UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x Quarterly
Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For
the
quarterly period ended September 30, 2007.
o Transition
Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For
the
Transition Period From ______________________ to
_________________________.
Commission
file number 001-32265
AMERICAN
CAMPUS COMMUNITIES, INC.
(Exact
name of registrant as specified in its charter)
Maryland
|
|
76-0753089
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(IRS
Employer Identification No.)
|
805
Las Cimas Parkway, Suite 400
Austin,
TX
(Address
of Principal Executive Offices)
|
|
78746
(Zip
Code)
|
(512)
732-1000
Registrant’s
telephone number, including area code
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes x No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer o
|
Accelerated
Filer x
|
Non-accelerated
filer o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
Yes
o
No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
There
were 27,275,491 shares of American Campus Communities, Inc.'s common stock
with a par value of $0.01 per share outstanding as of the close of business
on
November 5, 2007.
FORM
10-Q
FOR
THE QUARTER ENDED SEPTEMBER 30, 2007
TABLE
OF CONTENTS
|
PAGE
NO.
|
|
|
PART
I.
|
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|
|
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1
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2
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3
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4
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5
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19
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38
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38
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PART
II.
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39
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|
40
|
|
|
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
(in
thousands, except share and per share data)
|
|
September
30, 2007
|
|
|
December
31, 2006
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
in real estate:
|
|
|
|
|
|
|
Owned
properties, net
|
|
$ |
903,349
|
|
|
$ |
694,197
|
|
On-campus
participating properties, net
|
|
|
73,896
|
|
|
|
76,688
|
|
Investments
in real estate, net
|
|
|
977,245
|
|
|
|
770,885
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
10,852
|
|
|
|
79,107
|
|
Restricted
cash
|
|
|
14,025
|
|
|
|
11,260
|
|
Student
contracts receivable, net
|
|
|
4,316
|
|
|
|
3,129
|
|
Other
assets
|
|
|
25,979
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
1,032,417
|
|
|
$ |
884,381
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Secured
debt
|
|
$ |
543,685
|
|
|
$ |
432,294
|
|
Unsecured
revolving credit facility
|
|
|
47,900
|
|
|
|
-
|
|
Accounts
payable and accrued expenses
|
|
|
14,424
|
|
|
|
13,616
|
|
Other
liabilities
|
|
|
45,354
|
|
|
|
29,436
|
|
Total
liabilities
|
|
|
651,363
|
|
|
|
475,346
|
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
31,648
|
|
|
|
39,561
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Common
shares, $.01 par value, 800,000,000 shares authorized, 23,587,499
and
22,903,073 shares issued
and
outstanding at September 30, 2007 and December 31, 2006,
respectively
|
|
|
236
|
|
|
|
229
|
|
Additional
paid in capital
|
|
|
394,883
|
|
|
|
382,367
|
|
Accumulated
earnings and distributions
|
|
|
(45,056 |
) |
|
|
(13,533 |
) |
Accumulated
other comprehensive (loss) income
|
|
|
(657 |
) |
|
|
411
|
|
Total
stockholders’ equity
|
|
|
349,406
|
|
|
|
369,474
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
1,032,417
|
|
|
$ |
884,381
|
|
See
accompanying notes to consolidated financial statements
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
(Unaudited,
in thousands, except share and per share data)
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned
off-campus properties
|
|
$ |
30,045
|
|
|
$ |
24,340
|
|
|
$ |
85,197
|
|
|
$ |
64,687
|
|
On-campus
participating properties
|
|
|
4,083
|
|
|
|
3,971
|
|
|
|
14,160
|
|
|
|
13,450
|
|
Third
party development services
|
|
|
1,347
|
|
|
|
1,693
|
|
|
|
2,325
|
|
|
|
4,355
|
|
Third
party development services – on-campus
participating
properties
|
|
|
36
|
|
|
|
36
|
|
|
|
109
|
|
|
|
108
|
|
Third
party management services
|
|
|
627
|
|
|
|
491
|
|
|
|
1,999
|
|
|
|
1,844
|
|
Resident
services
|
|
|
380
|
|
|
|
328
|
|
|
|
1,044
|
|
|
|
993
|
|
Total
revenues
|
|
|
36,518
|
|
|
|
30,859
|
|
|
|
104,834
|
|
|
|
85,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned
off-campus properties
|
|
|
16,368
|
|
|
|
13,178
|
|
|
|
41,276
|
|
|
|
31,710
|
|
On-campus
participating properties
|
|
|
2,317
|
|
|
|
2,455
|
|
|
|
6,842
|
|
|
|
6,660
|
|
Third
party development and management services
|
|
|
1,484
|
|
|
|
1,338
|
|
|
|
3,925
|
|
|
|
4,402
|
|
General
and administrative
|
|
|
2,286
|
|
|
|
1,468
|
|
|
|
15,804
|
|
|
|
4,879
|
|
Depreciation
and amortization
|
|
|
7,797
|
|
|
|
6,735
|
|
|
|
22,535
|
|
|
|
18,672
|
|
Ground/facility
leases
|
|
|
473
|
|
|
|
238
|
|
|
|
1,263
|
|
|
|
676
|
|
Total
operating expenses
|
|
|
30,725
|
|
|
|
25,412
|
|
|
|
91,645
|
|
|
|
66,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
5,793
|
|
|
|
5,447
|
|
|
|
13,189
|
|
|
|
18,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
income and (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
221
|
|
|
|
294
|
|
|
|
1,242
|
|
|
|
623
|
|
Interest
expense
|
|
|
(7,560 |
) |
|
|
(7,445 |
) |
|
|
(20,940 |
) |
|
|
(19,847 |
) |
Amortization
of deferred financing costs
|
|
|
(324 |
) |
|
|
(334 |
) |
|
|
(936 |
) |
|
|
(1,078 |
) |
Total
nonoperating expenses
|
|
|
(7,663 |
) |
|
|
(7,485 |
) |
|
|
(20,634 |
) |
|
|
(20,302 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes, minority interests, and discontinued
operations
|
|
|
(1,870 |
) |
|
|
(2,038 |
) |
|
|
(7,445 |
) |
|
|
(1,864 |
) |
Income
tax provision
|
|
|
(576 |
) |
|
|
-
|
|
|
|
(696 |
) |
|
|
-
|
|
Minority
interests
|
|
|
77
|
|
|
|
149
|
|
|
|
309
|
|
|
|
202
|
|
Loss
from continuing operations
|
|
|
(2,369 |
) |
|
|
(1,889 |
) |
|
|
(7,832 |
) |
|
|
(1,662 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
attributable to discontinued operations
|
|
|
-
|
|
|
|
278
|
|
|
|
-
|
|
|
|
1,648
|
|
Net
loss
|
|
$ |
(2,369 |
) |
|
$ |
(1,611 |
) |
|
$ |
(7,832 |
) |
|
$ |
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share – basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations per share
|
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.34 |
) |
|
$ |
(0.09 |
) |
Net
loss per share
|
|
$ |
(0.10 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.34 |
) |
|
$ |
-
|
|
Loss
per share – diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations per share
|
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.11 |
) |
Net
loss per share
|
|
$ |
(0.10 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
23,563,651
|
|
|
|
18,218,128
|
|
|
|
23,261,475
|
|
|
|
17,553,627
|
|
Diluted
|
|
|
25,320,144
|
|
|
|
20,535,276
|
|
|
|
25,273,845
|
|
|
|
19,397,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
declared per common share
|
|
$ |
0.3375
|
|
|
$ |
0.3375
|
|
|
$ |
1.0125
|
|
|
$ |
1.0125
|
|
See
accompanying notes to consolidated financial statements
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
(Unaudited,
in thousands)
|
|
Nine Months
Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
Net
loss
|
|
$ |
(7,832 |
) |
|
$ |
(14 |
) |
|
|
|
|
|
|
|
|
|
Other
comprehensive loss:
|
|
|
|
|
|
|
|
|
Change
in fair value of interest rate swaps
|
|
|
(917 |
) |
|
|
(43 |
) |
Net
comprehensive loss
|
|
$ |
(8,749 |
) |
|
$ |
(57 |
) |
See
accompanying notes to consolidated financial statements
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
(Unaudited,
in thousands)
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
Operating
activities
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(7,832 |
) |
|
$ |
(14 |
) |
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Minority
interests share of loss
|
|
|
(309 |
) |
|
|
(202 |
) |
Depreciation
and amortization
|
|
|
22,535
|
|
|
|
19,305
|
|
Amortization
of deferred financing costs and debt premiums/discounts
|
|
|
(165 |
) |
|
|
98
|
|
Share-based
compensation
|
|
|
4,662
|
|
|
|
568
|
|
Amortization
of gain on interest rate swap termination
|
|
|
(151 |
) |
|
|
-
|
|
Income
tax provision
|
|
|
696
|
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
(2,116 |
) |
|
|
(1,283 |
) |
Student
contracts receivable, net
|
|
|
(1,137 |
) |
|
|
(418 |
) |
Other
assets
|
|
|
(5,471 |
) |
|
|
(5,697 |
) |
Accounts
payable and accrued expenses
|
|
|
(8 |
) |
|
|
6,517
|
|
Other
liabilities
|
|
|
998
|
|
|
|
467
|
|
Net
cash provided by operating activities
|
|
|
11,702
|
|
|
|
19,341
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
Cash
paid for property acquisitions
|
|
|
(43,183 |
) |
|
|
(69,633 |
) |
Investments
in owned properties
|
|
|
(92,863 |
) |
|
|
(66,209 |
) |
Investments
in on-campus participating properties
|
|
|
(402 |
) |
|
|
(395 |
) |
Purchase
of corporate furniture, fixtures and equipment
|
|
|
(347 |
) |
|
|
(442 |
) |
Net
cash used in investing activities
|
|
|
(136,795 |
) |
|
|
(136,679 |
) |
Financing
activities
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock
|
|
|
-
|
|
|
|
140,036
|
|
Offering
costs
|
|
|
-
|
|
|
|
(6,755 |
) |
Proceeds
from revolving credit facility, net of paydowns
|
|
|
47,900
|
|
|
|
-
|
|
Proceeds
from construction loans
|
|
|
30,613
|
|
|
|
33,541
|
|
Paydown
of construction loan
|
|
|
-
|
|
|
|
(20,224 |
) |
Principal
payments on debt
|
|
|
(6,251 |
) |
|
|
(5,153 |
) |
Change
in construction accounts payable
|
|
|
12,165
|
|
|
|
4,184
|
|
Debt
issuance and assumption costs
|
|
|
(1,638 |
) |
|
|
(1,823 |
) |
Distributions
to common and restricted stockholders
|
|
|
(23,722 |
) |
|
|
(17,524 |
) |
Distributions
to minority partners
|
|
|
(2,229 |
) |
|
|
(1,340 |
) |
Net
cash provided by financing activities
|
|
|
56,838
|
|
|
|
124,942
|
|
Net
change in cash and cash equivalents
|
|
|
(68,255 |
) |
|
|
7,604
|
|
Cash
and cash equivalents at beginning of period
|
|
|
79,107
|
|
|
|
24,641
|
|
Cash
and cash equivalents at end of period
|
|
$ |
10,852
|
|
|
$ |
32,245
|
|
Supplemental
disclosure of non-cash investing and financing
activities
|
|
|
|
|
|
|
|
|
Loans
assumed in connection with property acquisitions
|
|
$ |
(88,307 |
) |
|
$ |
(123,649 |
) |
Contribution
of land from minority partner in development joint venture
|
|
$ |
2,756
|
|
|
$ |
-
|
|
Issuance
of Common Units in connection with property acquisitions
|
|
$ |
-
|
|
|
$ |
(49,096 |
) |
Issuance
of Preferred Units in connection with property
acquisitions
|
|
$ |
-
|
|
|
$ |
(3,075 |
) |
Change
in fair value of derivative instruments, net
|
|
$ |
(917 |
) |
|
$ |
(43 |
) |
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
22,787
|
|
|
$ |
21,771
|
|
See
accompanying notes to consolidated financial statements
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
1. Organization
and Description of Business
American
Campus Communities, Inc. (the “Company”) is a real estate investment trust
(“REIT”) that was incorporated on March 9, 2004 and commenced operations
effective with the completion of an initial public offering (“IPO”) on August
17, 2004. Through the Company’s controlling interest in American
Campus Communities Operating Partnership LP (the “Operating Partnership”) and
American Campus Communities Services, Inc., (the Company’s taxable REIT
subsidiary or “TRS”), the Company 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. The Company 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.
As
of
September 30, 2007, the Company’s property portfolio contained 43 student
housing properties with approximately 26,900 beds and approximately 8,900
apartment units, consisting of 39 owned properties that are in close proximities
to colleges and universities and four on-campus participating properties
operated under ground/facility leases with the related university
systems. These communities contain modern housing units, offer
resort-style amenities and are supported by a classic resident assistant
system
and other student-oriented programming.
Through
the TRS, the Company also provides construction management and development
services for student housing properties owned by colleges and universities,
charitable foundations, and others. As of September 30, 2007, the
Company provided third party management and leasing services for 13 student
housing properties (nine of which the Company served as the third party
developer and construction manager) that represented approximately 8,900
beds in
approximately 3,100 units. Third party management and leasing
services are typically provided pursuant to multi-year management contracts
that
have initial terms that range from one to five years. As of September
30, 2007, the Company’s total owned and managed portfolio included 56 properties
with approximately 35,800 beds in approximately 12,000 units.
2.
Summary of Significant Accounting Policies
Principles
of Consolidation and Combination
The
accompanying consolidated financial statements include all of the accounts
of
the Company, the Operating Partnership and the subsidiaries of the Operating
Partnership. The Company consolidates entities in which it has an
ownership interest and over which it exercises significant control over major
operating decisions, such as budgeting, investment and financing
decisions. The real estate entities included in the consolidated
financial statements have been consolidated only for the periods that such
entities were under control by the Company. All significant
intercompany balances and transactions have been eliminated in
consolidation. All dollar amounts in the tables herein, except share
and per share amounts, are stated in thousands unless otherwise
indicated.
Recent
Accounting Pronouncements
In
June
2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN
48”). FIN 48 clarifies the accounting for uncertainty in income taxes
by prescribing a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The interpretation also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. FIN 48
became effective on January 1, 2007. The Company, or its
subsidiaries, files income tax returns in the U.S. Federal jurisdiction and
various states’ jurisdictions. Open tax years for federal income tax
purposes generally include tax years 2004-2006 as of the date of
adoption. The Company adopted the provisions of FIN 48 on January 1,
2007. The Company does not have any material unrecognized tax
benefits; therefore, the adoption of FIN 48 did not have a material impact
on
the Company’s consolidated financial statements.
