American Campus Communities, Inc. Reports Third Quarter 2019 Financial Results

Increased quarterly FFOM per share by 5 percent; announces three new on-campus development projects

AUSTIN, Texas–(BUSINESS WIRE)–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.

1. 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.
2. 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.

1. 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.
2. 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.
3. 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.
4. 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.

1. Represents depreciation on corporate assets not added back for purposes of calculating FFO.
2. 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).
3. 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.
4. 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.
5. Represents a gain related to cash proceeds received from a litigation settlement.
6. Represents FFO for an owned property that was transferred to the lender in July 2019 in settlement of the property’s mortgage loan.

1. 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.

Contacts

American Campus Communities, Inc., Austin

Ryan Dennison, 512-732-1000

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