Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ACC > SEC Filings for ACC > Form 10-Q on 8-Aug-2013All Recent SEC Filings

Show all filings for AMERICAN CAMPUS COMMUNITIES INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for AMERICAN CAMPUS COMMUNITIES INC


8-Aug-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. We caution investors that any forward-looking statements presented in this report, or which management may make orally or in writing from time to time, are based on management's beliefs and assumptions made by, and information currently available to, management. When used, the words "anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result" and similar expressions, do not relate solely to historical matters and are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you that forward-looking statements are not guarantees of future performance and will be impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they were made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following: general risks affecting the real estate industry; risks associated with changes in University admission or housing policies; risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments; failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully; risks and uncertainties affecting property development and construction; risks associated with downturns in the national and local economies, volatility in capital and credit markets, increases in interest rates, and volatility in the securities markets; costs of compliance with the Americans with Disabilities Act and other similar laws; potential liability for uninsured losses and environmental contamination; risks associated with our Company's potential failure to qualify as a REIT under the Internal Revenue Code of 1986 (the "Code"), as amended, and possible adverse changes in tax and environmental laws; and the other factors discussed in the "Risk Factors" contained in Item 1A of our Form 10-K for the year ended December 31, 2012.

Our Company and Our Business

Overview

American Campus Communities, Inc. ("ACC") is a real estate investment trust ("REIT") that commenced operations effective with the completion of an initial public offering ("IPO") on August 17, 2004. Through ACC's controlling interest in American Campus Communities Operating Partnership, L.P. ("ACCOP"), ACC is one of the largest owners, managers and developers of high quality student housing properties in the United States in terms of beds owned and under management. ACC is a fully integrated, self-managed and self-administered equity REIT with expertise in the acquisition, design, financing, development, construction management, leasing and management of student housing properties. ACC's common stock is publicly traded on the New York Stock Exchange ("NYSE") under the ticker symbol "ACC." References to the "Company," "we," "us" or "our" mean collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP. References to the "Operating Partnership" mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP. Unless otherwise indicated, the accompanying discussion applies to both the Company and the Operating Partnership.

Property Portfolio

As of June 30, 2013, our total owned property portfolio contained 162 properties, consisting of owned off-campus student housing properties that are in close proximity to colleges and universities, American Campus Equity ("ACEŽ") properties operated under ground/facility leases with university systems and on-campus participating properties operated under ground/facility leases with the related university systems. Of the 162 properties, 11 were under development as well as an additional phase under development at an existing property as of June 30, 2013, and when completed will consist of a total of approximately 6,900 beds in approximately 2,000 units. Our communities contain modern housing units and are supported by a resident assistant system and other student-oriented programming, with many offering resort-style amenities.

As of June 30, 2013, through ACC's taxable REIT subsidiary ("TRS") entities, we provided third-party management and leasing services for 31 properties, bringing our total owned and third-party managed portfolio to 193 properties. Third-party management and leasing services are typically provided pursuant to management contracts that have initial terms that range from one to five years. Below is a summary of our property portfolio as of June 30, 2013:

Property portfolio:                           Properties       Units         Beds
Wholly-owned operating properties:
Off-campus properties (1)                             137       25,586        79,608
On-campus ACE                                          10        2,666         8,492
Subtotal - operating properties                       147       28,252        88,100

Wholly-owned properties under development:
Off-campus properties (2) (3)                           7        1,286         4,627
On-campus ACE                                           4          684         2,227
Subtotal - properties under development                11        1,970         6,854

Total wholly-owned properties                         158       30,222        94,954

On-campus participating properties                      4        1,863         4,519

Total owned property portfolio                        162       32,085        99,473

Managed properties                                     31        9,537        23,977

Total property portfolio                              193       41,622       123,450

(1) Includes five properties classified as Held for Sale as of June 30, 2013.

(2) Includes Townhomes at Newton Crossing, a 152-unit, 608-bed property we did not own as of June 30, 2013, but are obligated to purchase as long as the developer meets certain construction completion deadlines and other closing conditions. The development of the property is anticipated to be completed in August 2013.

(3) Includes The Lodges of East Lansing Phase II, a 144-unit, 366-bed additional phase at an existing property we did not own as of June 30, 2013, but are obligated to purchase as long as the developer meets certain construction completion deadlines and other closing conditions. The development of the additional phase is anticipated to be completed in August 2013.

