Increased quarterly FFOM per share by 5
percent; announces three new on-campus development projects
American Campus Communities, Inc. (NYSE:ACC) today announced the
following financial results for the quarter ended September 30,
2019.
Highlights
- Reported net income attributable to ACC of $20.2 million or
$0.14 per fully diluted share, versus net loss of $2.3 million or
$0.02 per fully diluted share in the third quarter 2018.
- Increased FFOM per fully diluted share by 4.5 percent to $0.46
or $64.1 million, versus $0.44 or $60.6 million for the third
quarter prior year.
- Grew same store net operating income ("NOI") by 0.4 percent
over the third quarter 2018 with revenues increasing 2.2 percent
and operating expenses increasing 3.9 percent.
- Achieved 1.7 percent opening rental revenue growth for 2020
same store properties upon completion of the 2019-2020 academic
year lease-up. Results included 1.4 percent average rental rate
growth and occupancy of 97.4 percent as of September 30, 2019
versus 97.0 percent for the same date prior year. Adjusted to
include only the company’s 55 percent share of the Austin
portfolio, the effective rental revenue growth which flows through
to FFOM is 2.0 percent.
- Delivered five new owned development and presale development
projects containing 3,159 beds into service for the 2019-2020
academic year. Totaling $405.9 million, this year’s development
portfolio was 98.1 percent occupied as of September 30, 2019.
- Awarded or directly negotiating three new on-campus development
projects with Georgetown University in Washington D.C., Texas State
University in San Marcos, TX and a second phase project with
Northeastern University in Boston.
“We are pleased with the successful delivery of five
developments this quarter. This group of new assets has already
contributed to the $0.02 earnings guidance raise we recently
announced,” said Bill Bayless, American Campus Communities CEO.
“With our target development yields of 6.25 percent and above, and
private market values for core assets trading in the low 4 percent
area, these assets also generated significant net asset value for
our shareholders upon delivery. As we look forward to the start of
a new leasing season, we see a healthy fundamental environment with
Fall 2020 new supply in our markets expected to decline
approximately 20 percent from 2019 levels.”
Third Quarter Operating Results
Revenue for the 2019 third quarter totaled $227.7 million versus
$213.5 million in the third quarter 2018, and operating income for
the quarter totaled $27.3 million versus $21.5 million in the prior
year third quarter. The increase in revenue and operating income
was primarily due to increased occupancy and rental rates and
growth associated with recently completed development and presale
development projects. Net income for the 2019 third quarter totaled
$20.2 million, or $0.14 per fully diluted share, compared with net
loss of $2.3 million, or $0.02 per fully diluted share for the same
quarter in 2018. FFO for the 2019 third quarter totaled $86.0
million, or $0.62 per fully diluted share, as compared to $60.6
million, or $0.44 per fully diluted share for the same quarter in
2018. FFOM for the 2019 third quarter was $64.1 million, or $0.46
per fully diluted share, as compared to $60.6 million, or $0.44 per
fully diluted share for the same quarter in 2018. A reconciliation
of FFO and FFOM to net income is provided in Table 3.
NOI for same store properties was $91.2 million in the quarter,
an increase of 0.4 percent from $90.9 million in the 2018 third
quarter. Same store property revenues increased by 2.2 percent over
the 2018 third quarter due primarily to an increase in occupancy
and average rental rates. Same store property operating expenses
increased by 3.9 percent versus the prior year quarter. NOI for the
total portfolio increased 4.7 percent to $100.0 million for the
quarter from $95.5 million in the comparable period of 2018. A
reconciliation of same store NOI to total NOI is provided in Table
4.
Portfolio Update
Developments
During the quarter, the company placed into service five owned
development and presale development assets totaling $405.9 million.
As of September 30, 2019, this year’s portfolio achieved 98.1
percent occupancy. The company also progressed with construction of
its $785.8 million development pipeline with expected deliveries in
2020 through 2023. These projects are all core Class A assets and
remain on track to meet their targeted stabilized development yield
in the range of 6.25 – 6.8 percent.
On-Campus Development Awards
The company has been awarded or is directly negotiating three
new on-campus development projects through its public-private
partnership platform. Pre-development activities are underway for
these projects, which include anticipated third-party development
projects with Georgetown University in Washington D.C. and Texas
State University in San Marcos, TX, and an anticipated second phase
American Campus Equity (ACE®) development with Northeastern
University in Boston. The transaction structure, scope,
feasibility, fees and timing have not been finalized for the
proposed projects.