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (“SFAS 157”). SFAS 157 defines fair value,
establishes guidelines for measuring fair value and expands disclosures
regarding fair value measurements. SFAS 157 does not require any new fair
value measurements but rather eliminates inconsistencies in guidance found
in
various prior accounting pronouncements. SFAS 157 is effective for fiscal
years
beginning after November 15, 2007. The Company does not expect
its adoption to have a material impact on the Company’s consolidated financial
statements.
In
February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (“SFAS 159”), which gives entities the option to measure
eligible financial assets, financial liabilities and firm commitments at
fair
value on an instrument-by-instrument basis (i.e., the fair value option),
which
are otherwise not permitted to be accounted for at fair value under other
accounting standards. The election to use the fair value option is available
when an entity first recognizes a financial asset or financial liability
or upon
entering into a firm commitment. Subsequent changes in fair value must be
recorded in earnings. Additionally, SFAS No. 159 allows for a one-time election
for existing positions upon adoption, with the transition adjustment recorded
to
beginning retained earnings. This statement is effective for fiscal years
beginning after November 15, 2007. The Company does not expect
its adoption to have a material impact on the Company’s consolidated financial
statements.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Interim
Financial Statements
The
accompanying interim financial statements are unaudited, but have been prepared
in accordance with U.S. generally accepted accounting principles (“GAAP”) for
interim financial information and in conjunction with the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not
include all disclosures required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting
solely of normal recurring matters) necessary for a fair presentation of
the
financial statements for these interim periods have been
included. Because of the seasonal nature of the Company’s operations,
the results of operations and cash flows for any interim period are not
necessarily indicative of results for other interim periods or for the full
year. These financial statements should be read in conjunction with
the financial statements and the notes thereto included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2006.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets
and
liabilities, disclosures of contingent assets and liabilities at the date
of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Investments
in Real Estate
Investments
in real estate are recorded at historical cost. Major improvements
that extend the life of an asset are capitalized and depreciated over the
remaining useful life of the asset. The cost of ordinary repairs and
maintenance is charged to expense when incurred. Depreciation and
amortization are recorded on a straight-line basis over the estimated useful
lives of the assets as follows:
Buildings
and improvements
|
|
7-40
years
|
Leasehold
interest - on-campus
participating
properties
|
|
25-34
years (shorter of useful life or respective lease term)
|
Furniture,
fixtures and equipment
|
|
3-7
years
|
The
cost
of buildings and improvements includes the purchase price of the property,
including legal fees and acquisition costs. Project costs directly
associated with the development and construction of an owned real estate
project, which include interest, property taxes, and amortization of deferred
finance costs, are capitalized as construction in progress. Upon
completion of the project, costs are transferred into the applicable asset
category and depreciation commences. Interest totaling approximately
$1.4 million and $0.8 million was capitalized during the three months ended
September 30, 2007 and 2006, respectively, and $4.0 million and $2.1 million
was
capitalized during the nine months ended September 30, 2007 and 2006,
respectively. Amortization of deferred financing costs totaling
approximately $0.1 million and $82,000 was capitalized during the three months
ended September 30, 2007 and 2006, respectively, and approximately $0.3 million
and $0.2 million was capitalized during the nine months ended September 30,
2007
and 2006, respectively.
Management
assesses whether there has been an impairment in the value of the Company’s
investments in real estate whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be
recoverable. Impairment is recognized when estimated expected future
cash flows (undiscounted and before interest charges) are less than the carrying
value of the property. The estimation of expected future net cash flows is
inherently uncertain and relies on assumptions regarding current and future
economics and market conditions. If such conditions change, then an
adjustment to the carrying value of the Company’s long-lived assets could occur
in the future period in which the conditions change. To the extent that a
property is impaired, the excess of the carrying amount of the property over
its
estimated fair value is charged to earnings. The Company believes that there
were no impairments of the carrying values of its investments in real estate
as
of September 30, 2007.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company allocates the purchase price of acquired properties to net tangible
and
identified intangible assets based on relative fair values in accordance
with
Statement of Financial Accounting Standard (“SFAS”) No. 141, Business
Combinations. Fair value estimates are based on information
obtained from a number of sources, including independent appraisals that
may be
obtained in connection with the acquisition or financing of the respective
property and other market data. Information obtained about each
property as a result of due diligence, marketing and leasing activities is
also
considered. The value of in-place leases is based on the difference
between (i) the property valued with existing in-place leases adjusted to
market
rental rates and (ii) the property valued “as-if” vacant. As lease
terms are typically one year or less, rates on in-place leases generally
approximate market rental rates. Factors considered in the valuation
of in-place leases include an estimate of the carrying costs during the expected
lease-up period considering current market conditions, nature of the tenancy,
and costs to execute similar leases. Carrying costs include estimates
of lost rentals at market rates during the expected lease-up period, as well
as
marketing and other operating expenses. The value of in-place leases
is amortized over the remaining initial term of the respective leases, generally
less than one year. The purchase price of property acquisitions is
not expected to be allocated to tenant relationships, considering the terms
of
the leases and the expected levels of renewals. The Company’s
allocation of purchase price is contingent upon the final true-up of certain
prorations.
Intangible
Assets
In
connection with property acquisitions completed during the nine months ended
September 30, 2007 and 2006, the Company capitalized approximately $1.2 million
and $2.3 million, respectively, related to management’s estimate of the fair
value of the in-place leases assumed. These intangible assets are
amortized on a straight-line basis over a term of approximately six months,
which represents the average remaining term of the underlying
leases. The amortization is included in depreciation expense in the
accompanying consolidated statements of operations. See Note 3 for a
detailed discussion of the property acquisitions completed during the nine
months ended September 30, 2007.
Debt
Premiums and Discounts
Debt
premiums and discounts represent fair value adjustments to account for the
difference between the stated rates and market rates of debt assumed in
connection with the Company’s property acquisitions. The debt
premiums and discounts are amortized to interest expense over the term of
the
related loans using the effective-interest method. As of September
30, 2007 and December 31, 2006, unamortized debt premiums were $5.4 million
and
$6.4 million, respectively, and unamortized debt discounts were $0.7 million
and
$0.4 million, respectively. Debt premiums and discounts are included
in secured debt on the accompanying consolidated balance sheets.
Third-Party
Development Services Revenue and Costs
Development
revenues are generally recognized based on a proportionate performance method
based on contract deliverables, while construction revenues are recognized
using
the percentage of completion method, as determined by construction costs
incurred relative to total estimated construction costs. Costs
associated with such projects are deferred and recognized in relation to
the
revenues earned on executed contracts. For projects where the
Company’s fee is based on a fixed price, any cost overruns incurred during
construction, as compared to the original budget, will reduce the net fee
generated on those projects. Incentive fees are generally recognized
when the project is complete and performance has been agreed upon by all
parties, or when performance has been verified by an
independent third-party.
The
Company also evaluates the collectibility of fee income and expense
reimbursements generated through the provision of development and construction
management services based upon the individual facts and circumstances, including
the contractual right to receive such amounts in accordance with the terms
of
the various projects, and reserves any amounts that are deemed to be
uncollectible.
Pre-development
expenditures such as architectural fees, permits and deposits associated
with
the pursuit of third-party and owned development projects are expensed as
incurred, until such time that management believes it is probable that the
contract will be executed and/or construction will commence. Because
the Company frequently incurs these pre-development expenditures before a
financing commitment and/or required permits and authorizations have been
obtained, the Company bears the risk of loss of these pre-development
expenditures if financing cannot ultimately be arranged on acceptable terms
or
the Company is unable to successfully obtain the required permits and
authorizations. As such, management evaluates the status of
third-party and owned projects that have not yet commenced construction on
a
periodic basis and expenses any deferred costs related to projects whose
current
status indicates the commencement of construction is unlikely and/or the
costs
may not provide future value to the Company in the form of
revenues. Such write-offs are included in third-party development and
management services expenses (in the case of third-party development projects)
or general and administrative expenses (in the case of owned development
projects) on the accompanying consolidated statements of
operations. As of September 30, 2007, the Company has deferred
approximately $8.2 million in pre-development costs related to third-party
and
owned development projects that have not yet commenced
construction. Such costs are included in other assets on the
accompanying consolidated balance sheets.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based
Compensation
The
Company accounts for equity based awards in accordance with SFAS No. 123
(R),
Share-Based Payment. Accordingly, the Company has recognized
compensation expense related to certain restricted stock awards (see Note
9)
over the underlying vesting periods, which amounted to approximately $0.3
million and $0.2 million during the three months ended September 30, 2007
and
2006, respectively, and $1.0 million and $0.6 million during the nine months
ended September 30, 2007 and 2006, respectively.
The
Company’s Outperformance Bonus Plan discussed in Note 9 vested on August 17,
2007. Accordingly, the Compensation Committee of the Board of
Directors elected to pay a portion of the awards to selected recipients in
the
form of profits interest units (“PIUs”), which are discussed in more detail in
Note 7. Approximately $3.7 million of the compensation charge
recorded during the nine months ended September 30, 2007 reflects the settlement
of the Outperformance Bonus Plan through the issuance of PIUs.
Income
Taxes
The
Company has elected to be taxed as a REIT under the Internal Revenue Code
of
1986, as amended (the “Code”). To qualify as a REIT, the Company must
meet a number of organizational and operational requirements, including a
requirement that it currently distribute at least 90% of its adjusted taxable
income to its stockholders. As a REIT, the Company will
generally not be subject to corporate level federal income tax on taxable
income
it currently distributes to its stockholders. If the Company fails to qualify
as
a REIT in any taxable year, it will be subject to federal income taxes at
regular corporate rates (including any applicable alternative minimum tax)
and
may not be able to qualify as a REIT for the subsequent four taxable
years. Even if the Company qualifies for taxation as a REIT,
the Company may be subject to certain state and local income and excise taxes
on
its income and property, and to federal income and excise taxes on its
undistributed income.
The
TRS
manages the Company’s non-REIT activities and is subject to federal, state and
local income taxes.
In
August
2007, in connection with the vesting of the Company’s Outperformance Bonus Plan
discussed in Note 9, a portion of the compensation expense associated with
the
awards was recorded by the TRS. As a result, the Company determined
that it was more likely than not that the Company would not realize the benefit
of its deferred tax asset and increased its valuation allowance by a discrete
item of $0.5 million, which is reflected in income tax provision in the
accompanying consolidated statements of operations.
Earnings
Per Share
Basic
earnings per share is computed using net income (loss) and the weighted average
number of shares of the Company’s common stock outstanding during the period,
including restricted stock units (“RSUs”) issued to outside
directors. RSUs are included in both basic and diluted weighted
average common shares outstanding because they were fully vested on the date
of
grant and all conditions required in order for the recipients to earn the
RSUs
have been satisfied. Diluted earnings per share reflects weighted
average common shares issuable from the assumed conversion of restricted
stock
awards (“RSAs”) granted to employees, PIUs, and common and preferred units of
limited partnership interest in the Operating Partnership (“Common Units” and
“Series A Preferred Units,” respectively). See Note 7 for a
discussion of PIUs, Common Units and Series A Preferred Units.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
following is a summary of the elements used in calculating basic and diluted
earnings per share:
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Basic
earnings per share calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$ |
(2,369 |
) |
|
$ |
(1,889 |
) |
|
$ |
(7,832 |
) |
|
$ |
(1,662 |
) |
Discontinued
operations
|
|
|
-
|
|
|
|
278
|
|
|
|
-
|
|
|
|
1,648
|
|
Net
loss
|
|
$ |
(2,369 |
) |
|
$ |
(1,611 |
) |
|
$ |
(7,832 |
) |
|
$ |
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations – per share
|
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.34 |
) |
|
$ |
(0.09 |
) |
Income
from discontinued operations – per share
|
|
$ |
-
|
|
|
$ |
0.01
|
|
|
|
-
|
|
|
$ |
0.09
|
|
Net
(loss) income – per share
|
|
$ |
(0.10 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.34 |
) |
|
$ |
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
23,563,651
|
|
|
|
18,218,128
|
|
|
|
23,261,475
|
|
|
|
17,553,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$ |
(2,369 |
) |
|
$ |
(1,889 |
) |
|
$ |
(7,832 |
) |
|
$ |
(1,662 |
) |
Series
A Preferred Unit distributions
|
|
|
46
|
|
|
|
46
|
|
|
|
138
|
|
|
|
107
|
|
Loss
from continuing operations allocated to
Common
Units
|
|
|
(152 |
) |
|
|
(255 |
) |
|
|
(569 |
) |
|
|
(546 |
) |
Loss
from continuing operations, as adjusted
|
|
|
(2,475 |
) |
|
|
(2,098 |
) |
|
|
(8,263 |
) |
|
|
(2,101 |
) |
Discontinued
operations
|
|
|
-
|
|
|
|
278
|
|
|
|
-
|
|
|
|
1,648
|
|
Income
from discontinued operations allocated to
Common
Units
|
|
|
-
|
|
|
|
28
|
|
|
|
-
|
|
|
|
130
|
|
Income
from discontinued operations, as adjusted
|
|
|
-
|
|
|
|
306
|
|
|
|
-
|
|
|
|
1,778
|
|
Net
loss, as adjusted
|
|
$ |
(2,475 |
) |
|
$ |
(1,792 |
) |
|
$ |
(8,263 |
) |
|
$ |
(323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations – per share
|
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.11 |
) |
Income
from discontinued operations – per share
|
|
$ |
-
|
|
|
$ |
0.01
|
|
|
$ |
-
|
|
|
$ |
0.09
|
|
Net
loss – per share
|
|
$ |
(0.10 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
23,563,651
|
|
|
|
18,218,128
|
|
|
|
23,261,475
|
|
|
|
17,553,627
|
|
Common
Units/PIUs
|
|
|
1,641,530
|
|
|
|
2,202,185
|
|
|
|
1,897,407
|
|
|
|
1,753,826
|
|
Series
A Preferred Units
|
|
|
114,963
|
|
|
|
114,963
|
|
|
|
114,963
|
|
|
|
90,118
|
|
Restricted
stock awards (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Diluted
weighted average common shares outstanding
|
|
|
25,320,144
|
|
|
|
20,535,276
|
|
|
|
25,273,845
|
|
|
|
19,397,571
|
|
|
(1)
|
173,569
and 101,963 weighted average restricted stock awards are excluded
from
diluted weighted average common shares outstanding for the three
months
ended September 30, 2007 and 2006, respectively, and 163,724 and
97,600
weighted average restricted stock awards are excluded from diluted
weighted average common shares outstanding for the nine months
ended
September 30, 2007 and 2006, respectively, because they would be
anti-dilutive due to the Company’s loss position for these
periods.
|
3. Property
Acquisitions
In
January 2007, the Company acquired a 248-unit, 752-bed property (Village
on
Sixth) located near the campus of Marshall University in Huntington, West
Virginia, for a purchase price of $25.6 million, which excludes $1.7 million
of
anticipated transaction costs, initial integration expenses and capital
expenditures necessary to bring this property up to the Company’s operating
standards. As part of the transaction, the Company assumed two
fixed-rate mortgage loans, which includes one for $16.2 million with an annual
interest rate of 5.5% and remaining term to maturity of 7.5 years and a second
loan for $1.4 million with an annual interest rate of 6.6% and remaining
term to
maturity of 9.9 years.
