Delivers six development assets totaling $258.9
million
Leads public student housing sector in Fall
2014 occupancy and rental rate growth
American Campus Communities, Inc. (NYSE:ACC) today announced the
following financial results for the quarter ended September 30,
2014.
Highlights
- Increased quarterly FFOM per share to
$0.44 per fully diluted share or $46.5 million, versus $0.39 per
fully diluted share or $41.5 million for the third quarter prior
year.
- Increased same store wholly-owned net
operating income ("NOI") by 5.6 percent over the third quarter
2013.
- Improved same store wholly-owned
occupancy to 97.5 percent as of September 30, 2014 compared to 96.8
percent for the same date prior year, with an average rental rate
increase of 2.1 percent.
- Delivered six owned and mezzanine
development projects into service for the 2014-2015 academic year
totaling $258.9 million in development costs and containing 3,573
beds which were 98.1 percent occupied as of September 30,
2014.
- Completed and delivered College Park, a
567-bed on-campus participating property serving students attending
West Virginia University, which opened 97.7 percent occupied.
“We are pleased with the results of our Fall 2014 lease-up,
which resulted in 2.8 percent same store rental revenue growth for
the 2014-2015 academic year and led the public student housing
sector in both final occupancy and rental rate growth. With the
completion of the lease-up and our results to date, we believe we
are trending between the midpoint and upper end of our FFOM
guidance range,” said Bill Bayless, American Campus CEO.
“Significant tailwinds are developing in the sector, with public
and private student housing players noting increases in both
occupancy and rental rates at the recent National Multifamily
Housing Council Student Housing Conference. Additionally,
Axiometrics is projecting a decrease in Fall 2015 supply by
approximately 25 percent from the deliveries in Fall 2014. With
these strong underlying fundamentals, we are currently targeting
rental rate growth for the 2015-2016 academic year of approximately
2.8 percent as we kickoff leasing, which we believe positions us to
generate same store net operating income growth in excess of three
percent in 2015 and beyond.”
Third Quarter Operating Results
Revenue for the 2014 third quarter totaled $181.9 million, an
increase of 14.9 percent from $158.4 million in the third quarter
2013, and operating income for the quarter increased $6.1 million
or 40.6 percent over the prior year third quarter. The
increase in revenues and operating income was primarily due to
growth resulting from property acquisitions, recently completed
development properties, and increased rental rates for the
2014-2015 academic year. Net loss for the 2014 third quarter
totaled $5.8 million as compared with net income of $47.2 million
for the same quarter in 2013. The decrease in net income as
compared to the prior year quarter is primarily due to the
disposition of four properties in July 2013, which resulted in a
gain of $52.8 million recognized during the third quarter 2013. An
increase in corporate interest expense resulting from our June 2014
bond offering also contributed to the decrease in net
income. FFO for the 2014 third quarter totaled $45.7 million,
or $0.43 per fully diluted share, as compared to $39.9 million, or
$0.37 per fully diluted share for the same quarter in 2013. FFOM
for the 2014 third quarter was $46.5 million, or $0.44 per fully
diluted share as compared to $41.5 million, or $0.39 per fully
diluted share for the same quarter in 2013. A reconciliation of FFO
and FFOM to net income is provided in Table 3.
NOI for same store wholly-owned properties was $65.3 million in
the quarter, an increase of 5.6 percent over $61.8 million in the
2013 third quarter. Same store wholly-owned property revenues
increased by 4.9 percent over the 2013 third 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 4.3 percent over the prior year quarter due
primarily to increases in payroll and general and administrative
expenses. NOI for the total wholly-owned portfolio increased
15.9 percent to $74.3 million for the quarter from $64.1 million in
the comparable period of 2013.
Portfolio Update
Developments
During the quarter, the company completed construction and
delivered $227.2 million of owned and mezzanine development assets
into service. Including the June delivery of Merwick Stanworth
Phase I, six new communities were delivered in 2014 with a total
project cost of $258.9 million. These developments are all core
Class A assets pedestrian to campus in their respective markets and
on track to meet their previously announced stabilized development
yield in the range of 6.75 - 7.0 percent. As of September 30, 2014,
the new assets are 98.1 percent occupied for the upcoming academic
year.