Capital Recycling Update
The company is under an access agreement and the buyer is
completing final due diligence for the sale of one asset with
anticipated proceeds of $100 million. In addition, the company is
in negotiations for the sale of another property with proceeds of
approximately $150 million. The sale of these previously acquired
assets are expected to represent a low 4 percent economic cap
rate.
Capital Markets
At-The-Market (ATM) Share Offering Program
The company did not sell any shares under the ATM during the
quarter.
2019 Outlook
The company is maintaining its recently increased guidance range
for the fiscal year 2019, anticipating that FFO will be in the
range of $2.61 to $2.63 per fully diluted share and FFOM will be in
the range of $2.40 to $2.44 per fully diluted share. For additional
details regarding the company’s 2019 outlook, see pages S-18
through S-19 of the Supplemental Analyst Package 3Q 2019. All
guidance is based on the current expectations and judgment of the
company’s management team.
A reconciliation of the range provided for projected net income
to projected FFO and FFOM for the fiscal year ending December 31,
2019 is included in Table 5.
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 2019 outlook on Tuesday, October 22, 2019
at 10:00 a.m. ET (9:00 a.m. CT). The conference call may be
accessed by dialing 888-317-6003 passcode 4824168, or 412-317-6061
for international participants.
To listen to the live webcast, go to www.americancampus.com at
least 15 minutes prior to the call so that required audio software
can be downloaded. A replay of the conference call will be
available beginning one hour after the end of the call until
November 5, 2019 by dialing 877-344-7529 or 412-317-0088 conference
number 10134878. Additionally, the replay will be available for one
year at www.americancampus.com.
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. 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 net operating income (“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 September 30, 2019, American Campus Communities
owned 168 student housing properties containing approximately
113,400 beds. Including its owned and third-party managed
properties, ACC's total managed portfolio consisted of 205
properties with approximately 140,300 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, Inc. (the “Company”) 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, 2018 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 2019 operating results, whether as a result of new
information, future events, or otherwise.
Table 1
American Campus Communities,
Inc. and Subsidiaries
Consolidated Balance
Sheets
(dollars in thousands)
September 30, 2019
December 31, 2018
(unaudited)
Assets
Investments in real estate:
Owned properties, net
$
6,759,867
$
6,583,397
On-campus participating properties,
net
76,854
77,637
Investments in real estate, net
6,836,721
6,661,034
Cash and cash equivalents
56,218
71,238
Restricted cash
29,569
35,279
Student contracts receivable
27,360
8,565
Operating lease right of use assets 1
461,810
—
Other assets 1
257,304
262,730
Total assets
$
7,668,982
$
7,038,846
Liabilities and equity
Liabilities:
Secured mortgage, construction and bond
debt, net
$
827,588
$
853,084
Unsecured notes, net
1,984,748
1,588,446
Unsecured term loans, net
199,033
198,769
Unsecured revolving credit facility
352,100
387,300
Accounts payable and accrued expenses
86,295
88,767
Operating lease liabilities 2
469,479
—
Other liabilities 2
211,612
191,233
Total liabilities
4,130,855
3,307,599
Redeemable noncontrolling
interests
157,863
184,446
Equity:
American Campus Communities, Inc. and
Subsidiaries
stockholders’ equity:
Common stock
1,373
1,370
Additional paid in capital
4,455,565
4,458,240
Common stock held in rabbi trust
(3,486
)
(3,092
)
Accumulated earnings and dividends
(1,104,448
)
(971,070
)
Accumulated other comprehensive loss
(18,929
)
(4,397
)
Total American Campus Communities, Inc.
and
Subsidiaries stockholders’ equity
3,330,075
3,481,051
Noncontrolling interests – partially owned
properties
50,189
65,750
Total equity
3,380,264
3,546,801
Total liabilities and equity
$
7,668,982
$
7,038,846
- For purposes of calculating net asset value ("NAV") at
September 30, 2019, the company excludes other assets of
approximately $4.9 million related to net deferred financing costs
on its revolving credit facility and the net value of in-place
leases and operating lease right of use assets disclosed above
associated with new lease accounting guidance that was adopted by
the company on January 1, 2019.
- For purposes of calculating NAV at September 30, 2019, the
company excludes other liabilities of approximately $77.6 million
related to deferred revenue and fee income, as well as operating
lease liabilities disclosed above associated with new lease
accounting guidance that was adopted by the company on January 1,
2019.