In
February 2007, the Company acquired a three property portfolio (the “Edwards
Portfolio”) for a purchase price of $102.0 million, which excludes $3.7 million
of anticipated transaction costs, initial integration expenses and capital
expenditures necessary to bring these properties up to the Company’s operating
standards. As part of the transaction, the Company assumed $70.7
million in fixed-rate mortgage debt with a weighted average annual interest
rate
of 5.7% and an average remaining term to maturity of 8.5 years. In
August 2007, construction was completed on an additional phase at one of
these
properties. As contemplated in the original transaction, concurrent
with the completion of construction in August 2007, the Company purchased
this
additional phase consisting of 24 units and 84 beds, for approximately $4.6
million.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Edwards Portfolio consists of one property in Lexington, Kentucky located
near
the campus of the University of Kentucky, one property in Toledo, Ohio located
near the campus of the University of Toledo and one property in Ypsilanti,
Michigan located near the campus of Eastern Michigan
University. Including the purchase of the additional phase discussed
above, these three properties contain 764 units and 1,971 beds.
The
acquired properties’ results of operations have been included in the
accompanying consolidated statements of operations since their respective
acquisition closing dates. The following pro forma information for
the three and nine months ended September 30, 2007 and 2006 presents
consolidated financial information for the Company as if the property
acquisitions discussed above, the Company’s 2006 acquisitions and the Company’s
September 2006 equity offering had occurred at the beginning of the earliest
period presented. The unaudited pro forma information is provided for
informational purposes only and is not indicative of results that would have
occurred or which may occur in the future:
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Total
revenues
|
|
$ |
36,518
|
|
|
$ |
34,449
|
|
|
$ |
107,072
|
|
|
$ |
101,340
|
|
Net
loss
|
|
$ |
(2,105 |
) |
|
$ |
(2,413 |
) |
|
$ |
(6,411 |
) |
|
$ |
(1,881 |
) |
Net
loss per share – basic
|
|
$ |
(0.09 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.28 |
) |
|
$ |
(0.08 |
) |
Net
loss per share – diluted
|
|
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.08 |
) |
4. Property
Disposition and Discontinued Operations
The
Company sold The Village on University, an owned off-campus property, in
December 2006 for approximately $51.0 million, resulting in net cash proceeds
of
approximately $50.0 million. As such, the net income attributable to
this property is reflected in the accompanying consolidated statements of
operations as discontinued operations in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. Below is a summary of the results of operations of the
aforementioned property for all periods presented:
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Total
revenues
|
|
$ |
-
|
|
|
$ |
991
|
|
|
$ |
-
|
|
|
$ |
3,739
|
|
Total
operating expenses
|
|
|
-
|
|
|
|
(716 |
) |
|
|
-
|
|
|
|
(2,094 |
) |
Operating
income
|
|
|
-
|
|
|
|
275
|
|
|
|
-
|
|
|
|
1,645
|
|
Total
nonoperating income
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
Net
income
|
|
$ |
-
|
|
|
$ |
278
|
|
|
$ |
-
|
|
|
$ |
1,648
|
|
5. Investments
in Owned Properties
Owned
properties consisted of the following:
|
|
September
30, 2007
|
|
|
December
31, 2006
|
|
Land
|
|
$ |
92,087
|
|
|
$ |
75,263
|
|
Buildings
and improvements
|
|
|
768,322
|
|
|
|
579,906
|
|
Furniture,
fixtures and equipment
|
|
|
41,949
|
|
|
|
28,111
|
|
Construction
in progress
|
|
|
64,704
|
|
|
|
56,958
|
|
|
|
|
967,062
|
|
|
|
740,238
|
|
Less
accumulated depreciation
|
|
|
(63,713 |
) |
|
|
(46,041 |
) |
Owned
properties, net
|
|
$ |
903,349
|
|
|
$ |
694,197
|
|
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
6. On-Campus
Participating Properties
The
Company is a party to ground/facility lease agreements (“Leases”) with certain
state university systems and colleges (each, a “Lessor”) for the purpose of
developing, constructing, and operating student housing facilities on university
campuses. Under the terms of the Leases, title to the constructed facilities
is
held by the applicable Lessor and such Lessor receives a de minimus base
rent
paid at inception and 50% of defined net cash flows on an annual basis through
the term of the lease. The Leases terminate upon the earlier to occur
of the final repayment of the related debt, the amortization period of which
is
contractually stipulated, or the end of the lease term.
Pursuant
to the Leases, in the event the leasehold estates do not achieve Financial
Break
Even (defined as revenues less operating expenses, excluding management fees,
less debt service), the applicable Lessor would be required to make a rental
payment, also known as the Contingent Payment, sufficient to achieve Financial
Break Even. The Contingent Payment provision remains in effect until
such time as any financing placed on the facilities would receive an investment
grade rating without the Contingent Payment provision. In the event
that the Lessor is required to make a Contingent Payment, future net cash
flow
distributions would be first applied to repay such Contingent Payments and
then
to unpaid management fees prior to normal distributions. Beginning in
November 1999 and December 2002, as a result of the debt financing on the
facilities achieving investment grade ratings without the Contingent Payment
provision, the Texas A&M University System is no longer required to make
Contingent Payments under either the Prairie View A&M University Village or
University College Leases. The Contingent Payment obligation
continues to be in effect for the Texas A&M International University and
University of Houston Leases.
In
the
event the Company seeks to sell its leasehold interest, the Leases provide
the
applicable Lessor with the right of first refusal of a bona fide purchase
offer
and an option to purchase the lessee’s rights under the applicable
Lease.
In
conjunction with the execution of each Lease, the Company has entered into
separate five-year agreements to manage the related facilities for 5% of
defined
gross receipts. The five-year terms of the management agreements are not
contingent upon the continuation of the Leases. Upon expiration of the initial
five year terms, the agreements continue on a month-to-month basis.
On-campus
participating properties are as follows:
|
|
|
|
Historical
Cost
|
|
Lessor/University
|
Lease
Commencement
|
Required
Debt
Repayment
(1)
|
|
September
30, 2007
|
|
|
December
31, 2006
|
|
Texas
A&M University System /
Prairie
View A&M University (2)
|
2/1/96
|
9/1/23
|
|
$ |
38,458
|
|
|
$ |
38,277
|
|
Texas
A&M University System /
Texas
A&M International
|
2/1/96
|
9/1/23
|
|
|
6,033
|
|
|
|
6,009
|
|
Texas
A&M University System /
Prairie
View A&M University (3)
|
10/1/99
|
8/31/25 / 8/31/28
|
|
|
24,011
|
|
|
|
23,872
|
|
University
of Houston System /
University
of Houston (4)
|
9/27/00
|
8/31/35
|
|
|
34,686
|
|
|
|
34,628
|
|
|
|
|
|
|
103,188
|
|
|
|
102,786
|
|
Less
accumulated amortization
|
|
|
|
|
(29,292 |
) |
|
|
(26,098 |
) |
On-campus
participating properties, net
|
|
|
|
$ |
73,896
|
|
|
$ |
76,688
|
|
|
(1)
|
Represents
the effective lease termination date. The Leases terminate upon
the earlier to occur of the final repayment of the related debt
or the end
of the contractual lease term.
|
|
(2)
|
Consists
of three phases placed in service between 1996 and
1998.
|
|
(3)
|
Consists
of two phases placed in service in 2000 and 2003.
|
|
(4)
|
Consists
of two phases placed in service in 2001 and
2005.
|
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
7.
Minority Interests
The
Company consolidates the accounts of the Operating Partnership and its
subsidiaries into its consolidated financial statements. However, the
Company does not own 100% of the Operating Partnership and certain consolidated
real estate joint ventures. The amounts reported as minority
interests on the Company’s consolidated balance sheet reflect the portion of
these consolidated entities’ equity that the Company does not
own. Accordingly, the amounts reported as minority interest on the
Company’s consolidated statements of operations reflect the portion of these
consolidated entities’ net income or loss not allocated to the
Company.
Equity
interests in the Operating Partnership not owned by the Company are held
in the
form of PIUs, Common Units and Series A Preferred Units. PIUs are a
special class of partnership interests in the Operating Partnership and are
convertible into an equal number of Common Units upon the occurrence of certain
tax-related book-up events. Common Units and Series A Preferred Units
are exchangeable into an equal number of shares of the Company’s common stock,
or, at the Company’s election, cash. A PIU, Common Unit and a share
of the Company’s common stock have essentially the same economic
characteristics, as they effectively participate equally in the net income
and
distributions of the Operating Partnership. Series A Preferred Units
have a cumulative preferential per annum cash distribution rate of 5.99%,
payable quarterly concurrently with the payment of dividends on the Company’s
common stock.
Income
or
loss allocated to minority interests on the Company’s consolidated statements of
operations includes the Series A Preferred Unit distributions as well as
the pro
rata share of the Operating Partnership’s net income or loss allocated to PIUs
and Common Units. The Common Unitholders’ minority interest in the
Operating Partnership is reported at an amount equal to their ownership
percentage of the net equity of the Operating Partnership at the end of each
reporting period. Common Units and Series A Preferred Units issued in
connection with the 2006 acquisition of the Royal Portfolio became exchangeable
into an equal number of shares of the Company’s common stock on March 1,
2007. Subsequent to such date, 153,965 and 662,324 Common Units were
converted into shares of the Company’s common stock during the three and nine
months ended September 30, 2007, respectively. Additionally, as
partial consideration for the vesting of the Outperformance Bonus Plan, which
occurred on August 17, 2007, 132,400 PIUs were issued to certain employees
(see
Note 9). As of September 30, 2007 and December 31, 2006,
approximately 7% and 9%, respectively, of the equity interests of the Operating
Partnership was held by persons affiliated with Royal Properties and certain
current and former members of management in the form of PIUs, Common
Units and Series A Preferred Units.
Minority
interests also include the equity interests of unaffiliated joint venture
partners in four joint ventures consolidated by the Company for financial
reporting purposes. Three of the joint ventures own and operate the
Company’s Callaway House, University Village at Sweet Home and University Centre
owned-off campus properties. The other joint venture was formed to
develop, own, and operate the Company’s Villas at Chestnut Ridge owned
off-campus property, which is scheduled to open for occupancy in August
2008.
8. Debt
A
summary
of the Company’s outstanding consolidated indebtedness, including unamortized
debt premiums and discounts, is as follows:
|
|
September
30, 2007
|
|
|
December
31, 2006
|
|
Debt
secured by owned properties:
|
|
|
|
|
|
|
Mortgage
loans payable
|
|
$ |
398,811
|
|
|
$ |
315,044
|
|
Construction
loans payable
|
|
|
52,000
|
|
|
|
21,386
|
|
|
|
|
450,811
|
|
|
|
336,430
|
|
Debt
secured by on-campus participating properties:
|
|
|
|
|
|
|
|
|
Mortgage
loans payable
|
|
|
33,155
|
|
|
|
16,513
|
|
Construction
loan payable
|
|
|
-
|
|
|
|
16,710
|
|
Bonds
payable
|
|
|
55,030
|
|
|
|
56,675
|
|
|
|
|
88,185
|
|
|
|
89,898
|
|
Revolving
credit facility
|
|
|
47,900
|
|
|
|
-
|
|
Unamortized
debt premiums/discounts
|
|
|
4,689
|
|
|
|
5,966
|
|
Total
debt
|
|
$ |
591,585
|
|
|
$ |
432,294
|
|
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Loans
Assumed or Entered Into in Conjunction with Property
Acquisitions
In
connection with the January 2007 acquisition of Village on Sixth (see Note
3),
an owned off-campus property, the Company assumed approximately $17.6 million
of
fixed-rate mortgage debt, which is comprised of one $16.2 million mortgage
loan
with an annual interest rate of 5.5% and May 2014 maturity date, and a second
mortgage loan for $1.4 million with an annual interest rate of 6.6% and October
2016 maturity date. Upon assumption of this debt, the Company
recorded a debt discount of approximately $0.3 million on the $16.2 million
mortgage loan and a debt premium of approximately $0.1 million on the $1.4
million mortgage loan, in each case to reflect the estimated fair value of
the
debt assumed. These mortgage loans are secured by liens on the
related properties.
In
connection with the February 2007 acquisition of the Edwards Portfolio (see
Note
3), the Company assumed approximately $70.7 million in fixed-rate mortgage
debt. At the time of assumption, the debt had a weighted average
interest rate of 5.7% and an average remaining term to maturity of 8.3
years. Upon assumption of these three loans, the Company recorded
debt premiums of approximately $0.1 million to reflect the estimated fair
value
of the debt assumed. These three mortgage loans are secured by liens
on the related properties.
Construction
Loans
The
development and construction of Vista del Sol, an owned on-campus property
scheduled to complete construction and open for occupancy in August 2008,
is
partially financed with a construction loan. The loan amount is
$100.0 million and for each borrowing the Company has the option of choosing
the
Prime rate or one-, two-, or three-month LIBOR plus 1.45%. The loan
requires payments of interest only during the term of the loan and any accrued
interest and outstanding borrowings become due on the maturity date of December
27, 2009. The term of the loan can be extended through December 2011
through the exercise of two 12-month extension periods. The Company
began making draws under this construction loan during the three months ended
September 30, 2007. As of September 30, 2007, the balance outstanding
on this construction loan totaled $5.7 million, bearing interest at a rate
of
7.08%.
The
development and construction of Villas at Chestnut Ridge, an owned off-campus
property scheduled to complete construction and open for occupancy in August
2008, is partially financed with a construction loan. The loan amount
is $31.6 million and for each borrowing the Company has the option of choosing
the Prime rate or one-, two-, three-, or six-month LIBOR plus
1.25%. The loan requires payments of interest only during the term of
the loan and any accrued interest and outstanding borrowings become due on
the
maturity date of June 4, 2009. The term of the loan can be extended
through June 2010 through the exercise of a 12-month extension
period. The Company began making draws under this construction loan
during the three months ended September 30, 2007. As of September 30,
2007, the balance outstanding on this construction loan totaled $2.7 million,
bearing interest at a weighted average rate of 6.59%.
Cullen
Oaks Loans
In
addition, in February 2007, the Company extended the maturity date of the
Cullen
Oaks Phase I and Phase II loans to February 2014. The extended loans
bear interest at a rate of LIBOR plus 1.35% and require payments of interest
only through May 2008 and monthly payments of principal and interest from
May
2008 through the maturity date. In connection with these loan
extensions, the Company terminated an existing interest rate swap agreement
and
entered into a new interest rate swap agreement (see Note 10).
