic cap rate of 6.5 percent based on in-place
rental revenue, escalated trailing-12 other income and operating
expenses, and portfolio average capital reserves.
Subsequent to quarter end, the company continued with its
capital recycling efforts and completed the sale of an additional
three non-core properties in a single portfolio for $32.1 million.
The properties contain 1,200 beds serving students attending Middle
Tennessee State University in Murfreesboro, Tennessee, average 1.0
miles from campus and 14 years of age. The assets were sold at an
economic cap rate of 6.4 percent based on in-place rental revenue,
trailing-12 operating expenses and portfolio average capital
reserves.
Capital Recycling Summary
Year-to-date, when including the January closing of the final
assets in the 2014 disposition package, the company has completed
the disposition of 20 non-core assets for a total sales price of
$436.7 million and an average economic cap rate of 6.3 percent. The
proceeds from these dispositions are being recycled into the
company’s $313.7 million high yielding 2015 development pipeline
and $274.4 million of core acquisitions completed year-to-date.
This represents a significant improvement in portfolio quality as
the 20 disposition properties average 1.2 miles from their
respective campuses and an average age of over 15 years, while the
core pedestrian growth assets average less than 0.2 miles from
their respective campuses and an average age of 2 years.
Third-Party Services
During the quarter, the company completed construction of the
Lakeside Graduate Community, a third-party development on the
campus of Princeton University. Upon completion of development, the
company commenced management of the 715-bed community with
stabilized annual fees estimated to be $180 thousand.
Also during the quarter, the company closed on financing and
commenced construction on a third-party on-campus development
project containing 440 beds at Northeastern Illinois University.
The company expects to earn $2.1 million in development fees
throughout the construction period with completion scheduled for
Fall 2016.
During the quarter, the company completed contracted
pre-development services and earned $117 thousand in fees relating
to the future development of an estimated 700-bed residence hall on
the main campus of the University of Vermont, thereby concluding
the company’s role in the transaction.
Capital Markets
At-The-Market (ATM) Share Offering Program
The company did not sell any shares under the ATM Share Offering
Program during the second quarter.
2015 Outlook
The company is maintaining its previously stated guidance range
for the fiscal year 2015, anticipating that FFO will be in the
range of $2.33 to $2.45 per fully diluted share, and FFOM,
excluding the impact of transaction costs, will be in the range of
$2.30 to $2.42 per fully diluted share.
“With the conclusion of the first half of 2015, we continue to
be pleased with the operating performance of our properties and the
current progress of the lease-up for the 2015-2016 academic year,”
said Jon Graf, American Campus CFO. “While the acquisition and
disposition activity completed to date is in line with the
transaction assumptions at the lower end of the guidance range, our
full year results continue to be dependent upon the final outcome
of the 2015-2016 lease-up, overall operational performance, and any
additional external growth completed in the second half of
2015.”
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 second
quarter results and the 2015 outlook on Tuesday, July 28, 2015 at
11 a.m. EDT (10:00 a.m. CDT). Participants from within the U.S. may
dial 888-317-6003 passcode 5660122, and participants outside the
U.S. may dial 412-317-6061 passcode 5660122 at least 10 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 August 12, 2015 by dialing
877-344-7529 or 412-317-0088 conference number 10067131. 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 June 30, 2015, American Campus Communities owned
159 student housing properties containing approximately 96,400
beds. Including its owned and third-party managed properties, ACC's
total managed portfolio consisted of 198 properties with
approximately 126,800 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) June 30, 2015
December 31, 2014 (unaudited) Assets
Investments in real estate: Wholly-owned properties, net $
5,370,868 $ 5,308,707 Wholly-owned properties held for sale 26,498
131,014 On-campus participating properties, net 91,582
94,128 Investments in real estate, net
5,488,948 5,533,849 Cash and cash equivalents 8,765 25,062
Restricted cash 40,673 31,937 Student contracts receivable, net
8,052 10,145 Other assets1 263,732 233,755
Total assets $ 5,810,170
$ 5,834,748 Liabilities and
equity Liabilities: Secured mortgage, construction and bond
debt $ 1,105,432 $ 1,331,914 Unsecured notes 798,389 798,305
Unsecured term loans 600,000 600,000 Unsecured revolving credit
facility 229,400 242,500 Accounts payable and accrued expenses
68,185 70,629 Other liabilities2 115,701
121,645 Total liabilities 2,917,107 3,164,993
Redeemable noncontrolling interests 62,091 54,472 Equity:
American Campus Communities, Inc. and
Subsidiaries stockholders' equity:
Common stock 1,123 1,072 Additional paid in capital 3,323,010
3,102,540 Accumulated earnings and dividends (490,368 ) (487,986 )
Accumulated other comprehensive loss (6,891 ) (6,072
)
Total American Campus Communities, Inc.
and Subsidiaries stockholders' equity
2,826,874 2,609,554 Noncontrolling interests - partially owned
properties 4,098 5,729 Total equity
2,830,972 2,615,283
Total
liabilities and equity $ 5,810,170
$ 5,834,748 1. As of June 30, 2015,
other assets include approximately $22.6 million related to net
deferred financing costs and the net value of in-place leases. 2.