Table 2
American Campus Communities,
Inc. and Subsidiaries
Consolidated Statements of
Comprehensive Income
(dollars in thousands, except
share and per share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(unaudited)
(unaudited)
Revenues
Owned properties 1
$
211,082
$
202,834
$
638,657
$
597,854
On-campus participating properties 1
6,944
6,980
24,788
23,605
Third-party development services
5,611
835
12,389
3,883
Third-party management services
3,342
2,128
9,118
7,311
Resident services
726
692
2,255
2,284
Total revenues
227,705
213,469
687,207
634,937
Operating expenses
Owned properties 1
111,836
107,997
294,768
282,193
On-campus participating properties 1
3,822
3,875
11,585
11,030
Third-party development and management
services
5,430
3,831
14,129
11,573
General and administrative 2
7,165
7,183
22,595
27,055
Depreciation and amortization
68,930
66,131
206,500
194,447
Ground/facility leases
3,215
2,951
10,000
8,526
Loss (gain) from disposition of real
estate
—
—
282
(42,314
)
Provision for real estate impairment
—
—
3,201
—
Other operating income
—
—
—
(2,648
)
Total operating expenses
200,398
191,968
563,060
489,862
Operating income
27,307
21,501
124,147
145,075
Nonoperating income (expenses)
Interest income
960
1,274
2,855
3,740
Interest expense
(28,303
)
(25,185
)
(82,432
)
(72,207
)
Amortization of deferred financing
costs
(1,315
)
(1,116
)
(3,665
)
(4,744
)
Gain (loss) from extinguishment of debt
3
20,992
—
20,992
(784
)
Other nonoperating income
—
570
—
570
Total nonoperating expenses
(7,666
)
(24,457
)
(62,250
)
(73,425
)
Income (loss) before income taxes
19,641
(2,956
)
61,897
71,650
Income tax (provision) benefit 4
(305
)
219
(983
)
(2,147
)
Net income (loss)
19,336
(2,737
)
60,914
69,503
Net loss (income) attributable to
noncontrolling interests
887
392
(665
)
88
Net income (loss) attributable to ACC,
Inc. and
Subsidiaries common
stockholders
$
20,223
$
(2,345
)
$
60,249
$
69,591
Other comprehensive (loss)
income
Change in fair value of interest rate
swaps and other
(145
)
81
(14,532
)
726
Comprehensive income (loss)
$
20,078
$
(2,264
)
$
45,717
$
70,317
Net income (loss) per share
attributable to ACC, Inc.
and Subsidiaries common
shareholders
Basic and diluted
$
0.14
$
(0.02
)
$
0.43
$
0.50
Weighted-average common shares
outstanding
Basic
137,403,842
137,022,012
137,259,130
136,742,094
Diluted
138,375,527
137,022,012
138,257,906
137,660,802
- The company adopted new lease accounting guidance on January 1,
2019, which required the reclassification of the provision for
uncollectible accounts from operating expenses to revenue. The
reclassification is reflected on a prospective basis starting in
the first quarter 2019, but the prior year amounts have not been
reclassified. The provision for uncollectible accounts for owned
properties was $3.3 million and $2.9 million for the three months
ended September 30, 2019 and 2018, respectively, and was $6.1
million and $5.6 million for the nine months ended September 30,
2019 and 2018, respectively. The provision for uncollectible
accounts for on-campus participating properties for the three
months ended September 30, 2019 was $0.1 million, nominal for the
three months ended September 30, 2018, and a $0.6 million benefit
and a $0.2 million expense for the nine months ended September 30,
2019 and 2018, respectively.
- The nine months ended September 30, 2018 amount includes $5.8
million of transaction costs incurred in connection with the
closing of the ACC / Allianz joint venture transaction in May
2018.
- The three and nine months ended September 30, 2019 amounts
represent the gain on the extinguishment of debt associated with a
property that was transferred to the lender in settlement of the
property's mortgage loan in July 2019.
- Income tax provision / benefit for the three and nine months
ended September 30, 2018 includes a $0.5 million benefit and a $1.3
million provision, respectively, related to an estimated taxable
gain resulting from the ACC / Allianz joint venture transaction
which closed in May 2018.