Revolving
Credit Facility
The
Operating Partnership has a $115 million revolving credit facility, which
may be
expanded by up to an additional $110 million upon the satisfaction of certain
conditions. The maturity date of the facility is August 17, 2009 and
the Company guarantees the Operating Partnership’s obligations under the
facility.
Availability
under the revolving credit facility is limited to an "aggregate borrowing
base
amount" equal to the lesser of (i) 65% of the value of certain properties,
calculated as set forth in the credit facility, and (ii) the adjusted net
operating income from these properties divided by a formula
amount. The facility bears interest at a variable rate, at the
Company’s option, based upon a base rate or one-, two-, three-, or six-month
LIBOR plus, in each case, a spread based upon the Company’s total
leverage. Additionally, the Company is required to pay an unused
commitment fee ranging from 0.15% to 0.20% per annum, depending on the aggregate
unused balance. As of September 30, 2007, the balance outstanding on
the revolving credit facility totaled $47.9 million, bearing interest at
a
weighted average rate of 6.94%, with remaining availability under the facility
(subject to the satisfaction of certain financial covenants) totaling
approximately $66.8 million. In October 2007, the Company paid off
the entire balance on the revolving credit facility by using proceeds from
an
equity offering (See Note 13).
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
terms
of the facility include certain restrictions and covenants, which limit,
among
other items, the incurrence of additional indebtedness, liens, and the
disposition of assets. The facility contains customary affirmative and negative
covenants and also contains financial covenants that, among other things,
require the Company to maintain certain minimum ratios of "EBITDA" (earnings
before interest, taxes, depreciation and amortization) to fixed
charges. The Company may not pay distributions that exceed 100% of
funds from operations for any four consecutive quarters. The
financial covenants also include consolidated net worth and leverage ratio
tests. As of September 30, 2007, the Company was in compliance with
all such covenants.
9. Incentive
Award Plan
The
Company has adopted the 2004 Incentive Award Plan (the “Plan”). The
Plan provides for the grant to selected employees and directors of the Company
and the Company’s affiliates of stock options, RSUs, RSAs, and other stock-based
incentive awards. The Company has reserved a total of 1,210,000
shares of the Company’s common stock for issuance pursuant to the Plan, subject
to certain adjustments for changes in the Company’s capital structure, as
defined in the Plan. As of September 30, 2007, the Company has issued
484,173 awards under the Plan. A summary of the Company’s stock-based
incentive awards under the Plan as of September 30, 2007 and changes during
the
nine months ended September 30, 2007, is presented below:
|
|
Common
Units
/ PIUs
|
|
Restricted
Stock
Units
(RSUs)
|
|
Restricted
Stock
Awards
(RSAs)
|
|
Total
|
Outstanding
at December 31, 2006
|
|
110,000
|
|
20,555
|
|
100,047
|
|
230,602
|
Granted
|
|
132,400
|
(1)
|
5,376
|
(2)
|
110,890
|
(4)
|
248,666
|
Vested
/ Settled in common shares
|
|
-
|
|
(4,029)
|
(3)
|
(18,073)
|
|
(22,102)
|
Settled
in cash
|
|
|
|
(3,116)
|
(3)
|
-
|
|
(3,116)
|
Forfeited
|
|
-
|
|
-
|
|
(12,552)
|
|
(12,552)
|
Converted
to common shares
|
|
(1,000)
|
|
-
|
|
-
|
|
(1,000)
|
Outstanding
at September 30, 2007
|
|
241,400
|
|
18,786
|
|
180,312
|
|
440,498
|
(1)
|
The
Outperformance Bonus Plan was adopted upon consummation of the
Company’s
IPO in August 2004, and consisted of awards to key employees equal
to the
value of 367,682 shares of the Company’s common stock. Such
awards vested on the third anniversary of the IPO (August 2007),
upon the
Company’s achievement of specified performance measures. Upon
vesting, the Compensation Committee of the Board of Directors exercised
its permitted discretion and granted 132,400 of the awards to selected
recipients in the form of PIUs, with the remainder of the awards
paid in
cash in the amount of $6.7 million. During the three and nine
months ended September 30, 2007, the Company recorded a compensation
charge of approximately $0.5 million and $10.4 million to reflect
the
value of such awards. As a result of the October 2007 equity
offering discussed in Note 13, a book-up event occurred for tax
purposes,
resulting in the 132,400 PIUs being converted to Common Units of
the
Operating Partnership.
|
|
|
(2)
|
In
May 2007, one outside member of the Board of Directors was granted
RSUs
valued at $35,000 and the remaining outside members were each granted
RSUs
valued at $25,000, with the number of RSUs determined based on
the fair
market value of the company’s stock on the date of grant, as defined in
the Plan. All awards vested immediately on the date of grant;
accordingly, a compensation charge of approximately $0.2 million
was
recorded during the nine months ended September 30, 2007 related
to these
awards.
|
|
|
(3)
|
On
August 17, 2004, in conjunction with the IPO, 7,145 RSUs were granted
to
certain outside members of the Board of Directors and these awards
vested
immediately on the date of grant. On August 17, 2007, the third
anniversary of the date of grant, as determined by the Compensation
Committee of the Board of Directors, 4,029 RSUs were settled through
the
delivery of shares of common stock and 3,116 RSUs were settled
in
cash.
|
|
|
(4)
|
In
2007, the Company granted 110,890 RSAs to its executive officers
and
certain employees that primarily vest in equal annual installments
over
five years. Unvested awards are forfeited upon the termination
of an individual’s employment with the Company. Recipients of
RSAs receive dividends, as declared by the Company’s Board of Directors,
on unvested shares provided that the respective recipient continues
to be
an employee of the Company.
|
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
10.
Interest Rate Hedges
In
February 2007, the Company extended the maturity date of the Cullen Oaks
Phase I
and Phase II loans to February 2014. The extended loans bear interest
at a rate of LIBOR plus 1.35% and require payments of interest only through
May
2008 and monthly payments of principal and interest from May 2008 through
the
maturity date. In connection with these loan extensions, the Company
terminated the existing interest rate swap agreement and received a termination
payment from the lender of approximately $0.4 million. In accordance
with SFAS No. 133, the $0.4 million gain will be amortized from accumulated
other comprehensive income to earnings over the remaining term of the terminated
interest rate swap agreement (through November 2008).
In
addition, the Company entered into an interest rate swap agreement effective
February 15, 2007 through February 15, 2014, that is designated to hedge
its
exposure to fluctuations in interest payments attributed to changes in interest
rates associated with payments on the Cullen Oaks Phase I and Phase II
loans. Under the terms of the interest rate swap agreement, the
Company pays a fixed rate of 6.69% and receives a floating rate of LIBOR
plus
1.35%. The interest rate swap had an estimated negative fair value of
approximately $0.9 million at September 30, 2007 and is reflected in other
liabilities in the accompanying consolidated balance
sheets. Ineffectiveness resulting from the Company’s hedges is not
material.
11. Commitments
and Contingencies
Commitments
Development-related
guarantees: The Company commonly provides
alternate housing and project cost guarantees, subject to force
majeure. These guarantees are typically limited, on an aggregate
basis, to the amount of the projects’ related development fees or a
contractually agreed-upon maximum exposure amount. Alternate housing
guarantees typically expire five days after construction is complete and
generally require the Company to provide substitute living quarters and
transportation for students to and from the university if the project is
not
complete by an agreed-upon completion date. Under project cost
guarantees, the Company is responsible for the construction cost of a project
in
excess of an approved budget. The budget consists primarily of
costs included in the general contractors’ guaranteed maximum price contract
(“GMP”). In most cases, the GMP obligates the general contractor,
subject to force majeure and approved change orders, to provide completion
date
guarantees and to cover cost overruns and liquidated damages. In
addition, the GMP is typically secured with payment and performance
bonds. Project cost guarantees expire upon completion of certain
developer obligations, which are normally satisfied within one year after
completion of the project.
On
one
completed project, the Company has guaranteed losses up to $3.0 million in
excess of the development fee if the loss is due to any failure of the Company
to maintain, or cause its professionals to maintain, required insurance for
a
period of five years after completion of the project (August 2009).
The
Company’s estimated maximum exposure amount under the above guarantees is
approximately $10.2 million
At
September 30, 2007, management did not anticipate any material deviations
from
schedule or budget related to third-party development projects currently
in
progress. The Company has estimated the fair value of guarantees entered
into or modified after December 31, 2002, the effective date of FASB
Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to
be immaterial.
In
the
normal course of business, the Company enters into various development-related
purchase commitments with parties that provide development-related goods
and
services. In the event that the Company was to terminate development
services prior to the completion of projects under construction, the Company
could potentially be committed to satisfy outstanding purchase orders with
such
parties.
Contingencies
Litigation: The
Company is subject to various claims, lawsuits, and legal proceedings.
While it is not possible to ascertain the ultimate outcome of such matters,
management believes that the aggregate amount of such liabilities, if any,
in
excess of amounts provided or covered by insurance, will not have a material
adverse effect on the consolidated financial position or results of operations
of the Company.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Letters
of Intent: In the ordinary course of the Company’s business, the
Company enters into letters of intent indicating a willingness to negotiate
for acquisitions, dispositions or joint ventures. Such letters of
intent are non-binding, and neither party to the letter of intent is obligated
to pursue negotiations unless and until a definitive contract is entered
into by
the parties. Even if definitive contracts are entered into, the
letters of intent relating to the acquisition and disposition of real property
and resulting contracts generally contemplate that such contracts will provide
the acquirer with time to evaluate the property and conduct due diligence,
during which periods the acquiror will have the ability to terminate the
contracts without penalty or forfeiture of any deposit or earnest
money. There can be no assurance that definitive contracts will be
entered into with respect to any matter covered by letters of intent or that
the
Company will consummate any transaction contemplated by any definitive
contract. Furthermore, due diligence periods for real property are
frequently extended as needed. An acquisition or disposition of real
property becomes probable at the time that the due diligence period expires
and
the definitive contract has not been terminated. The Company is then
at risk under a real property acquisition contract, but only to the extent
of
any earnest money deposits associated with the contract, and is obligated
to
sell under a real property sales contract.
Environmental
Matters: The Company is not aware of any environmental liability
with respect to the properties that would have a material adverse effect
on the
Company's business, assets or results of operations. However, there can be
no
assurance that such a material environmental liability does not exist. The
existence of any such material environmental liability could have an adverse
effect on the Company's results of operations and cash flows.
12. Segments
The
Company defines business segments by their distinct customer base and service
provided. The Company has identified four reportable segments: Owned Off-Campus
Properties, On-Campus Participating Properties, Development Services, and
Property Management Services. Management evaluates each segment’s performance
based on operating income before depreciation, amortization, minority interests
and allocation of corporate overhead. Intercompany fees are reflected at
the
contractually stipulated amounts.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Owned
Off-Campus Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
revenues
|
|
$ |
30,425
|
|
|
$ |
24,668
|
|
|
$ |
86,241
|
|
|
$ |
65,680
|
|
Interest
income
|
|
|
74
|
|
|
|
79
|
|
|
|
245
|
|
|
|
127
|
|
Total
revenues from external customers
|
|
|
30,499
|
|
|
|
24,747
|
|
|
|
86,486
|
|
|
|
65,807
|
|
Operating
expenses before depreciation and amortization
|
|
|
16,307
|
|
|
|
13,105
|
|
|
|
41,024
|
|
|
|
31,402
|
|
Interest
expense
|
|
|
6,464
|
|
|
|
5,113
|
|
|
|
18,020
|
|
|
|
13,788
|
|
Operating
income before depreciation and amortization, minority
interests
and allocation of corporate overhead
|
|
$ |
7,728
|
|
|
$ |
6,529
|
|
|
$ |
27,442
|
|
|
$ |
20,617
|
|
Depreciation
and amortization
|
|
$ |
6,586
|
|
|
$ |
5,563
|
|
|
$ |
18,972
|
|
|
$ |
15,201
|
|
Capital
expenditures
|
|
$ |
48,903
|
|
|
$ |
26,260
|
|
|
$ |
92,863
|
|
|
$ |
66,209
|
|
Total
segment assets at September 30,
|
|
$ |
935,416
|
|
|
$ |
710,141
|
|
|
$ |
935,416
|
|
|
$ |
710,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On-Campus
Participating Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
revenues
|
|
$ |
4,083
|
|
|
$ |
3,971
|
|
|
$ |
14,160
|
|
|
$ |
13,450
|
|
Interest
income
|
|
|
116
|
|
|
|
102
|
|
|
|
285
|
|
|
|
255
|
|
Total
revenues from external customers
|
|
|
4,199
|
|
|
|
4,073
|
|
|
|
14,445
|
|
|
|
13,705
|
|
Operating
expenses before depreciation, amortization, and
ground/facility
leases
|
|
|
2,163
|
|
|
|
2,305
|
|
|
|
6,372
|
|
|
|
6,217
|
|
Ground/facility
leases
|
|
|
473
|
|
|
|
238
|
|
|
|
1,263
|
|
|
|
676
|
|
Interest
expense
|
|
|
1,548
|
|
|
|
1,638
|
|
|
|
4,683
|
|
|
|
4,838
|
|
Operating
income (loss) before depreciation and amortization, minority
interests
and allocation of corporate overhead
|
|
$ |
15
|
|
|
$ |
(108 |
) |
|
$ |
2,127
|
|
|
$ |
1,974
|
|
Depreciation
and amortization
|
|
$ |
1,068
|
|
|
$ |
1,037
|
|
|
$ |
3,194
|
|
|
$ |
3,083
|
|
Capital
expenditures
|
|
$ |
175
|
|
|
$ |
275
|
|
|
$ |
402
|
|
|
$ |
395
|
|
Total
segment assets at September 30,
|
|
$ |
86,206
|
|
|
$ |
88,735
|
|
|
$ |
86,206
|
|
|
$ |
88,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
and construction management fees from
external
customers
|
|
$ |
1,383
|
|
|
$ |
1,729
|
|
|
$ |
2,434
|
|
|
$ |
4,463
|
|
Intersegment
revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
revenues
|
|
|
1,383
|
|
|
|
1,729
|
|
|
|
2,434
|
|
|
|
4,463
|
|
Operating
expenses
|
|
|
1,543
|
|
|
|
1,150
|
|
|
|
3,978
|
|
|
|
3,618
|
|
Operating
(loss) income before depreciation and amortization,
minority
interests and allocation of corporate overhead
|
|
$ |
(160 |
) |
|
$ |
579
|
|
|
$ |
(1,544 |
) |
|
$ |
845
|
|
Total
segment assets at September 30,
|
|
$ |
3,598
|
|
|
$ |
6,275
|
|
|
$ |
3,598
|
|
|
$ |
6,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
Management Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
management fees from external customers
|
|
$ |
627
|
|
|
$ |
491
|
|
|
$ |
1,999
|
|
|
$ |
1,844
|
|
Intersegment
revenues
|
|
|
1,043
|
|
|
|
862
|
|
|
|
3,084
|
|
|
|
2,535
|
|
Total
revenues
|
|
|
1,670
|
|
|
|
1,353
|
|
|
|
5,083
|
|
|
|
4,379
|
|
Operating
expenses
|
|
|
644
|
|
|
|
577
|
|
|
|
2,014
|
|
|
|
1,865
|
|
Operating
income before depreciation and amortization, minority
interests
and allocation of corporate overhead
|
|
$ |
1,026
|
|
|
$ |
776
|
|
|
$ |
3,069
|
|
|
$ |
2,514
|
|
Total
segment assets at September 30,
|
|
$ |
1,851
|
|
|
$ |
1,296
|
|
|
$ |
1,851
|
|
|
$ |
1,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segment revenues
|
|
$ |
37,751
|
|
|
$ |
31,902
|
|
|
$ |
108,448
|
|
|
$ |
88,354
|
|
Unallocated
interest income earned on corporate cash
|
|
|
31
|
|
|
|
113
|
|
|
|
712
|
|
|
|
241
|
|
Elimination
of intersegment revenues
|
|
|
(1,043 |
) |
|
|
(862 |
) |
|
|
(3,084 |
) |
|
|
(2,535 |
) |
Total
consolidated revenues, including interest income
|
|
$ |
36,739
|
|
|
$ |
31,153
|
|
|
$ |
106,076
|
|
|
$ |
86,060
|
|
Segment
operating income before depreciation, amortization,
minority
interests and allocation of corporate overhead
|
|
$ |
8,609
|
|
|
$ |
7,776
|
|
|
$ |
31,094
|
|
|
$ |
25,950
|
|
Depreciation
and amortization, including amortization of deferred
financing
costs
|
|
|
(8,121 |
) |
|
|
(7,069 |
) |
|
|
(23,471 |
) |
|
|
(19,750 |
) |
Net
unallocated expenses relating to corporate overhead
|
|
|
(2,358 |
) |
|
|
(2,745 |
) |
|
|
(15,068 |
) |
|
|
(8,064 |
) |
Income
tax provision
|
|
|
(576 |
) |
|
|
-
|
|
|
|
(696 |
) |
|
|
-
|
|
Minority
interests
|
|
|
77
|
|
|
|
149
|
|
|
|
309
|
|
|
|
202
|
|
Loss
from continuing operations
|
|
$ |
(2,369 |
) |
|
$ |
(1,889 |
) |
|
$ |
(7,832 |
) |
|
$ |
(1,662 |
) |
Total
segment assets at September 30,
|
|
$ |
1,027,071
|
|
|
$ |
806,447
|
|
|
$ |
1,027,071
|
|
|
$ |
806,447
|
|
Unallocated
corporate assets and assets held for sale
|
|
|
5,346
|
|
|
|
57,982
|
|
|
|
5,346
|
|
|
|
57,982
|
|
Total
assets at September 30,
|
|
$ |
1,032,417
|
|
|
$ |
864,429
|
|
|
$ |
1,032,417
|
|
|
$ |
864,429
|
|
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
13. Subsequent
Events
October
2007 Equity Offering:
On
October 10, 2007, the Company completed an equity offering, consisting of
the
sale of 3,500,000 shares of the Company’s common stock at a price of $28.29 per
share, resulting in gross proceeds of approximately $99.0
million. The company received approximately $98.7 million in net
proceeds after deducting estimated expenses of approximately $0.3
million. The Company used $47.9 million to repay the outstanding
balance on its revolving credit facility and $43.9 million to repay the
outstanding balance on the University Centre construction loan.