The company continues to progress on the construction of four
additional owned development projects with expected deliveries in
Fall 2015. The developments total approximately $313.7 million, are
all core Class A assets located on or pedestrian to campus in their
respective markets and average less than 0.1 miles to campus.
Also during the quarter, the company delivered College Park, a
567-bed on-campus participating property at West Virginia
University, which generated on-campus participating property
development fees of $2.4 million during the construction period. As
the community is now operational, the company and the University
will each receive 50 percent of defined net cash flow on an annual
basis for an initial term of 40 years with two 10-year extension
options.
Dispositions
In September, the company sold The Enclave, a non-core 480-bed
community built in 2002 and located approximately one-mile from the
campus of Bowling Green State University in Ohio for a total sales
price of $6.3 million. The property was sold at an economic cap
rate of 5.6 percent based on in-place rental revenue and
trailing-12 operating expenses.
Capital Markets
At-The-Market (ATM) Share Offering Program
During the quarter, the company sold 149,240 shares of common
stock under the ATM program at a weighted average price of $40.10
per share for net proceeds of approximately $5.9 million. There has
been no ATM activity subsequent to quarter end.
2014 Outlook
Based upon the results of the Fall 2014 lease-up and the
financial results achieved through the third quarter of 2014,
management believes that both 2014 FFO and FFOM are trending
between the midpoint and the upper end of the current guidance
ranges of $2.34 to $2.41 and $2.29 to $2.37 per fully diluted
share, respectively.
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 third
quarter results and the 2014 outlook on Wednesday, October 22, 2014
at 10 a.m. EDT (9:00 a.m. CDT). Participants from within the U.S.
may dial 888-317-6003 passcode 6030479, and participants outside
the U.S. may dial 412-317-6061 passcode 6030479 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 October 30, 2014 by dialing
877-344-7529 or 412-317-0088 conference number 10052439. 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
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 and
manager 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. American Campus Communities owns 166 student housing
properties containing approximately 102,200 beds. Including its
owned and third-party managed properties, ACC’s total managed
portfolio consists of 199 properties with approximately 128,300
beds. Visit www.americancampus.com or www.studenthousing.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) September 30,
2014 December 31, 2013 Assets (unaudited)
Investments in real estate: Wholly-owned properties, net $
5,356,617 $ 5,199,008 Wholly-owned property held for sale - 14,408
On-campus participating properties, net 95,393
73,456 Investments in real estate, net 5,452,010 5,286,872
Cash and cash equivalents 19,412 38,751 Restricted cash
31,338 35,451 Student contracts receivable, net 14,660 9,238 Other
assets 236,441 227,728
Total
assets $ 5,753,861 $
5,598,040 Liabilities and equity
Liabilities: Secured mortgage, construction and bond debt $
1,387,581 $ 1,507,216 Secured agency facility - 87,750 Unsecured
notes 798,264 398,721 Unsecured term loans 600,000 600,000
Unsecured revolving credit facility 138,500 150,700 Accounts
payable and accrued expenses 73,596 65,088 Other liabilities
155,386 110,036 Total liabilities 3,153,327
2,919,511 Redeemable noncontrolling interests 50,937 47,964
Equity:
American Campus Communities, Inc. and
Subsidiaries stockholders’ equity:
Common stock 1,044 1,043 Additional paid in capital 3,022,686
3,017,631 Accumulated earnings and dividends (474,659 ) (392,338 )
Accumulated other comprehensive loss (5,114 ) (1,435
)
Total American Campus Communities, Inc.
