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American Campus Communities, Inc. Reports First Quarter 2017 Financial ResultsAmerican Campus Communities, Inc. (NYSE:ACC) today announced the following financial results for the quarter ended March 31, 2017. Highlights
"We are excited to announce five new on-campus awards and a core acquisition, highlighting the company's robust external growth opportunities," said Bill Bayless, American Campus CEO. "Additionally, our continued focus on creating operational efficiencies resulted in solid NOI growth again this quarter, and achievement of a 55 percent NOI margin on a trailing twelve-month basis for the total portfolio." First Quarter Operating Results Revenue for the 2017 first quarter totaled $192.9 million, versus $200.0 million in the first quarter 2016, and operating income for the quarter totaled $49.2 million compared to $53.0 million in the prior year first quarter. The decrease in revenues and operating income was primarily due to the sale of 21 non-core properties in 2016, offset by growth resulting from recently completed development properties, increased rental rates for the 2016-2017 academic year, and property acquisitions completed in 2016. Net income for the 2017 first quarter totaled $34.1 million, or $0.25 per fully diluted share, compared with net income of $45.6 million, or $0.36 per fully diluted share for the same quarter in 2016. Compared to the prior year, the decrease in net income is primarily due to a $17.4 million gain from disposition of real estate recognized in the first quarter of 2016, as two properties were sold in the first quarter of 2016 and no property sales were completed in the current quarter. FFO for the 2017 first quarter totaled $86.0 million, or $0.64 per fully diluted share, as compared to $81.8 million, or $0.65 per fully diluted share for the same quarter in 2016. FFOM for the 2017 first quarter was $83.2 million, or $0.62 per fully diluted share as compared to $78.2 million, or $0.62 per fully diluted share for the same quarter in 2016. A reconciliation of FFO and FFOM to net income is provided in Table 3. NOI for same store wholly-owned properties was $98.9 million in the quarter, an increase of 3.3 percent from $95.7 million in the 2016 first quarter. Same store wholly-owned property revenues increased by 3.3 percent over the 2016 first quarter due to an increase in average rental rates for the 2016-2017 academic year. Same store wholly-owned property operating expenses increased by 3.4 percent over the prior year quarter. NOI for the total wholly-owned portfolio decreased 2.7 percent to $104.8 million for the quarter from $107.7 million in the comparable period of 2016 due to the disposition of 21 non-core properties noted above. A reconciliation of same store NOI to total NOI is provided in Table 4. Portfolio Update Developments The company continues to progress on the construction of its 18 owned-development and presale development projects with expected deliveries in Fall 2017, 2018 and 2019. The developments total approximately $1.2 billion, are all core Class A assets located on or pedestrian to campus in their respective markets, averaging 0.1 miles to campus, and are expected to achieve a stabilized development yield in the range of 6.5 - 7.0 percent. Of the under construction development pipeline of 18 projects, 10 are scheduled to open in Fall 2017 totaling $603.1 million, and are preleased to an average of 56.1 percent for the upcoming academic year as of April 21, 2017. The company's guidance assumes that these 10 developments lease to 88 percent in Fall 2017, with certain projects expected to stabilize in Fall 2018. American Campus Equity (ACE) Subsequent to quarter end, the company executed a ground lease and commenced construction on our fifth on-campus ACE development at Northern Arizona University. The project, which is located in the heart of campus, is designed to serve as the NAU Honors College upon delivery in Fall 2018 and has been master leased by the university for the first year of operation. Totaling a net investment of $43.4 million by the company, the living-learning community offers housing and activity space to 636 students in addition to eight classrooms and 26 faculty and administrative offices which will be funded by the University. Modern, student centric amenities will include academic study space and computer stations, a state-of-the-art fitness center, recreational lounges and ample common area space. Subsequent to quarter end, the company executed a predevelopment agreement for a new ACE transaction at the University of Arizona. The proposed living-learning honors college is currently anticipated to include modern student accommodations for approximately 1,000 students with an integrated dining hall. Additionally, the development is planned to include a new University office facility and student recreation and wellness center, which will be funded by the University, with the company expected to earn third-party fees for its role in the development of these separate facilities. The collaborative project targets delivery in Fall 2019 and will be located on university owned land as well as campus-adjacent sites previously acquired by the company, which will be donated to the University to facilitate the transaction. Acquisitions Subsequent to quarter end, the company acquired The Arlie, a 598-bed community located one block from the edge of the University of Texas at Arlington campus. The community, which opened in Fall 2016, provides modern student accommodations and finishes as well as a competitive amenity package featuring academic study spaces, fitness center, resort style pool with expansive sundeck and an attached parking garage. After investment of $1.7 million of upfront capital improvements, the acquisition targets a year-one cap rate of 5.5 percent nominal and 5.3 percent economic. Additionally, as the property is