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, which do not
relate solely to historical matters, 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 while forward-looking statements reflect our
good
faith beliefs when we make them, they are not guarantees of future performance
and are 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 (including, without limitation, the inability
to enter into or renew leases, dependence on tenants’ financial condition, and
competition from other developers, owners and operators of real estate);
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 (including,
without limitation, construction delays, cost overruns, inability to obtain
necessary permits and public opposition to such activities); risks associated
with downturns in the national and local economies, 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 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 risks associated with our dependence on key personnel whose continued
service is not guaranteed.
The
risks
included here are not exhaustive, and additional factors could adversely
affect
our business and financial performance, including factors and risks included
in
other sections of this report. Moreover, we operate in a very competitive
and
rapidly changing environment. New risk factors emerge from time to time and
it
is not possible for management to predict all such risk factors, nor can
it
assess the impact of all such risk factors on our business or the extent
to
which any factor, or combination of factors, may cause actual results to
differ
materially from those contained in any forward-looking statements. Given
these
risks and uncertainties, investors should not place undue reliance on
forward-looking statements as a prediction of actual results.
Our
Company and Our Business
American
Campus Communities, Inc. (referred to herein as “the Company,” “us,” “we,” and
“our”) is a real estate investment trust (“REIT”) that was incorporated on March
9, 2004 and commenced operations effective with the completion of our initial
public offering (“IPO”) on August 17, 2004. Through our controlling
interest in American Campus Communities Operating Partnership LP (the “Operating
Partnership”) and American Campus Communities Services, Inc., (our taxable REIT
subsidiary or “TRS”), we are 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. We are 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.
As
of
September 30, 2007, our property portfolio contained 43 student housing
properties with approximately 26,900 beds and approximately 8,900 apartment
units, consisting of 39 owned properties that are in close proximities to
colleges and universities and four on-campus participating properties operated
under ground/facility leases with the related university
systems. These communities contain modern housing units, offer
resort-style amenities and are supported by a resident assistant system and
other student-oriented programming.
Through
the TRS, we also provide construction management and development services
for
student housing properties owned by colleges and universities, charitable
foundations, and others. As of September 30, 2007, we provided third
party management and leasing services for 13 student housing properties (nine
of
which we served as the third party developer and construction manager) that
represented approximately 8,900 beds in approximately 3,100
units. Third party management and leasing services are typically
provided pursuant to multi-year management contracts that have initial terms
that range from one to five years. As of September 30, 2007, our
total owned and managed portfolio included 56 properties with approximately
35,800 beds in approximately 12,000 units.
Third-Party
Development Services
Our
third-party development and construction management services as of September
30,
2007 consisted of four projects under contract and currently in progress
with
fees ranging from $0.2 million to $3.1 million. As of September 30,
2007, fees of approximately $1.6 million remained to be earned by us with
respect to these projects, which have scheduled completion dates of October
2007
through July 2009.
We
recently completed two projects with a total of approximately 1,100 beds
in
approximately 338 units, with total fees of approximately $2.2
million.
While
we
believe that our third party development/construction management and property
management services allow us to develop strong and key relationships with
colleges and universities, revenue from this area has over time become a
smaller
portion of our operations due to the continued focus on and growth of our
owned
property portfolio. Nevertheless, we believe these services continue
to provide synergies with respect to our ability to identify, acquire or
develop, and successfully operate, student housing properties.
Acquisitions
In
January 2007, we acquired a 248-unit, 752-bed property (Village on Sixth)
located near the campus of Marshall University in Huntington, West Virginia,
for
a purchase price of $25.6 million, which excludes $1.7 million of anticipated
transaction costs, initial integration expenses and capital expenditures
necessary to bring this property up to our operating standards. As
part of the transaction, we assumed two fixed-rate mortgage loans, which
includes one for $16.2 million with an annual interest rate of 5.5% and
remaining term to maturity of 7.5 years and a second loan for $1.4 million
with
an annual interest rate of 6.6% and remaining term to maturity of 9.9
years.
In
February 2007, we acquired a three property portfolio (the “Edwards Portfolio”)
for a purchase price of $102.0 million, which excludes $3.7 million of
anticipated transaction costs, initial integration expenses and capital
expenditures necessary to bring these properties up to our operating
standards. As part of the transaction, we assumed $70.7 million in
fixed-rate mortgage debt with a weighted average annual interest rate of
5.7%
and an average remaining term to maturity of 8.5 years. In August
2007, construction was completed on an additional phase at one of these
properties. As contemplated in the original transaction, concurrent
with the completion of construction in August 2007, we purchased this additional
phase consisting of 24 units and 84 beds, for approximately $4.6
million.
The
Edwards Portfolio consists of one property in Lexington, Kentucky located
near
the campus of the University of Kentucky, one property in Toledo, Ohio located
near the campus of the University of Toledo and one property in Ypsilanti,
Michigan located near the campus of Eastern Michigan
University. Including the purchase of the additional phase discussed
above, these three properties contain 763 units and 1,970 beds.
Owned
Development Activities
University
Centre: In August 2007, we completed the final stages of construction on
this owned off-campus property located in Newark, New Jersey, which contains
838
beds in 234 units and serves students attending Newark and metro New York
area
colleges and universities. Total development costs incurred for the
project were approximately $77.8 million.
Vista
del Sol: As of September 30, 2007, our Vista del Sol (formerly Arizona
State University – South Campus Residential Community) owned on-campus property
was under construction with total development costs estimated to be
approximately $137.5 million. The project, which is located in Tempe,
Arizona, is scheduled to complete construction and open for occupancy in
August
2008 and serves students attending Arizona State University. As of
September 30, 2007, the project was approximately 42% complete, and we estimate
that remaining development costs will be approximately $86.0
million. As of September 30, 2007, we have funded $37.5 million of
the project’s development costs internally, with the remaining development costs
to be funded through a construction loan. We began drawing under this
construction loan during the third quarter 2007.
Villas
at Chestnut Ridge: As of September 30, 2007, our Villas at
Chestnut Ridge owned off-campus property was under construction with total
development costs estimated to be approximately $34.8 million. The
project, which is located in Amherst, New York, is scheduled to complete
construction and open for occupancy in August 2008, and serves students
attending State University of New York - Buffalo. As of September 30,
2007, the project was approximately 44% complete, and we estimate that remaining
development costs will be approximately $18.8 million. As of
September 30, 2007, we have funded $3.2 million of the project’s development
costs internally, with the remaining development costs to be funded through
a
construction loan. We began drawing under this construction loan
during the third quarter 2007.
As
of September 30, 2007, our property portfolio consisted of the
following:
|
PROPERTY
|
|
YEAR
ACQUIRED / DEVELOPED (1)
|
|
LOCATION
|
|
PRIMARY
UNIVERSITY SERVED
|
|
UNITS
|
|
BEDS
|
Owned
properties:
|
|
|
|
|
|
|
|
|
|
|
1.
Villas on Apache
|
|
1999
|
|
Tempe,
AZ
|
|
Arizona
State University Main Campus
|
|
111
|
|
288
|
2.
The Village at Blacksburg
|
|
2000
|
|
Blacksburg,
VA
|
|
Virginia
Polytechnic Institute and
State
University
|
|
288
|
|
1,056
|
3.
River Club Apartments
|
|
1999
|
|
Athens,
GA
|
|
The
University of Georgia–Athens
|
|
266
|
|
792
|
4.
River Walk Townhomes
|
|
1999
|
|
Athens,
GA
|
|
The
University of Georgia–Athens
|
|
100
|
|
336
|
5.
The Callaway House
|
|
2001
|
|
College
Station, TX
|
|
Texas
A&M University
|
|
173
|
|
538
|
6.
The Village at Alafaya Club
|
|
2000
|
|
Orlando,
FL
|
|
The
University of Central Florida
|
|
228
|
|
839
|
7.
The Village at Science Drive
|
|
2001
|
|
Orlando,
FL
|
|
The
University of Central Florida
|
|
192
|
|
732
|
8.
University Village at Boulder Creek
|
|
2002
|
|
Boulder,
CO
|
|
The
University of Colorado at Boulder
|
|
82
|
|
309
|
9.
University Village at Fresno
|
|
2004
|
|
Fresno,
CA
|
|
California
State University, Fresno
|
|
105
|
|
406
|
10.
University Village at TU
|
|
2004
|
|
Philadelphia,
PA
|
|
Temple
University
|
|
220
|
|
749
|
11.
University Club Tallahassee
|
|
2005
|
|
Tallahassee,
FL
|
|
Florida
State University
|
|
152
|
|
608
|
12.
The Grove at University Club
|
|
2005
|
|
Tallahassee,
FL
|
|
Florida
State University
|
|
64
|
|
128
|
13.
College Club Tallahassee
|
|
2005
|
|
Tallahassee,
FL
|
|
Florida
A&M University
|
|
96
|
|
384
|
14.
The Greens at College Club
|
|
2005
|
|
Tallahassee,
FL
|
|
Florida
A&M University
|
|
40
|
|
160
|
15.
University Club Gainesville
|
|
2005
|
|
Gainesville,
FL
|
|
University
of Florida
|
|
94
|
|
376
|
16.
City Parc at Fry Street
|
|
2005
|
|
Denton,
TX
|
|
University
of North Texas
|
|
136
|
|
418
|
17.
The Estates
|
|
2005
|
|
Gainesville,
FL
|
|
University
of Florida
|
|
396
|
|
1,044
|
18.
University Village at Sweet Home
|
|
2005
|
|
Amherst,
NY
|
|
State
University of New York - Buffalo
|
|
269
|
|
828
|
19.
Entrada Real
|
|
2006
|
|
Tucson,
AZ
|
|
University
of Arizona
|
|
98
|
|
363
|
20.
Royal Oaks
|
|
2006
|
|
Tallahassee,
FL
|
|
Florida
State University
|
|
82
|
|
224
|
21.
Royal Pavilion
|
|
2006
|
|
Tallahassee,
FL
|
|
Florida
State University
|
|
60
|
|
204
|
22.
Royal Village Tallahassee
|
|
2006
|
|
Tallahassee,
FL
|
|
Florida
State University
|
|
75
|
|
288
|
23.
Royal Village Gainesville
|
|
2006
|
|
Gainesville,
FL
|
|
University
of Florida
|
|
118
|
|
448
|
24.
Northgate Lakes
|
|
2006
|
|
Orlando,
FL
|
|
The
University of Central Florida
|
|
194
|
|
710
|
25.
Royal Lexington
|
|
2006
|
|
Lexington,
KY
|
|
University
of Kentucky
|
|
94
|
|
364
|
26.
The Woods at Greenland
|
|
2006
|
|
Murfreesboro,
TN
|
|
Middle
Tennessee State University
|
|
78
|
|
276
|
27.
Raiders Crossing
|
|
2006
|
|
Murfreesboro,
TN
|
|
Middle
Tennessee State University
|
|
96
|
|
276
|
28.
Raiders Pass
|
|
2006
|
|
Lubbock,
TX
|
|
Texas
Tech University
|
|
264
|
|
828
|
29.
Aggie Station
|
|
2006
|
|
College
Station, TX
|
|
Texas
A&M University
|
|
156
|
|
450
|
30.