Table 3
American Campus Communities,
Inc. and Subsidiaries
Consolidated Statements of
Funds from Operations (“FFO”)
(unaudited, dollars in
thousands, except share and per share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Net income (loss) attributable to ACC,
Inc. and Subsidiaries
common stockholders
$
20,223
$
(2,345
)
$
60,249
$
69,591
Noncontrolling interests' share of net
(loss) income
(887
)
(392
)
665
(88
)
Joint venture partners' share of FFO
(1,175
)
(1,563
)
(6,856
)
(2,100
)
Loss (gain) from disposition of real
estate
—
—
282
(42,314
)
Elimination of provision for real estate
impairment
—
—
3,201
—
Total depreciation and amortization
68,930
66,131
206,500
194,447
Corporate depreciation 1
(1,135
)
(1,261
)
(3,528
)
(3,420
)
FFO attributable to common stockholders
and OP unitholders
85,956
60,570
260,513
216,116
Elimination of operations of on-campus
participating properties
Net loss (income) from on-campus
participating properties
424
436
(2,138
)
(1,715
)
Amortization of investment in on-campus
participating properties
(2,289
)
(1,962
)
(6,334
)
(5,856
)
84,091
59,044
252,041
208,545
Modifications to reflect operational
performance of on-campus participating properties
Our share of net cashflow 2
353
644
2,063
2,232
Management fees and other
369
302
1,597
1,058
Contribution from on-campus participating
properties
722
946
3,660
3,290
Transaction costs 3
147
(232
)
147
7,586
Elimination of (gain) loss from
extinguishment of debt 4
(20,992
)
—
(20,992
)
784
Elimination of gain from litigation
settlement 5
—
—
—
(2,648
)
Elimination of FFO from property in
receivership 6
104
842
1,912
2,037
Funds from operations-modified (“FFOM”)
attributable to common stockholders and OP unitholders
$
64,072
$
60,600
$
236,768
$
219,594
FFO per share – diluted
$
0.62
$
0.44
$
1.88
$
1.56
FFOM per share – diluted
$
0.46
$
0.44
$
1.71
$
1.58
Weighted-average common shares
outstanding - diluted
138,879,244
138,585,384
138,854,970
138,569,643
- Represents depreciation on corporate assets not added back for
purposes of calculating FFO.
- 50% of the properties’ net cash available for distribution
after payment of operating expenses, debt service (including
repayment of principal) and capital expenditures which is included
in ground/facility leases expense in the consolidated statements of
comprehensive income (refer to table 2).
- The three months ended September 30, 2019 amount represents
transaction costs incurred in connection with the closing of one
presale transaction in August 2019. The three months ended
September 30, 2018 amount represents transaction costs incurred in
connection with the closing of a presale transaction in August
2018, net of an adjustment to estimated state income tax related to
a tax gain resulting from the ACC / Allianz real estate joint
venture transaction in May 2018. The nine months ended September
30, 2018 amount includes the costs discussed above in addition to
transaction costs incurred in connection with the closing of the
ACC / Allianz real estate joint venture transaction.
- Represents gains and losses associated with the extinguishment
of mortgage loans due to real estate disposition transactions,
including the sale of partial ownership interests in properties and
the transfer of an owned property to the lender in satisfaction of
the property's mortgage loan. Such costs are excluded from gains
from disposition of real estate reported in accordance with
GAAP.
- Represents a gain related to cash proceeds received from a
litigation settlement.
- Represents FFO for an owned property that was transferred to
the lender in July 2019 in settlement of the property's mortgage
loan.
Table 4
American Campus Communities,
Inc. and Subsidiaries
Owned Properties Results of
Operations1
(unaudited, dollars in
thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
$ Change
% Change
2019
2018
$ Change
% Change
Owned properties revenues
Same store properties
$
194,005
$
189,791
$
4,214
2.2
%
$
589,581
$
573,187
$
16,394
2.9
%
New properties
17,799
9,337
8,462
49,116
9,594
39,522
Sold and held for sale properties 2
4
1,547
(1,543
)
2,215
11,774
(9,559
)
Total revenues 3 4
$
211,808
$
200,675
$
11,133
5.5
%
$
640,912
$
594,555
$
46,357
7.8
%
Owned properties operating
expenses
Same store properties
$
102,805
$
98,929
$
3,876
3.9
%
$
271,817
$
265,102
$
6,715
2.5
%
New properties
8,886
4,831
4,055
20,782
5,146
15,636
Other 5
75
217
(142
)
210
561
(351
)
Sold and held for sale properties 2 6
70
1,169
(1,099
)
1,959
5,801
(3,842
)
Total operating expenses 3
$
111,836
$
105,146
$
6,690
6.4
%
$
294,768
$
276,610
$
18,158
6.6
%
Owned properties net operating
income
Same store properties
$
91,200
$
90,862
$
338
0.4
%
$
317,764
$
308,085
$
9,679
3.1
%
New properties
8,913
4,506
4,407
28,334
4,448
23,886
Other 5
(75
)
(217
)
142
(210
)
(561
)
351
Sold and held for sale properties 2 6
(66
)
378
(444
)
256
5,973
(5,717
)
Total net operating income
$
99,972
$
95,529
$
4,443
4.7
%
$
346,144
$
317,945
$
28,199
8.9
%
- The same store grouping above represents properties owned and
operating for both of the entire years ended December 31, 2019 and
2018, which are not conducting or planning to conduct substantial
development, redevelopment, or repositioning activities, and are
not classified as held for sale as of September 30, 2019. Includes
the full operating results of properties owned through joint
ventures in which the company has a controlling financial interest
and which are consolidated for financial reporting purposes.