Wholly-owned development activity

Our wholly-owned properties consist of owned off-campus properties that are in close proximity to colleges and universities and on-campus ACE properties operated under ground/facility leases with related university systems. At June 30, 2013, we were in the process of constructing seven owned off-campus properties, four ACE on-campus properties and an additional phase at an existing off-campus property. These properties are summarized in the table below:

                                                                                                                                              Scheduled
                                                                                                               Estimated                       to Open
                                                                                                                Project        Total Costs       for
    Project         Project Type       Location       Primary University Served     Units         Beds           Cost           Incurred      Occupancy

Manzanita Hall      ACE            Tempe, AZ                                            241           816     $    50,300     $      36,784     August
                                                      Arizona State University                                                                   2013

The Callaway        Off-campus     Austin, TX         The University of                 219           753          61,600            53,461     August
House                                                 Texas at Austin                                                                            2013
                                                                                                                                              September
Chestnut Square     ACE            Philadelphia, PA   Drexel University                 220           861          97,600            83,298      2013

U Club on           Off-campus     Tallahassee, FL                                      112           448          29,000            26,837     August
Woodward                                              Florida State University                                                                   2013

Townhomes at        Off-campus     Lubbock, TX                                          112           448          29,200            26,915     August
Overton Park                                          Texas Tech University                                                                      2013

601 Copeland        Off-campus     Tallahassee, FL    Florida State                      81           283          22,100            15,571     August
                                                      University                                                                                 2013

University View     ACE            Prairie View,                                         96           336          15,600            12,759     August
(PVAMU Phase                        TX                Prairie View A&M                                                                           2013
VII)                                                  University

Townhomes at        Off-campus     Lexington, KY                                        152           608          38,750            29,178     August
Newtown Crossing                                      University of                                                                              2013
(1)                                                   Kentucky

The Lodges of       Off-campus     East Lansing, MI                                     144           366          32,300            21,184     August
East Lansing                                                                                                                                     2013
Phase II (2)                                          Michigan State University

                                                     SUBTOTAL - 2013 DELIVERIES       1,377         4,919     $   376,450     $     305,987

The Plaza on        Off-campus     Orlando, FL        University of Central             364         1,313         112,300            47,724     August
University                                            Florida                                                                                    2014
Stanworth           ACE            Princeton, NJ      Princeton University              127           214          35,800             8,996   July 2014
Commons Phase I

U Club on Frey      Off-campus     Kennesaw, GA                                         102           408          25,300             7,068     August
Phase II                                              Kennesaw State University                                                                  2014

                                                     SUBTOTAL - 2014 DELIVERIES         593         1,935     $   173,400     $      63,788

                                                           TOTAL - ALL PROJECTS       1,970         6,854     $   549,850     $     369,775

(1) We did not own this property as of June 30, 2013 but are obligated to purchase the property as long as the developer meets certain construction completion deadlines and other closing conditions.

(2) We did not own this additional phase at an existing property as of June 30, 2013 but are obligated to purchase the additional phase as long as the developer meets certain construction completion deadlines and other closing conditions.

Third-Party Development Services

Through ACC's TRS entities, we provide development and construction management services for student housing properties owned by colleges and universities, charitable foundations and others. As of June 30, 2013, we were under contract on a total of three third-party development projects that are currently in progress and whose fees range from $2.3 million to $3.2 million. As of June 30, 2013, fees of approximately $2.5 million remained to be earned by us with respect to these projects, which have scheduled completion dates of August 2013 through August 2014.

Results of Operations

Comparison of the Three Months Ended June 30, 2013 and June 30, 2012

The following table presents our results of operations for the three months
ended June 30, 2013 and 2012, including the amount and percentage change in
these results between the two periods.

                                               Three Months Ended June 30,
                                                2013                 2012           Change ($)       Change (%)
Revenues
 Wholly-owned properties                   $      146,814       $       90,510     $     56,304             62.2 %
 On-campus participating properties                 4,703                4,712               (9 )           (0.2 %)
 Third-party development services                     555                3,866           (3,311 )          (85.6 %)
 Third-party management services                    1,924                1,638              286             17.5 %
 Resident services                                    432                  185              247            133.5 %
Total revenues                                    154,428              100,911           53,517             53.0 %

Operating expenses
 Wholly-owned properties                           69,595               42,903           26,692             62.2 %
 On-campus participating properties                 2,929                2,801              128              4.6 %
 Third-party development and management
services                                            2,422                2,626             (204 )           (7.8 %)
 General and administrative                         4,626                4,638              (12 )           (0.3 %)
 Depreciation and amortization                     47,477               23,266           24,211            104.1 %
 Ground/facility leases                             1,160                  804              356             44.3 %
Total operating expenses                          128,209               77,038           51,171             66.4 %