The Outpost San Marcos
|
|
2006
|
|
San
Marcos, TX
|
|
Texas
State University - San Marcos
|
|
162
|
|
486
|
31.
The Outpost San Antonio
|
|
2006
|
|
San
Antonio, TX
|
|
University
of Texas – San Antonio
|
|
276
|
|
828
|
32.
Callaway Villas
|
|
2006
|
|
College
Station, TX
|
|
Texas
A&M University
|
|
236
|
|
704
|
33.
Village on Sixth
|
|
2007
|
|
Huntington,
WV
|
|
Marshall
University
|
|
248
|
|
752
|
34.
Newtown Crossing (2)
|
|
2007
|
|
Lexington,
KY
|
|
University
of Kentucky
|
|
356
|
|
942
|
35.
Olde Towne University Square
|
|
2007
|
|
Toledo,
OH
|
|
University
of Toledo
|
|
224
|
|
550
|
36.
Peninsular Place
|
|
2007
|
|
Ypsilanti,
MI
|
|
Eastern
Michigan University
|
|
183
|
|
478
|
37.
University Centre (3)
|
|
2007
|
|
Newark,
NJ
|
|
Rutgers
University, NJIT, Essex CCC
|
|
234
|
|
838
|
38.
Vista del Sol (4)
|
|
2008
|
|
Tempe,
AZ
|
|
Arizona
State University
|
|
613
|
|
1,866
|
39.
Villas at Chestnut Ridge (4)
|
|
2008
|
|
Amherst,
NY
|
|
State
University of New York - Buffalo
|
|
196
|
|
552
|
Total
owned properties
|
|
|
|
|
|
|
|
7,055
|
|
22,418
|
PROPERTY
|
|
YEAR
ACQUIRED / DEVELOPED (1)
|
|
LOCATION
|
|
PRIMARY
UNIVERSITY SERVED
|
|
UNITS
|
|
BEDS
|
|
|
|
|
|
|
|
|
|
|
|
On-campus
participating properties:
|
|
|
|
|
|
|
|
|
|
|
40.
University Village—PVAMU
|
|
1996
/ 97 / 98
|
|
Prairie
View, TX
|
|
Prairie
View A&M University
|
|
612
|
|
1,920
|
41.
University College—PVAMU
|
|
2000
/ 2003
|
|
Prairie
View, TX
|
|
Prairie
View A&M University
|
|
756
|
|
1,470
|
42.
University Village—TAMIU
|
|
1997
|
|
Laredo,
TX
|
|
Texas
A&M International University
|
|
84
|
|
250
|
43.
Cullen Oaks – Phase I and II
|
|
2001
/ 2006
|
|
Houston,
TX
|
|
The
University of Houston
|
|
411
|
|
879
|
Total
on-campus participating properties
|
|
1,863
|
|
4,519
|
|
|
|
|
|
|
|
|
|
|
|
Total
– all properties
|
|
|
|
|
|
|
|
8,918
|
|
26,937
|
(1)
|
As
of September 30, 2007, the average age of our operating properties
was
approximately 7.2 years.
|
(2)
|
In
August 2007, construction was completed on an additional phase
at this
property. As contemplated in the original transaction,
concurrent with the completion of construction, we purchased
this
additional phase consisting of 24 units and 84 beds, for approximately
$4.6 million.
|
(3)
|
Construction
was completed and the property commenced operations in August
2007.
|
(4)
|
Currently
under development with a scheduled completion date of August
2008.
|
Results
of Operations
Comparison
of the Three Months Ended September 30, 2007 and September 30,
2006
The
following table presents our results of operations for the three months ended
September 30, 2007 and 2006, including the amount and percentage change in
these
results between the two periods:
|
|
Three
Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Change
($)
|
|
|
Change
(%)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned
off-campus properties
|
|
$ |
30,045
|
|
|
$ |
24,340
|
|
|
$ |
5,705
|
|
|
|
23.4 |
% |
On-campus
participating properties
|
|
|
4,083
|
|
|
|
3,971
|
|
|
|
112
|
|
|
|
2.8 |
% |
Third
party development services
|
|
|
1,383
|
|
|
|
1,729
|
|
|
|
(346 |
) |
|
|
(20.0 |
%) |
Third
party management services
|
|
|
627
|
|
|
|
491
|
|
|
|
136
|
|
|
|
27.7 |
% |
Resident
services
|
|
|
380
|
|
|
|
328
|
|
|
|
52
|
|
|
|
15.9 |
% |
Total
revenues
|
|
|
36,518
|
|
|
|
30,859
|
|
|
|
5,659
|
|
|
|
18.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned
off-campus properties
|
|
|
16,368
|
|
|
|
13,178
|
|
|
|
3,190
|
|
|
|
24.2 |
% |
On-campus
participating properties
|
|
|
2,317
|
|
|
|
2,455
|
|
|
|
(138 |
) |
|
|
(5.6 |
%) |
Third
party development and management services
|
|
|
1,484
|
|
|
|
1,338
|
|
|
|
146
|
|
|
|
10.9 |
% |
General
and administrative
|
|
|
2,286
|
|
|
|
1,468
|
|
|
|
818
|
|
|
|
55.7 |
% |
Depreciation
and amortization
|
|
|
7,797
|
|
|
|
6,735
|
|
|
|
1,062
|
|
|
|
15.8 |
% |
Ground/facility
leases
|
|
|
473
|
|
|
|
238
|
|
|
|
235
|
|
|
|
98.7 |
% |
Total
operating expenses
|
|
|
30,725
|
|
|
|
25,412
|
|
|
|
5,313
|
|
|
|
20.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
5,793
|
|
|
|
5,447
|
|
|
|
346
|
|
|
|
6.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
income and (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
221
|
|
|
|
294
|
|
|
|
(73 |
) |
|
|
(24.8 |
%) |
Interest
expense
|
|
|
(7,560 |
) |
|
|
(7,445 |
) |
|
|
(115 |
) |
|
|
1.5 |
% |
Amortization
of deferred financing costs
|
|
|
(324 |
) |
|
|
(334 |
) |
|
|
10
|
|
|
|
(3.0 |
%) |
Total
nonoperating expenses
|
|
|
(7,663 |
) |
|
|
(7,485 |
) |
|
|
(178 |
) |
|
|
2.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes, minority interests, and discontinued
operations
|
|
|
(1,870 |
) |
|
|
(2,038 |
) |
|
|
168
|
|
|
|
(8.2 |
%) |
Income
tax provision
|
|
|
(576 |
) |
|
|
-
|
|
|
|
(576 |
) |
|
|
100.0 |
% |
Minority
interests
|
|
|
77
|
|
|
|
149
|
|
|
|
(72 |
) |
|
|
(48.3 |
%) |
Loss
from continuing operations
|
|
|
(2,369 |
) |
|
|
(1,889 |
) |
|
|
(480 |
) |
|
|
25.4 |
% |
Income
attributable to discontinued operations
|
|
|
-
|
|
|
|
278
|
|
|
|
(278 |
) |
|
|
(100.0 |
%) |
Net
loss
|
|
$ |
(2,369 |
) |
|
$ |
(1,611 |
) |
|
$ |
(758 |
) |
|
|
47.1 |
% |
Owned
Properties Operations
Revenues
from our owned properties for the three months ended September 30, 2007 compared
with the same period in 2006 increased by $5.7 million primarily due to the
acquisition of four properties during the first quarter of 2007 and the
completion of construction and opening of an owned development project in
August
2006 and another owned development project in August 2007. Operating
expenses increased approximately $3.2 million for the three months ended
September 30, 2007 compared with the same period in 2006, primarily due to
the
same factors which affected the increase in revenues.
New
Property Operations. In January 2007, we acquired a 752-bed
property (Village on Sixth) located near the campus of Marshall University
in
Huntington, West Virginia, and in February and August 2007, we acquired a
three-property portfolio consisting of 1,970 beds serving students attending
The
University of Kentucky, the University of Toledo, and Eastern Michigan
University (the “Edwards Portfolio”). In addition, in August 2006, we completed
construction of and opened Callaway Villas, a 704-bed property serving students
attending Texas A&M University and in August 2007 we completed construction
of and opened University Centre, an 838-bed property serving students attending
Newark and metro New York area colleges and universities. These new
properties contributed $4.8 million of additional revenues and $3.2 million
of
additional operating expenses during the three months ended September 30,
2007
as compared to the three months ended September 30, 2006.
Same
Store Property Operations (Excluding New Property Activity). We
had 31 properties containing 15,736 beds which were operating during both
the
three months ended September 30, 2007 and 2006. These properties
produced revenues of $25.0 million and $24.0 million during the three months
ended September 30, 2007 and 2006, respectively, an increase of $1.0
million. This increase was primarily due to an increase in average
rental rates during the three months ended September 30, 2007 as compared
to the
same period in 2006, as well as the improved lease up for the 2007/2008 academic
year, which resulted in average occupancy rates increasing to 96.8% during
the
three months ended September 30, 2007 from 95.3% during the three months
ended
September 30, 2006. Future revenues will be dependent on, among other
items, our ability to maintain our current leases in effect for the 2007/2008
academic year and our ability to obtain appropriate rental rates and desired
occupancy for the 2008/2009 academic year at our various properties during
our
leasing period, which typically begins in January and ends in
August.
At
these
existing properties, operating expenses remained relatively constant at $12.9
and $13.0 million during the three months ended September 30, 2007 and 2006,
respectively. We anticipate that operating expenses for the full year
2007 will increase slightly as compared with 2006 as a result of expected
increases in insurance costs, utility costs, property taxes and general
inflation.
On-Campus
Participating Properties (“OCPP”) Operations
Same
Store OCPP Operations. We had four participating properties
containing 4,519 beds which were operating during both the three month periods
ended September 30, 2007 and 2006. Revenues from our same store
on-campus participating properties increased to $4.1 million during the three
months ended September 30, 2007 from $4.0 million for the three months ended
September 30, 2006, an increase of $0.1 million. This increase was
primarily due to an increase in average occupancy from 66.8% during the three
months ended September 30, 2006 to 70.0% for the three months ended September
30, 2007, as well as an increase in average rental rates during the three
months
ended September 30, 2007 as compared to the same period in
2006. Occupancy at our on-campus participating properties is
typically low in the second and third quarter of each calendar year due to
the
expiration of the 9 month leases at these properties concurrent with the
end of
the spring semester.
At
these
existing properties, operating expenses remained relatively constant at $2.3
million and $2.4 million during the three months ended September 30, 2007
and
2006, respectively. We anticipate that operating expenses for the
full year 2007 will increase slightly as compared with 2006 as a result of
expected increases in insurance costs, utility costs and general
inflation.
Third
Party Development Services Revenue
Third
party development services revenue decreased by $0.3 million from $1.7 million
during the three months ended September 30, 2006 to $1.4 million for the
three
months ended September 30, 2007. This decrease was primarily due to
fewer projects in progress as well as a lower average contractual fee per
project during the three months ended September 30, 2007 as compared to the
same
period in 2006. We had six projects in progress during the three
months ended September 30, 2007 with an average contractual fee of approximately
$1.4 million, as compared to the three months ended September 30, 2006 in
which
we had seven projects in progress with an average contractual fee of
approximately $1.8 million.
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 $0.1 million for the three
months
ended September 30, 2007 as compared to the same period in 2006. This
increase was primarily the result of the commencement of four management
contracts in August 2006. We anticipate that revenues in our third
party management segment for the full year 2007 will increase as compared
with
2006 as a result of the four management contracts discussed above and the
recent
award of four management assignments that will commence in the fourth quarter
of
2007.
General
and Administrative
General
and administrative expenses increased approximately $0.8 million, from $1.5
million during the three months ended September 30, 2006, to $2.3 million
for
the three months ended September 30, 2007. This increase was
primarily due to a compensation charge of $0.5 million recorded during the
three
months ended September 30, 2007 related to the Company’s 2004 Outperformance
Bonus Plan, which is more fully discussed in Note 9 to the accompanying Notes
to
Consolidated Financial Statements contained in Item 1 herein. In
addition, we experienced an increase in payroll and other related costs as
a
result of overall increases in corporate staffing levels due to the recent
growth in our owned property portfolio from the property acquisitions completed
in 2007 and the increased owned development activity for the three months
ended
September 30, 2007 as compared to the same period in 2006.
We
anticipate general and administrative expenses to increase substantially
in 2007
as a result of the $10.4 million compensation charge recorded to reflect
the
August 2007 vesting of the 2004 Outperformance Bonus Plan, upon the Company’s
achievement of specified performance measures. In addition, we
anticipate increases in payroll and other related costs for the full year
2007
due to increases in corporate staffing levels experienced as a result of
the
recent growth of our owned portfolio.
Depreciation
and Amortization
Depreciation
and amortization increased by $1.1 million, from $6.7 million during the
three
months ended September 30, 2006 to $7.8 million for the three months ended
September 30, 2007. This increase was due to the acquisition of four
properties during the first quarter of 2007 and the completion of construction
and opening of one owned off-campus property in August 2006 and another owned
off-campus property in August 2007. In conjunction with the
acquisition of the four properties during the first quarter of 2007 and the
13-property Royal Portfolio on March 1, 2006, a valuation was assigned to
in-place leases which was amortized over the remaining lease terms of the
acquired leases (generally less than one year). This contributed $0.3
million and $0.6 million of additional depreciation and amortization expense
for
the three months ended September 30, 2007 and 2006, respectively, a decrease
of
$0.3 million. We expect depreciation and amortization for the full
year 2007 to increase significantly from 2006 levels primarily due to 2007
acquisitions, additional depreciation on the owned off-campus property that
opened in August 2007 and a full year of depreciation on properties acquired
and
placed into service in 2006.
Ground
Lease Expense
Ground
lease expense increased by $0.2 million, from $0.2 million during the three
months ended September 30, 2006 to $0.4 million for the three months ended
September 30, 2007. This increase was primarily the result of the
refinancing of the Cullen Oaks loans in February 2007, which reduced debt
service expense and therefore increased the amount of cash flow available
for
distribution.
Interest
Expense
Interest
expense increased $0.1 million, from $7.5 million during the three months
ended
September 30, 2006, to $7.6 million for the three months ended September
30,
2007. This increase was primarily due to additional interest incurred
during the three months ended September 30, 2007 associated with debt assumed
or
incurred in connection with the previously mentioned 2007 property acquisitions,
net of the amortization of debt premiums and discounts recorded to reflect
the
market value of debt assumed. This increase was offset by a $0.7
million decrease in interest expense on our revolving credit facility as
a
result of a decrease in the weighted average balance from $70.6 million to
$26.3
million for the three months ended September 30, 2006 and 2007,
respectively. In addition, capitalized interest increased by $0.4
million as a result of more owned properties being under development during
the
three months ended September 30, 2007 as compared to the same period in
2006. We anticipate that interest expense in 2007 will increase from
2006 levels due to interest expense assumed or incurred in connection with
property acquisitions and increases in potential borrowing rates that may
impact
our floating rate on our credit facility.