and Subsidiaries stockholders’ equity
2,543,957 2,624,901 Noncontrolling interests - partially owned
properties 5,640 5,664 Total equity
2,549,597 2,630,565
Total
liabilities and equity $ 5,753,861
$ 5,598,040
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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2014 2013 2014
2013 Revenues Wholly-owned properties $ 171,816 $
150,031 $ 506,822 $ 447,904 On-campus participating properties
5,786 5,066 18,709 17,871 Third-party development services 1,856
622 3,624 1,656 Third-party management services 1,769 1,792 5,751
5,425 Resident services 709 883
2,190 1,912
Total revenues
181,936 158,394 537,096 474,768
Operating expenses Wholly-owned properties 98,232 86,838
250,074 221,817 On-campus participating properties 3,003 3,021
8,265 8,454 Third-party development and management services 2,881
3,058 8,387 7,786 General and administrative 4,807 3,934 14,159
12,366 Depreciation and amortization 49,576 45,056 146,201 137,811
Ground/facility leases 2,206 1,386
5,351 3,749
Total operating
expenses 160,705 143,293
432,437 391,983
Operating income 21,231 15,101 104,659
82,785 Nonoperating income and (expenses) Interest
income 1,055 792 3,123 2,165 Interest expense (23,794 ) (19,584 )
(65,873 ) (56,364 ) Amortization of deferred financing costs (1,543
) (1,410 ) (4,503 ) (4,134 ) Loss from disposition of real estate1
(67 ) - (67 ) - Other nonoperating (expense) income (2,377 )
134 (2,377 ) (2,666 )
Total
nonoperating expenses (26,726 )
(20,068 ) (69,697 )
(60,999 ) (Loss) income before income taxes and
discontinued operations (5,495 ) (4,967 ) 34,962 21,786 Income tax
provision (290 ) (255 ) (869 ) (765 )
(Loss) income from continuing operations (5,785
) (5,222 ) 34,093 21,021
Discontinued operations2 Income (loss) attributable
to discontinued operations - 223 (123 ) 5,027 Gain from disposition
of real estate - 52,831 2,843
52,831
Total discontinued operations
- 53,054
2,720 57,858 Net (loss)
income (5,785 ) 47,832 36,813
78,879 Net income attributable to noncontrolling interests
(62 ) (656 ) (824 ) (2,064 )
Net (loss) income attributable to
American Campus Communities, Inc. and Subsidiaries
$ (5,847 ) $ 47,176
$ 35,989 $ 76,815
Other comprehensive income (loss) Change in fair value of
interest rate swaps 2,073 (1,163 )
(3,797 ) 4,451
Comprehensive (loss) income
$ (3,774 ) $ 46,013
$ 32,192 $ 81,266
Net (loss) income per share
attributable to American Campus Communities, Inc. and Subsidiaries
common stockholders
Basic $ (0.06 ) $ 0.45
$ 0.34 $ 0.73
Diluted $ (0.06 ) $ 0.45
$ 0.33 $ 0.72
Weighted-average common shares
outstanding
Basic 104,968,616
104,781,431 104,903,344
104,752,982 Diluted 104,968,616
104,781,431 105,605,755
105,381,053
- Represents a loss from the sale of a
wholly-owned property (the Enclave) in September 2014. Due to a
recent change in accounting guidance, The Enclave along with future
disposals of individual operating properties will no longer qualify
as discontinued operations and will be classified within income
from continuing operations on the consolidated statements of
comprehensive income.
- The operations for properties sold
during 2013, along with any properties sold in 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 in the
consolidated statements of comprehensive income. We sold Hawks
Landing in February 2014 but will continue to present the
operations of the property and the resulting gain from disposition
in discontinued operations because the property was classified as
held for sale in our consolidated financial statements for the year
ended December 31, 2013.