Operating income                                   26,219               23,873            2,346              9.8 %

Nonoperating income and (expenses)
 Interest income                                      947                  413              534            129.3 %
 Interest expense                                 (19,603 )            (12,368 )         (7,235 )           58.5 %
 Amortization of deferred financing
costs                                              (1,416 )               (967 )           (449 )           46.4 %
Total nonoperating expenses                       (20,072 )            (12,922 )         (7,150 )           55.3 %

Income before income taxes and
discontinued operations                             6,147               10,951           (4,804 )          (43.9 %)
Income tax provision                                 (255 )               (156 )            (99 )           63.5 %
Income from continuing operations                   5,892               10,795           (4,903 )          (45.4 %)

Discontinued operations
 Income attributable to discontinued
operations                                          2,774                2,129              645             30.3 %
 Gain from disposition of real estate                   -                   83              (83 )         (100.0 %)
Total discontinued operations                       2,774                2,212              562             25.4 %

Net income                                          8,666               13,007           (4,341 )          (33.4 %)
Net income attributable to
noncontrolling interests
 Redeemable noncontrolling interests                 (134 )               (188 )             54            (28.7 %)
 Partially owned properties                          (483 )               (491 )              8             (1.6 %)
Net income attributable to
noncontrolling interests                             (617 )               (679 )             62             (9.1 %)
Net income attributable to common
shareholders                               $        8,049       $       12,328     $     (4,279 )          (34.7 %)

Same Store and New Property Operations

We define our same store property portfolio as wholly-owned properties that were owned and/or operating for both of the entire periods being compared, and which are not conducting or planning to conduct substantial development or redevelopment activities or are classified as Held for Sale in accordance with generally accepted accounting principles.

Same store revenues are defined as revenues generated from our same store portfolio and consist of rental revenue earned from student leases as well as other income items such as utility income, damages, parking income, summer conference rent, application and administration fees, income from retail tenants, and income earned by one of our taxable REIT subsidiaries ("TRS") from ancillary activities such as the provision of food services.

Same store operating expenses are defined as operating expenses generated from our same store portfolio and include usual and customary expenses incurred to operate a property such as payroll, maintenance, utilities, marketing, general and administrative costs, insurance, property taxes, and bad debt. Same store operating expenses also include an allocation of payroll and other administrative costs related to corporate management and oversight.

A reconciliation of our same store and new property operations to our consolidated statements of comprehensive income is set forth below:

                     Same Store Properties (1)            New Properties (2)             Total - All Properties (1)
                        Three Months Ended                Three Months Ended                 Three Months Ended
                             June 30,                          June 30,                           June 30,
                     2013                2012             2013           2012             2013                2012
Number of
properties                  92                  92              50             2                142                  94
Number of beds          55,396              55,396          29,153         1,234             84,549              56,630

Revenues (3)     $      90,902       $      89,326     $    56,344     $   1,369     $      147,246       $      90,695
Operating
expenses                43,534              41,341          26,061         1,562             69,595              42,903

(1) Excludes five properties classified as Held for Sale as of June 30, 2013 that are included in discontinued operations on the accompanying consolidated statements of comprehensive income.

(2) Does not include properties under construction as of June 30, 2013. Number of properties and number of beds also excludes properties undergoing redevelopment as of June 30, 2013, although the results of operations of those properties are included in revenues and operating expenses prior to commencement of redevelopment activities.

(3) Includes revenues which are reflected as resident services revenue on the accompanying consolidated statements of comprehensive income.

Same Store Properties. The increase in revenue from our same store properties was due to an increase in average rental rates for the 2012/2013 academic year as average occupancy remained constant at 94.0% for both three month periods ended June 30, 2013 and 2012. Future revenues will be dependent on our ability to maintain our current leases in effect for the 2012/2013 academic year and our ability to obtain appropriate rental rates and desired occupancy for the 2013/2014 academic year at our various properties during our leasing period, which typically begins in January and ends in August.

The increase in operating expenses for our same store properties was primarily due to an increase in marketing costs incurred to stimulate leasing velocity for the 2013/2014 academic year. We anticipate that operating expenses for our same store property portfolio for 2013 will increase as compared with 2012 primarily for the reason discussed above.

New Property Operations. Our new properties for the three months ended June 30, 2013 consist of the following: (i) Avalon Heights, acquired in May 2012, (ii) University Commons, acquired in June 2012, (iii) The Block, acquired in August 2012, (iv) The Retreat, acquired in September 2012, (v) 11 owned development projects that opened for occupancy in August and September 2012 (vi) a 15-property student housing portfolio acquired in September 2012, (vii) a 19-property student housing portfolio acquired in November 2012, and (viii) University Edge, a property previously subject to a pre-sale agreement that we acquired in December 2012.