located adjacent to an existing ACC asset, multiple property market efficiencies offer the potential for additional yield of 25 to 50 basis points above the going-in cap rates. Dispositions As previously announced, the company is under contract for the disposition of The Province, a 657-bed non-core property serving students attending Wright State University. The transaction is anticipated to close during the second quarter but remains subject to the satisfaction of standard closing conditions. Third-Party Services The company executed a predevelopment services agreement for a third-party on-campus development at the University of California, Irvine. The proposed 1,441-bed student housing development project represents the fourth phase of the company's partnership with the University of California, Irvine to reshape the university's on-campus housing experience. Including this phase, the partnership has produced more than 6,500 modern student beds in purpose-built, academically oriented student communities totaling more than $550 million of total project cost on the campus of the University of California, Irvine. The newly awarded project is expected to commence construction during the third or fourth quarter of 2017 with an anticipated delivery in Fall 2019 although the full scope, fees, feasibility and construction period have not been finalized. Subsequent to quarter end, the company executed a predevelopment services agreement for a proposed third-party on-campus development project at the University of Illinois at Chicago. The project is currently targeting approximately 525 beds, however the full scope, fees, feasibility and construction period have not been finalized. Subsequent to quarter end, the previously announced third-party development at La Salle University was terminated pending the outcome of the University's Board of Trustees comprehensive reevaluation of their student housing requirements. Capital Markets At-The-Market (ATM) Share Offering Program During the quarter, the company sold 1.3 million shares of common stock under the ATM program at a weighted average price of $49.70 per share for net proceeds of approximately $62.7 million. Subsequent to quarter end, the company sold an additional 405 thousand shares of common stock at a weighted average price of $47.97 per share for net proceeds of approximately $19.2 million. Total gross proceeds of $158.9 million have been raised under the ATM program in 2016 and 2017 leaving approximately $341 million of capacity under the current program. 2017 Outlook The company is maintaining its previously stated guidance range for the fiscal year 2017, anticipating that FFO will be in the range of $2.34 to $2.44 per fully diluted share and FFOM will be in the range of $2.32 to $2.42 per fully diluted share. For additional details regarding the company's 2017 outlook, please see pages 16-17 of the Supplemental Analyst Package 1Q 2017. 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, 2017 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 first quarter results and the 2017 outlook on Tuesday, April 25, 2017 at 10 a.m. EDT (9:00 a.m. CDT). Participants from within the U.S. may dial 888-317-6003 passcode 0785065, and participants outside the U.S. may dial 412-317-6061 passcode 0785065 at least five 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 May 9, 2017 by dialing 877-344-7529 or 412-317-0088 conference number 10102932. The replay also 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, many of which present FFO when reporting their results. We also believe it is meaningful to present a measure we refer to as FFO-Modified, or FFOM, which reflects certain adjustments related to the economic performance of our on-campus participating properties and excludes property acquisition costs, contractual executive separation and retirement charges, and other non-cash items, as we determine in good faith. FFO and FFOM should not be considered as alternatives to net income or loss computed in accordance with GAAP as an indicator of our financial performance or to cash flow from operating activities computed in accordance with GAAP as an indicator of our liquidity, nor are these measures indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. The company defines property NOI as property revenues less direct property operating expenses, excluding depreciation, but including allocated corporate general and administrative expenses. About American Campus Communities American Campus Communities, Inc. is the largest owner, manager and developer of high-quality student housing communities in the United States. The company is a fully integrated, self-managed and self-administered equity real estate investment trust (REIT) with expertise in the design, finance, development, construction management and operational management of student housing properties. As of March 31, 2017, American Campus Communities owned 157 student housing properties containing approximately 97,500 beds. Including its owned and third-party managed properties, ACC's total managed portfolio consisted of 194 properties with approximately 127,200 beds. Visit www.americancampus.com. Forward-Looking Statements In addition to historical information, this press release contains forward-looking statements under the federal securities law. These statements are based on current expectations, estimates and projections about the industry and markets in which American Campus operates, management's beliefs, and assumptions made by management. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict.
Note: The same store grouping above represents properties owned and operating for both of the entire years ended December 31, 2017 and 2016, which are not conducting or planning to conduct substantial development or redevelopment activities, and are not classified as held for sale as of March 31, 2017.
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