- Includes properties sold in 2018 and 2019 and one property that
was transferred to the lender in July 2019 in settlement of the
property's $27.4 million mortgage loan.
- The company adopted new lease accounting guidance on January 1,
2019, which required the reclassification of the provision for
uncollectible accounts from operating expenses to revenue starting
in the first quarter 2019. To ensure comparability between periods
when calculating same store and new property results of operations,
the reclassification has also been made for the prior year. See
table 2 for the total amounts reclassified from operating expenses
to revenue for all properties for both periods presented.
- Includes revenues that are reflected as Resident Services
Revenue on the accompanying consolidated statements of
comprehensive income.
- Includes transaction costs and recurring professional fees
related to the formation and operation of the ACC / Allianz joint
venture that are included in owned properties operating expenses in
the consolidated statements of comprehensive income (refer to table
2).
- Does not include the allocation of payroll and other
administrative costs related to corporate management and
oversight.
Table 5
American Campus Communities,
Inc. and Subsidiaries
2019 Outlook1
(dollars in thousands, except
share and per share data)
Prior Guidance
Current Guidance
Low
High
Low
High
Net income 2
$
74,600
$
86,700
$
102,500
$
106,300
Noncontrolling interests' share of net
income
5,800
3,900
1,600
1,600
Joint venture partners' share of funds
from operations
(14,500
)
(11,600
)
(9,700
)
(9,700
)
Real estate related depreciation and
amortization
273,100
273,100
272,400
272,400
Corporate depreciation
(5,300
)
(5,300
)
(4,800
)
(4,800
)
Funds from operations ("FFO")
$
333,700
$
346,800
$
362,000
$
365,800
Elimination of operations from on-campus
participation properties ("OCPP")
(14,100
)
(13,700
)
(14,400
)
(14,000
)
Contribution from on-campus participation
properties
5,500
6,100
4,800
5,400
Elimination of gain from early
extinguishment of debt 2
—
—
(21,000
)
(21,000
)
Elimination of FFO from property in
receivership 2
—
—
1,900
1,900
Transaction costs 3
800
800
600
600
Funds from operations - modified
("FFOM")
$
325,900
$
340,000
$
333,900
$
338,700
Net income per share - diluted
$
0.54
$
0.62
$
0.74
$
0.77
FFO per share - diluted
$
2.40
$
2.50
$
2.61
$
2.63
FFOM per share - diluted
$
2.35
$
2.45
$
2.40
$
2.44
Weighted-average common shares
outstanding - diluted
138,866,100
138,866,100
138,866,100
138,866,100
1.
The company believes that the financial
results for the fiscal year ending December 31, 2019 may be
affected by, among other factors:
- national and regional economic trends and events;
- interest rate risk;
- university enrollment, funding and policy trends;
- the timing of acquisitions, dispositions or joint venture
activity;
- the timing of commencement of construction on owned development
projects;
- the ability of the company to be awarded and the timing of the
commencement of construction on third-party development
projects;
- the ability of the company to earn third-party management
revenues;
- the amount of income recognized by the taxable REIT
subsidiaries and any corresponding income tax expense;
- the ability of the company to integrate acquired
properties;
- the outcome of legal proceedings arising in the normal course
of business; and
- the finalization of property tax rates and assessed values in
certain jurisdictions.
2.
In July 2019, an owned property was
transferred to the lender in settlement of the property's $27.4
million mortgage loan. The gain resulting from the transfer as well
as the operating results of the property during the receivership
period have been eliminated when calculating FFOM in order to more
accurately present the company's anticipated operating results for
2019.
3.
Represents transaction costs related to
the closing of two presale development properties.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191021005798/en/
American Campus Communities, Inc., Austin Ryan Dennison,
512-732-1000
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