Table 3
American Campus Communities, Inc. and Subsidiaries
Calculation of FFO and FFOM (unaudited, dollars in
thousands, except share and per share data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2014 2013 2014
2013 Net (loss) income attributable to American Campus
Communities, Inc. and Subsidiaries $ (5,847 ) $ 47,176 $ 35,989 $
76,815 Noncontrolling interests1 62 656 824 1,273 Loss (gain) from
disposition of real estate 67 (52,831 ) (2,776 ) (52,831 )
Elimination of provision for asset impairment – wholly-owned
property2 2,377 - 2,377 - Real estate related depreciation and
amortization 49,029 44,905
144,681 138,704
Funds from operations
(“FFO”) 45,688 39,906 181,095
163,961 Elimination of operations of on-campus
participating properties
Net loss (income) from on-campus
participating properties
749 1,002 (1,242 ) (493 )
Amortization of investment in on-campus
participating properties
(1,548 ) (1,197 ) (3,988 ) (3,553 )
44,889 39,711 175,865 159,915 Modifications to reflect operational
performance of on-campus participating properties Our share of net
cash flow3 1,070 627 2,347 1,686 Management fees 257 242 841 832
On-Campus participating properties development fees4 642
950 1,070 950
Impact of on-campus participating properties 1,969 1,819 4,258
3,468 Impact of University Walk (pre-sale arrangement)5 (323
) - (323 ) - Non-cash litigation settlement expense6 -
- - 2,800
Funds
from operations-modified ("FFOM”) $ 46,535
$ 41,530 $ 179,800
$ 166,183 FFO per share –
diluted $ 0.43 $ 0.37
$ 1.69 $ 1.54 FFOM per
share – diluted $ 0.44 $
0.39 $ 1.68 $ 1.56
Weighted average common shares outstanding – diluted
106,974,047 106,639,825
106,940,665 106,629,998
- For the nine months ended September 30,
2013, excludes $0.8 million of income attributable to the
noncontrolling partner in The Varsity, a property purchased in
December 2011 from a seller that retained a 20.5% noncontrolling
interest in the property. Effective July 1, 2013, the company
acquired the noncontrolling partner’s interest and now owns 100% of
the property.
- For the three and nine months ended
September 30, 2014, represents an impairment charge recorded for
The Enclave, a property that was sold in September 2014. Due to a
recent change in accounting guidance, The Enclave along with future
disposals of individual operating properties will no longer qualify
as discontinued operations. As a result, this impairment charge is
included in other nonoperating expense in the consolidated
statements of comprehensive income (refer to table 2).
- 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).
- Represents development and construction
management fees related to the West Virginia University on-campus
participating property, which completed construction in August
2014. Although the company is including this project in its
consolidated financial statements for accounting purposes, similar
to our other on-campus participating properties, we view the
economic benefit of such properties as limited to the
development/construction management fees, property management fees
and the 50% share of net cash flow that we receive. As such, for
purposes of calculating FFOM, we are recognizing the fees received
for this project similar to other third-party development
projects.
- University Walk is a property subject
to a pre-sale arrangement that we did not own as of September 30,
2014 but are obligated to purchase as long as the developer meets
certain construction deadlines and closing conditions. The property
opened for operations in August and we anticipate closing on the
purchase of the property in the fourth quarter 2014. The property
is consolidated for financial reporting purposes but we do not
benefit from the net cash flow from operations prior to our
purchase. As a result, we have excluded the operations of this
property from FFOM.
- On April 22, 2013, the company acquired
a note and subrogation rights from National Public Finance
Guarantee Corporation (formerly known as MBIA Insurance Corp. of
Illinois) for an aggregate of $52.8 million, which are secured by a
lien on, and the cash flows from, two student housing properties in
close proximity to the University of Central Florida and currently
under a ground lease with the UCF Foundation. The instruments carry
an interest rate of 5.123 percent. The acquisition facilitated the
settlement of litigation related to a third-party management
agreement for the properties with a GMH entity that was acquired by
the company’s 2008 merger with GMH. The acquisition resulted in a
non-cash settlement charge of $2.8 million to reflect the fair
market valuation of the instruments. Management believes it is
appropriate to exclude this non-cash charge from FFOM in order to
more accurately present the operating results of the company on a
comparative basis during the periods presented
American Campus Communities, Inc., AustinRyan Dennison,
512-732-1000
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