Income
Taxes
The
income tax provision of $0.6 million for the three months ended September
30,
2007 is primarily the result of the write-off of the Company’s deferred tax
asset. In August 2007, in connection with the vesting of the
Company’s Outperformance Bonus Plan discussed in Note 9 in the accompanying
Notes to Consolidated Financial Statements contained in Item 1 herein, a
portion
of the compensation expense associated with the awards was recorded by the
TRS. As a result, it was determined that it was more likely than not
that we would not realize the benefit of the deferred tax asset and increased
the valuation allowance by a discrete item of $0.5 million.
Discontinued
Operations
Statement
of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, requires, among other items,
that the operating results of real estate properties sold or classified as
held
for sale be included in discontinued operations in the statements of operations
for all periods presented. The Village on University, an owned off-campus
property, was sold in December 2006. As such, the net income
attributable to this property is included in discontinued operations for
the
three months ended September 30, 2006. Refer to Note 4 in the
accompanying Notes to Consolidated Financial Statements contained in Item
1
herein for a more detailed description of discontinued operations.
Comparison
of the Nine Months Ended September 30, 2007 and September 30,
2006
The
following table presents our results of operations for the nine months ended
September 30, 2007 and 2006, including the amount and percentage change in
these
results between the two periods:
|
|
Nine
Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Change
($)
|
|
|
Change
(%)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned
off-campus properties
|
|
$ |
85,197
|
|
|
$ |
64,687
|
|
|
$ |
20,510
|
|
|
|
31.7 |
% |
On-campus
participating properties
|
|
|
14,160
|
|
|
|
13,450
|
|
|
|
710
|
|
|
|
5.3 |
% |
Third
party development services
|
|
|
2,434
|
|
|
|
4,463
|
|
|
|
(2,029 |
) |
|
|
(45.5 |
%) |
Third
party management services
|
|
|
1,999
|
|
|
|
1,844
|
|
|
|
155
|
|
|
|
8.4 |
% |
Resident
services
|
|
|
1,044
|
|
|
|
993
|
|
|
|
51
|
|
|
|
5.1 |
% |
Total
revenues
|
|
|
104,834
|
|
|
|
85,437
|
|
|
|
19,397
|
|
|
|
22.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned
off-campus properties
|
|
|
41,276
|
|
|
|
31,710
|
|
|
|
9,566
|
|
|
|
30.2 |
% |
On-campus
participating properties
|
|
|
6,842
|
|
|
|
6,660
|
|
|
|
182
|
|
|
|
2.7 |
% |
Third
party development and management services
|
|
|
3,925
|
|
|
|
4,402
|
|
|
|
(477 |
) |
|
|
(10.8 |
%) |
General
and administrative
|
|
|
15,804
|
|
|
|
4,879
|
|
|
|
10,925
|
|
|
|
223.9 |
% |
Depreciation
and amortization
|
|
|
22,535
|
|
|
|
18,672
|
|
|
|
3,863
|
|
|
|
20.7 |
% |
Ground/facility
leases
|
|
|
1,263
|
|
|
|
676
|
|
|
|
587
|
|
|
|
86.8 |
% |
Total
operating expenses
|
|
|
91,645
|
|
|
|
66,999
|
|
|
|
24,646
|
|
|
|
36.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
13,189
|
|
|
|
18,438
|
|
|
|
(5,249 |
) |
|
|
(28.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
income and (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,242
|
|
|
|
623
|
|
|
|
619
|
|
|
|
99.4 |
% |
Interest
expense
|
|
|
(20,940 |
) |
|
|
(19,847 |
) |
|
|
(1,093 |
) |
|
|
5.5 |
% |
Amortization
of deferred financing costs
|
|
|
(936 |
) |
|
|
(1,078 |
) |
|
|
142
|
|
|
|
(13.2 |
%) |
Total
nonoperating expenses
|
|
|
(20,634 |
) |
|
|
(20,302 |
) |
|
|
(332 |
) |
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes, minority interests and discontinued
operations
|
|
|
(7,445 |
) |
|
|
(1,864 |
) |
|
|
(5,581 |
) |
|
|
299.4 |
% |
Income
tax provision
|
|
|
(696 |
) |
|
|
-
|
|
|
|
(696 |
) |
|
|
100.0 |
% |
Minority
interests
|
|
|
309
|
|
|
|
202
|
|
|
|
107
|
|
|
|
53.0 |
% |
Loss
from continuing operations
|
|
|
(7,832 |
) |
|
|
(1,662 |
) |
|
|
(6,170 |
) |
|
|
371.2 |
% |
Income
attributable to discontinued operations
|
|
|
-
|
|
|
|
1,648
|
|
|
|
(1,648 |
) |
|
|
(100.0 |
%) |
Net
loss
|
|
$ |
(7,832 |
) |
|
$ |
(14 |
) |
|
$ |
(7,818 |
) |
|
|
55,842.9 |
% |
Owned
Off-Campus Properties Operations
Revenues
from our owned off-campus properties for the nine months ended September
30,
2007 compared with the same period in 2006 increased by $20.5 million primarily
due to the acquisition of four properties during the first quarter of 2007,
the
acquisition of a 13-property portfolio (the “Royal Portfolio”) in March 2006,
and the completion of construction and opening of an owned development project
in August 2006 and another owned development project in August 2007. Operating
expenses increased approximately $9.6 million for the nine months ended
September 30, 2007 compared with the same period in 2006, primarily due to
the
same factors which affected the increase in revenues.
New
Property Operations. In January 2007 we acquired Village on
Sixth and in February and August 2007 we acquired the Edwards
Portfolio. In March 2006, we also acquired the 13-property Royal
Portfolio, consisting of 5,745 beds. Finally, in August 2006, we
completed construction of and opened Callaway Villas and in August 2007 we
completed construction of and opened University Centre. These new
properties contributed $18.8 million of additional revenues and $9.2 million
of
additional operating expenses during the nine months ended September 30,
2007 as
compared to the nine months ended September 30, 2006.
Same
Store Property Operations (Excluding New Property Activity). We
had 18 properties containing 9,991 beds which were operating during both
the
nine month periods ended September 30, 2007 and 2006. These
properties produced revenues of $49.3 million and $47.5 million during the
nine
month periods ended September 30, 2007 and 2006, respectively, an increase
of
$1.8 million. This increase was primarily due to an increase in
average rental rates and other income during the nine months ended September
30,
2007 as compared to the same period in 2006, which was offset by a slight
decrease in average occupancy rates from 96.7% during the nine months ended
September 30, 2006 to 96.6% during the nine months ended September 30,
2007.
At
these
existing properties, operating expenses increased by $0.4 million, to $22.6
million during the nine months ended September 30, 2007 as compared to $22.2
million during the nine months ended September 30, 2006. This
increase was primarily the result of an increase in maintenance costs, payroll
and bad debt expense, offset by utility savings and marketing cost savings
related to our early lease-up for the 2007/2008 academic year.
On-Campus
Participating Properties (“OCPP”) Operations
Same
Store OCPP Operations. We had four participating properties
containing 4,519 beds which were operating during both the nine month periods
ended September 30, 2007 and 2006. Revenues from our same store
on-campus participating properties increased to $14.2 million during the
nine
months ended September 30, 2007 from $13.5 million for the nine months ended
September 30, 2006, an increase of $0.7 million. This increase was
primarily due to an increase in average occupancy from 65.9% during the nine
months ended September 30, 2006 to 72.1% for the nine months ended September
30,
2007, as well as an increase in average rental rates during the nine months
ended September 30, 2007 as compared to the same period in
2006. Occupancy at our on-campus participating properties is
typically low in the second and third quarter of each calendar year due to
the
expiration of the 9 month leases at these properties concurrent with the
end of
the spring semester.
At
these
existing properties, operating expenses increased to $6.8 million for the
nine
months ended September 30, 2007 from $6.6 million for the nine months ended
September 30, 2006, an increase of $0.2 million. This increase was
primarily the result of an increase in maintenance costs incurred at one
of our
on-campus participating properties and an increase in bad debt expense at
all of
our on-campus participating properties.
Third
Party Development Services Revenue
Third
party development services revenue decreased by $2.0 million from $4.4 million
during the nine months ended September 30, 2006 to $2.4 million for the nine
months ended September 30, 2007. This decrease was primarily due to
fewer projects in progress as well as a lower average contractual fee per
project during the nine months ended September 30, 2007 as compared to the
same
period in 2006. In addition, a lower percentage of the total
contractual fees was recognized during the nine months ended September 30,
2007
as compared to the same period in 2006. We had six projects in
progress during the nine months ended September 30, 2007 with an average
contractual fee of approximately $1.4 million, as compared to the nine months
ended September 30, 2006 in which we had eight projects in progress with
an
average contractual fee of approximately $1.8 million.
Third
Party Development and Management Services Expenses
Third
party development and management services expenses decreased by $0.5 million,
from $4.4 million during the nine months ended September 30, 2006, to $3.9
million for the nine months ended September 30, 2007. This decrease
was primarily due to a decrease in payroll and related costs of $0.4 million
as
a result of fewer projects in progress during the respective
periods.
General
and
Administrative
General
and administrative expenses increased by $10.9 million, from $4.9 million
during
the nine months ended September 30, 2006, to $15.8 million for the nine months
ended September 30, 2007. This increase was primarily due to a
compensation charge of $10.4 million recorded during the nine months ended
September 30, 2007 related to the Company’s 2004 Outperformance Bonus Plan,
which is more fully discussed in Note 9 to the accompanying Notes to
Consolidated Financial Statements contained in Item 1 herein. In
addition, we experienced an increase in payroll and other related costs as
a
result of overall increases in corporate staffing levels due to the recent
growth in our owned property portfolio from the property acquisitions completed
in 2007 and 2006 and the increased owned development activity for the nine
months ended September 30, 2007 as compared to the same period in
2006.
Depreciation
and Amortization
Depreciation
and amortization increased by $3.8 million, from $18.7 million during the
nine
months ended September 30, 2006 to $22.5 million for the nine months ended
September 30, 2007. This increase was due to the acquisition of four
properties during the first quarter of 2007, the acquisition of a 13-property
Royal Portfolio in March 2006, the completion of construction and opening
of an
owned development project in August 2006 and the completion of construction
and
opening of another owned development project in August 2007. In
conjunction with the acquisition of the four properties during the first
quarter
of 2007 and the 13-property Royal Portfolio on March 1, 2006, a valuation
was
assigned to in-place leases which was amortized over the remaining lease
terms
of the acquired leases (generally less than one year). This
contributed $1.2 million and $2.3 million of additional depreciation and
amortization expense for the nine months ended September 30, 2007 and 2006,
respectively, a decrease of $1.1 million.
Ground
Lease Expense
Ground
lease expense increased by $0.6 million, from $0.7 million during the nine
months ended September 30, 2006 to $1.3 million for the nine months ended
September 30, 2007. This increase was primarily the result of the
refinancing of the Cullen Oaks loans in February 2007, which reduced debt
service expense and therefore increased the amount of cash flow available
for
distribution. In addition, we experienced a significant decrease in
vacancies at one of our other on-campus participating properties which increased
the amount of cash flow available for distribution.
Interest
Income
Interest
income increased by $0.6 million, from $0.6 million during the nine months
ended
September 30, 2006 to $1.2 million for the nine months ended September 30,
2007. This increase was primarily due to interest earned during the
nine months ended September 30, 2007 on the remaining proceeds from our
September 2006 equity offering and net proceeds from the disposition of an
owned
property in December 2006.
Interest
Expense
Interest
expense increased $1.1 million, from $19.8 million during the nine months
ended
September 30, 2006, to $20.9 million for the nine months ended September
30,
2007. This increase was primarily due to additional interest incurred
during the nine months ended September 30, 2007 associated with debt assumed
or
incurred in connection with the previously mentioned 2007 and 2006 property
acquisitions, net of the amortization of debt premiums and discounts recorded
to
reflect the market value of debt assumed. This increase was offset by
a $2.2 million decrease in interest expense on our revolving credit facility
as
a result of a decrease in the weighted average balance from $55.0 million
to
$9.5 million for the nine months ended September 30, 2006 and 2007,
respectively. In addition, capitalized interest increased by $0.8
million as a result of more owned properties being under development during
the
nine months ended September 30, 2007 as compared to the same period in
2006.
Income
Taxes
The
income tax provision of $0.7 million for the nine months ended September
30,
2007 is primarily the result of the write-off of the Company’s deferred tax
asset. In August 2007, in connection with the vesting of the
Company’s Outperformance Bonus Plan discussed in Note 9 in the accompanying
Notes to Consolidated Financial Statements contained in Item 1 herein, a
portion
of the compensation expense associated with the awards was recorded by the
TRS. As a result, it was determined that it was more likely than not
that we would not realize the benefit of the deferred tax asset and increased
the valuation allowance by a discrete item of $0.5 million.
Minority
Interests
The
variance in minority interests is primarily due to an increase in the Company’s
net loss position for the nine months ended September 30, 2007 as compared
to
the same period in 2006. Minority interests represent external
partners in our Operating Partnership as well as certain third-party partners
in
joint ventures consolidated by us for financial reporting
purposes. Accordingly, these external partners are allocated their
share of income/loss during the respective reporting periods.
Discontinued
Operations
Statement
of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, requires, among other items,
that the operating results of real estate properties sold or classified as
held
for sale be included in discontinued operations in the statements of operations
for all periods presented. The Village on University, an owned off-campus
property, was sold in December 2006. As such, the net income
attributable to this property is included in discontinued operations for
the
nine months ended September 30, 2006.
Cash
Flows
Comparison
of Nine Months Ended September 30, 2007 and September 30,
2006
Operating
Activities
For
the
nine months ended September 30, 2007, net cash provided by operating activities
was approximately $11.7 million, as compared to $19.3 million for the nine
months ended September 30, 2006, a decrease of $7.6 million. This decrease
was primarily due to the $6.7 million cash payment of awards under the 2004
Outperformance Bonus Plan. In addition, we made a partial payment in
2007 of secured promissory notes and cash retained by us related to the
acquisition of the Royal Portfolio in March 2006.