As of June 30, 2015, other liabilities include approximately $56.8
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 June 30,
Six Months Ended June 30, 2015
2014 2015
2014
Revenues Wholly-owned properties $ 167,468 $ 163,056 $
347,366 $ 335,006 On-campus participating properties 5,704 4,735
14,904 12,923 Third-party development services 1,677 1,581 2,241
1,768 Third-party management services 2,324 1,997 4,325 3,982
Resident services 701 608 1,531
1,481
Total revenues 177,874
171,977 370,367 355,160 Operating
expenses Wholly-owned properties 77,251 76,034 156,261 151,842
On-campus participating properties 2,942 2,780 5,610 5,262
Third-party development and management services 3,952 2,720 6,999
5,506 General and administrative 5,738 4,978 10,581 9,352
Depreciation and amortization 51,578 48,450 102,229 96,625
Ground/facility leases 1,961 1,582
4,059 3,145
Total operating
expenses 143,422 136,544
285,739 271,732
Operating income 34,452 35,433 84,628
83,428 Nonoperating income and (expenses) Interest
income 1,085 1,037 2,197 2,068 Interest expense (20,586 ) (20,989 )
(42,574 ) (42,079 ) Amortization of deferred financing costs (1,338
) (1,461 ) (2,717 ) (2,960 ) Gain from disposition of real estate1
3,790 - 48,042 - Loss from early extinguishment of debt
(1,175 ) - (1,770 ) -
Total
nonoperating (expenses) income (18,224 )
(21,413 ) 3,178
(42,971 ) Income before income taxes and discontinued
operations 16,228 14,020 87,806 40,457 Income tax provision
(310 ) (289 ) (621 ) (579 )
Income from
continuing operations 15,918 13,731 87,185
39,878 Discontinued operations2 Loss
attributable to discontinued operations - - - (123 ) Gain from
disposition of real estate - - -
2,843
Total discontinued operations
- - -
2,720 Net income 15,918
13,731 87,185 42,598 Net income attributable
to noncontrolling interests (338 ) (293 )
(1,408 ) (762 )
Net income attributable to ACC, Inc.
and
Subsidiaries common
stockholders
$ 15,580 $ 13,438
$ 85,777 $ 41,836
Other comprehensive loss Change in fair value of interest
rate swaps 845 (4,877 ) (1,023 )
(5,870 )
Comprehensive income $ 16,425
$ 8,561 $ 84,754 $
35,966 Net income per share attributable to ACC,
Inc.
and Subsidiaries common
stockholders
Basic $ 0.14 $ 0.13
$ 0.76 $ 0.39
Diluted $ 0.14 $ 0.12
$ 0.76 $ 0.39
Weighted-average common shares outstanding Basic
112,308,114 104,918,131
111,635,345 104,870,167
Diluted 112,983,939
105,609,561 113,652,341
105,583,346 1. Represents net gains from the
sale of wholly-owned properties. Due to a recent change in
accounting guidance, disposals of individual operating properties
or portfolios that do not represent a strategic shift in the
Company’s operations will no longer qualify as discontinued
operations and will be classified within income from continuing
operations. 2. The operations for any properties sold during 2014
that were classified as held for sale as of December 31, 2013 are
not subject to the new accounting guidance for discontinued
operations and have been presented in discontinued operations.
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
June 30, Six Months Ended June 30,
2015 2014
2015 2014
Net income attributable to American Campus Communities, Inc.
and Subsidiaries common stockholders
$ 15,580 $ 13,438 $ 85,777 $ 41,836 Noncontrolling interests 338
293 1,408 762 Gain from disposition of real estate (3,790 ) -
(48,042 ) (2,843 ) Real estate related depreciation and
amortization 50,985 47,884
101,009 95,652
Funds from operations
("FFO") attributable to
common stockholders and OP
unitholders
63,113 61,615 140,152 135,407
Elimination of operations of on-campus participating properties Net
income from on-campus participating properties 969 880 (1,699 )
(1,991 ) Amortization of investment in on-campus participating
properties (1,735 ) (1,228 ) (3,451 )
(2,440 ) 62,347 61,267 135,002 130,976 Modifications to reflect
operational performance of on-campus
participating properties
Our share of net cash flow1 739 650 1,614 1,277 Management fees 241
209 668 584 On-campus participating properties development fees2
- 191 - 428
Impact of on-campus participating properties 980 1,050 2,282 2,289
Property acquisition costs 683 - 2,213 - Elimination of loss
from early extinguishment of debt3 1,175 -
1,770 -
Funds from
operations-modified ("FFOM") attributable to
common stockholders and OP
unitholders
$ 65,185 $ 62,317
$ 141,267 $ 133,265
FFO per share - diluted $ 0.55
$ 0.58 $ 1.23 $
1.27 FFOM per share - diluted $
0.57 $ 0.58 $ 1.24
$ 1.25 Weighted average common
shares outstanding - diluted 114,541,910
106,947,442 113,762,540
106,923,696 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. 2. Represents
development and construction management fees related to the West
Virginia University on-campus participating property, which
completed construction in August 2014. 3. Represents losses
associated with the early pay-off of mortgage loans for four
properties sold during the six months ended June 30, 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 FFO to exclude
these losses more appropriately reflects the results of our
operations exclusive of the impact of our disposition transactions.
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American Campus Communities, Inc., AustinRyan Dennison,
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