On-Campus Participating Properties ("OCPP") Operations

We had four participating properties containing 4,519 beds which were operating during the three months ended June 30, 2013 and 2012. Revenues from our participating properties remained constant at $4.7 million for both three month periods ended June 30, 2013 and 2012. This occurred as a result of an increase in average rental rates for 2012/2013 academic year, offset by a decrease in average occupancy from 42.7% for the three months ended June 30, 2012 to 41.7% for the three months June 30, 2013. Occupancy at our on-campus participating properties is low during the summer months due to the expiration of the 9-month leases concurrent with the end of the spring semester.

At these properties, operating expenses increased by approximately $0.1 million, from $2.8 million for the three months ended June 30, 2012 to $2.9 million for the three months ended June 30, 2013. We anticipate that operating expenses in 2013 will increase slightly as compared with 2012 as a result of general inflation.

Third-Party Development Services Revenue

Third-party development services revenue decreased by approximately $3.3 million, from $3.9 million during the three months ended June 30, 2012 to $0.6 million for the three months ended June 30, 2013. This decrease was primarily due to the closing of bond financing and commencement of construction for the Southern Oregon University projects and the commencement of construction on the Lakeside Graduate Community at Princeton University during the three months ended June 30, 2012, resulting in $2.6 million of revenue recognized during that period. During the three months ended June 30, 2013, we had three projects in progress with an average contractual fee of approximately $2.7 million, as compared to the three months ended June 30, 2012 in which we had seven projects in progress with an average contractual fee of approximately $2.4 million. We anticipate that third-party development services revenue in 2013 will decrease significantly as compared to 2012 as a result of fewer currently outstanding awarded projects in this business segment.

Development services revenues are dependent on our ability to successfully be awarded such projects, the amount of the contractual fee related to the project and the timing and completion of the development and construction of the project. In addition, to the extent projects are completed under budget, we may be entitled to a portion of such savings, which are recognized as revenue when performance has been agreed upon by all parties, or when performance has been verified by an independent third-party. It is possible that projects for which we have deferred pre-development costs will not close and that we will not be reimbursed for such costs. The pre-development costs associated therewith will ordinarily be charged against income for the then-current period.

Third-Party Management Services Revenue

Third-party management services revenue increased by approximately $0.3 million, from $1.6 million during the three months ended June 30, 2012 to $1.9 million for the three months ended June 30, 2013. This increase was primarily a result of the recognition of incentive management fees from two of our third-party management contracts during the three months ended June 30, 2013. We anticipate that third-party management services revenue in 2013 will increase as compared to 2012 for the reason discussed above.

Third-Party Development and Management Services Expenses

Third party development and management services expenses decreased by approximately $0.2 million, from $2.6 million during the three months ended June 30, 2012 to $2.4 million for the three months ended June 30, 2013. This decrease was primarily a result of the recent growth in our wholly-owned property portfolio, as well as a lower number of newly awarded contracts in this business segment during 2013 as compared to the prior year. We anticipate that third-party development and management services expenses will continue to decrease in 2013 for these same reasons.

Depreciation and Amortization

Depreciation and amortization increased by approximately $24.2 million, from $23.3 million during the three months ended June 30, 2012 to $47.5 million for the three months ended June 30, 2013. This increase was primarily a result of additional depreciation and amortization expense of approximately $18.0 million recorded during the three months ended June 30, 2013 related to properties acquired during 2012 and the completion of construction and opening of 11 owned development properties in August and September 2012, which contributed an additional $6.2 million of depreciation and amortization expense during the three months ended June 30, 2013. We expect depreciation and amortization expense to increase significantly in 2013 as a result of properties acquired during 2012, the completion of 11 owned development projects in August and September 2012 and the anticipated completion of eight owned development projects and an additional phase at an existing property in August and September 2013.

Ground/Facility Leases

Ground/facility leases expense increased by approximately $0.4 million, from $0.8 million during the three months ended June 30, 2012 to $1.2 million for the three months ended June 30, 2013. This increase was primarily due to the completion of construction and commencement of operations of six ACE development projects during 2012. We anticipate ground/facility leases expense to increase in 2013 as compared to 2012 due to the planned completion of construction on three ACE development projects in August and September 2013 and the timing of ACE development projects placed into service during 2012.

Interest Income

Interest income increased by approximately $0.5 million, from $0.4 million . . .

  Add ACC to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ACC - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.