Investing
Activities
Investing
activities utilized $136.8 million and $136.7 million for the nine months
ended
September 30, 2007 and 2006, respectively. The slight increase in
cash utilized in investing activities during the nine months ended September
30,
2007 related primarily to a $26.9 million increase in cash used to fund the
construction of our owned development properties. During the nine
months ended September 30, 2007, three owned properties were under development,
of which one was completed and opened for occupancy in August
2007. During the nine months ended September 30, 2006, two owned
properties were under development, of which one was completed and opened
for
occupancy in August 2006. This increase was offset by a $26.5 million
decrease in the use of cash to acquire properties. We acquired the
13-property Royal Portfolio during the first quarter of 2006 as compared
to four
properties acquired during February and August 2007. For the nine
months ended September 30, 2007 and 2006, our cash utilized in investing
activities was comprised of the following:
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
Property
acquisitions
|
|
$ |
(43,183 |
) |
|
$ |
(69,633 |
) |
Capital
expenditures for on-campus participating properties
|
|
|
(402 |
) |
|
|
(395 |
) |
Capital
expenditures for owned properties
|
|
|
(7,097 |
) |
|
|
(5,690 |
) |
Renovation
expenditures for owned property
|
|
|
-
|
|
|
|
(1,611 |
) |
Investment
in owned properties under development
|
|
|
(85,766 |
) |
|
|
(58,908 |
) |
Purchase
of corporate furniture, fixtures, and equipment
|
|
|
(347 |
) |
|
|
(442 |
) |
Total
|
|
$ |
(136,795 |
) |
|
$ |
(136,679 |
) |
Financing
Activities
Cash
provided by financing activities totaled $56.8 million and $124.9 million
for
the nine months ended September 30, 2007 and 2006, respectively. The
decrease in cash provided by financing activities was primarily the result
of
our September 2006 equity offering which raised $133.3 million, net of offering
costs. In addition, there was a $7.1 million increase in
distributions to common and restricted stockholders and minority partners
as a
result of the September 2006 equity offering and the issuance of common and
preferred units in the Operating Partnership as partial consideration for
the
purchase of the Royal Portfolio. These decreases were offset by a
$47.9 million increase in proceeds received from our revolving credit facility,
net of paydowns. During the nine months ended September 30, 2006, we
used a portion of the proceeds from our September 2006 equity offering to
pay
down the entire balances on our revolving credit facility and a construction
loan. In addition, there was an $8.0 million increase in the change
of our construction accounts payable balance as a result of an increase in
owned
development activity financed with construction loans.
Structure
of On-campus Participating Properties
At
our
on-campus participating properties, the subject universities own both the
land
and improvements. We then have a leasehold interest under a
ground/facility lease. Under the lease, we receive an annual
distribution representing 50% of these properties’ net cash available for
distribution after payment of operating expenses (which includes our management
fees), debt service (which includes repayment of principal) and capital
expenditures. We also manage these properties under multi-year
management agreements and are paid a management fee representing 5% of
receipts.
We
do not
have access to the cash flows and working capital of these participating
properties except for the annual net cash distribution as described
above. Additionally, a substantial portion of these properties’ cash
flow is dedicated to capital reserves required under the applicable property
indebtedness and to the amortization of such indebtedness. These
amounts do not increase our economic interest in these properties since our
interest, including our right to share in the net cash available for
distribution from the properties, terminates upon the amortization of their
indebtedness. Our economic interest in these properties is therefore
limited to our interest in the net cash flow and management and development
fees
from these properties, as reflected in our calculation of Funds from Operations
modified for the operational performance of on-campus participating properties
(“FFOM”) contained herein. Accordingly, when considering these
properties’ contribution to our operations, we focus upon our share of these
properties’ net cash available for distribution and the management fees that we
receive from these properties, rather than upon their contribution to our
gross
revenues and expenses for financial reporting purposes.
The
following table reflects the amounts included in our consolidated financial
statements for the three and nine months ended September 30, 2007 and
2006:
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Revenues
|
|
$ |
4,083
|
|
|
$ |
3,971
|
|
|
$ |
14,160
|
|
|
$ |
13,450
|
|
Direct
operating expenses (1)
|
|
|
(2,163 |
) |
|
|
(2,305 |
) |
|
|
(6,372 |
) |
|
|
(6,217 |
) |
Amortization
|
|
|
(1,068 |
) |
|
|
(1,037 |
) |
|
|
(3,194 |
) |
|
|
(3,083 |
) |
Amortization
of deferred financing costs
|
|
|
(48 |
) |
|
|
(46 |
) |
|
|
(141 |
) |
|
|
(197 |
) |
Ground/facility
leases (2)
|
|
|
(473 |
) |
|
|
(238 |
) |
|
|
(1,263 |
) |
|
|
(676 |
) |
Net
operating income
|
|
|
331
|
|
|
|
345
|
|
|
|
3,190
|
|
|
|
3,277
|
|
Interest
income
|
|
|
116
|
|
|
|
102
|
|
|
|
285
|
|
|
|
255
|
|
Interest
expense (3)
|
|
|
(1,549 |
) |
|
|
(1,638 |
) |
|
|
(4,683 |
) |
|
|
(4,838 |
) |
Net
loss
|
|
$ |
(1,102 |
) |
|
$ |
(1,191 |
) |
|
$ |
(1,208 |
) |
|
$ |
(1,306 |
) |
|
(1)
|
Excludes
property management fees of $0.2 million for both the three month
periods
ended September 30, 2007 and 2006, and $0.7 million and $0.6 million
for
the nine months ended September 30, 2007 and 2006,
respectively. This expense and the corresponding fee revenue we
recognized have been eliminated in consolidation. Also excludes
allocation of expenses related to corporate management and
oversight.
|
|
(2)
|
Represents
the universities’ 50% share of the properties’ net cash available for
distribution after payment of operating expenses, debt service
(including
payment of principal) and capital expenditures.
|
|
(3)
|
Debt
service expenditures for these properties totaled $2.1 million
and $2.3
million for the three months ended September 30, 2007 and 2006,
respectively, and $6.3 million for both the nine month periods
ended
September 30, 2007 and 2006.
|
Liquidity
and Capital Resources
Cash
Balances and Liquidity
As
of
September 30, 2007, excluding our on-campus participating properties, we
had
$18.3 million in cash and cash equivalents and restricted cash as compared
to
$83.5 million in cash and cash equivalents and restricted cash as of December
31, 2006. This decrease was primarily due to the use of the remaining proceeds
from our September 2006 equity offering and December 2006 disposition of
an
owned off-campus property, The Village on University, to fund our recent
property acquisitions and the construction of our owned development
projects. Restricted cash primarily consists of escrow accounts held
by lenders and resident security deposits, as required by law in certain
states. Additionally, restricted cash as of September 30, 2007 also
included $0.1 million of funds held in escrow in connection with potential
development opportunities.
As
of
September 30, 2007, our short-term liquidity needs included, but were not
limited to, the following: (i) anticipated distribution payments to our common
and restricted stockholders totaling approximately $36.8 million based on
an
anticipated annual distribution of $1.35 per share based on the number of
our
shares outstanding subsequent to our October 2007 equity offering, including
those distributions required to maintain our REIT status and satisfy our
current
distribution policy, (ii) anticipated distribution payments to our Operating
Partnership unitholders totaling approximately $2.4 million based on an
anticipated annual distribution of $1.35 per Common Unit and a cumulative
preferential per annum cash distribution rate of 5.99% on our Series A Preferred
Units based on the number of units outstanding as of September 30, 2007,
(iii)
funds for other potential future acquisitions and development projects,
including development expenditures for component II and III of the Arizona
State
University project which are estimated to range from $55.0 to $60.0
million. We expect to meet our short-term liquidity requirements
generally through net cash provided by operations, borrowings under our
revolving credit facility, and offerings under a shelf registration statement
under which we may offer up to $261 million of debt securities, preferred
stock,
common stock and securities warrants (subsequent to our October 2007 equity
offering).
We
may
seek additional funds to undertake initiatives not contemplated by our business
plan or obtain additional cushion against possible shortfalls. We
also may pursue additional financing as opportunities arise. Future
financings may include a range of different sizes or types of financing,
including the sale of additional debt or equity securities. While we
believe we will be able to obtain such funds, these funds may not be available
on favorable terms or at all. Our ability to obtain additional
financing depends on several factors, including future market conditions,
our
success or lack of success in penetrating our markets, our future
creditworthiness, and restrictions contained in agreements with our investors
or
lenders, including the restrictions contained in the agreements governing
our
revolving credit facility. These financings could increase our level
of indebtedness or result in dilution to our equity holders.
Revolving
Credit Facility
The
Operating Partnership has a $115 million revolving credit facility, which
may be
expanded by up to an additional $110 million upon the satisfaction of certain
conditions. The maturity date of the facility is August 17, 2009 and
we guarantee the Operating Partnership’s obligations under the
facility.
Availability
under the revolving credit facility is limited to an "aggregate borrowing
base
amount" equal to the lesser of (i) 65% of the value of certain properties,
calculated as set forth in the credit facility, and (ii) the adjusted net
operating income from these properties divided by a formula
amount. The facility bears interest at a variable rate, at the
Company’s option, based upon a base rate or one-, two-, three-, or six-month
LIBOR plus, in each case, a spread based upon the Company’s total
leverage. Additionally, we are required to pay an unused commitment
fee ranging from 0.15% to 0.20% per annum, depending on the aggregate unused
balance. As of September 30, 2007, the balance outstanding on the
revolving credit facility totaled $47.9 million, bearing interest at a weighted
average rate of 6.94%, with remaining availability under the facility (subject
to the satisfaction of certain financial covenants) totaling approximately
$66.8
million. In October 2007, we paid off the entire balance on the
revolving credit facility by using proceeds from an equity
offering. See Note 13 in the accompanying Notes to Consolidated
Financial Statements contained in Item 1 herein for a detailed discussion
of our
October 2007 equity offering.
The
terms
of the facility include certain restrictions and covenants, which limit,
among
other items, the incurrence of additional indebtedness, liens, and the
disposition of assets. The facility contains customary affirmative
and negative covenants and also contains financial covenants that, among
other
things, require us to maintain certain minimum ratios of "EBITDA" (earnings
before interest, taxes, depreciation and amortization) to fixed
charges. We may not pay distributions that exceed 100% of funds from
operations for any four consecutive quarters. The financial covenants
also include consolidated net worth and leverage ratio tests. As of
September 30, 2007, we were in compliance with all such covenants.
Distributions
We
are
required to distribute 90% of our REIT taxable income (excluding capital
gains)
on an annual basis in order to qualify as a REIT for federal income tax
purposes. Accordingly, we intend to make, but are not contractually bound
to
make, regular quarterly distributions to common stockholders and unit
holders. Distributions to common stockholders are at the discretion
of the Board of Directors. We may be required to use borrowings under the
credit
facility, if necessary, to meet REIT distribution requirements and maintain
our
REIT status. The Board of Directors considers market factors and our Company’s
performance in addition to REIT requirements in determining distribution
levels.
Pre-Development
Expenditures
Our
third-party and owned development activities have historically required us
to
fund pre-development expenditures such as architectural fees, permits and
deposits. The closing and/or commencement of construction of these
development projects is subject to a number of risks such as our inability
to
obtain financing on favorable terms and delays or refusals in obtaining
necessary zoning, land use, building, and other required governmental permits
and authorizations As such, we cannot always predict accurately the
liquidity needs of these activities. We frequently incur these
pre-development expenditures before a financing commitment and/or required
permits and authorizations have been obtained. Accordingly, we bear
the risk of the loss of these pre-development expenditures if financing cannot
ultimately be arranged on acceptable terms or we are unable to successfully
obtain the required permits and authorizations. Historically, our
third-party and owned development projects have been successfully structured
and
financed; however, these developments have at times been delayed beyond the
period initially scheduled, causing revenue to be recognized in later
periods. As of September 30, 2007, we had deferred approximately $8.2
million in pre-development costs related to third-party and owned development
projects that have not yet commenced construction.
Indebtedness
As
of
September 30, 2007, we had approximately $586.9 million of outstanding
consolidated indebtedness (excluding unamortized debt premiums/discounts
of
approximately $4.7 million), comprised of a $47.9 million balance on our
unsecured revolving credit facility, $398.8 million in mortgage loans secured
by
30 of our owned properties, $52.0 million in construction loans secured by
three
of our owned properties, $33.2 million in mortgage loans secured by two phases
of an on-campus participating property, and $55.0 million in bond issuances
secured by three of our on-campus participating properties. The
weighted average interest rate on our consolidated indebtedness as of September
30, 2007 was 6.55%. As of September 30, 2007, approximately 17.0% of
our total consolidated indebtedness was variable rate debt, comprised of
our
revolving credit facility and our University Centre, Vista del Sol and Villas
at
Chestnut Ridge construction loans discussed below.
Owned
Properties
The
weighted average interest rate of the $398.8 million of owned off-campus
mortgage debt was 6.34% as of September 30, 2007. Each of the
mortgage loans is a non-recourse obligation subject to customary
exceptions. Each of these mortgages has a 30-year amortization, and
none are cross-defaulted or cross-collateralized to any other indebtedness.
The
loans generally may not be prepaid prior to maturity, although in certain
cases
prepayment is allowed, subject to prepayment penalties.
In
August
2007, we completed the final stages of construction on University Centre,
an
owned off-campus property. The development and construction of
University Centre was partially financed with a $45.5 million construction
loan. For each borrowing we have the option of choosing the Prime
rate or one-, two-, or three-month LIBOR plus 1.50%. The loan
requires payments of interest only during the term of the loan and any accrued
interest and outstanding borrowings become due on the maturity date of October
1, 2008. As of September 30, 2007, the balance outstanding on the
construction loan totaled $43.6 million, bearing interest at a weighted average
rate of 6.70%. In October 2007, we paid off the entire balance of
this construction loan using proceeds from our equity offering. See
Note 13 in the accompanying Notes to Consolidated Financial Statements contained
in Item 1 herein for a detailed discussion of the October 2007 equity
offering.
The
development and construction of Vista del Sol, an owned on-campus property
scheduled to complete construction and open for occupancy in August 2008,
is
partially financed with a $100.0 million construction loan. For each
borrowing we have the option of choosing the Prime rate or one-, two-, or
three-month LIBOR plus 1.45%. The loan requires payments of interest
only during the term of the loan and any accrued interest and outstanding
borrowings become due on the maturity date of December 27, 2009. The
term of the loan can be extended through December 2011 through the exercise
of
two 12-month extension periods. As of September 30, 2007, the balance
outstanding on the construction loan totaled $5.7 million, bearing interest
at a
rate of 7.08%.
The
development and construction of Villas at Chestnut Ridge, an owned off-campus
property scheduled to complete construction and open for occupancy in August
2008, is partially financed with a $31.6 million construction
loan. For each borrowing we have the option of choosing the Prime
rate or one-, two-, three-, or six-month LIBOR plus 1.25%. The loan
requires payments of interest only during the term of the loan and any accrued
interest and outstanding borrowings become due on the maturity date of June
4,
2009. The term of the loan can be extended through June 2010 through
the exercise of a 12-month extension period. As of September 30,
2007, the balance outstanding on the construction loan totaled $2.7 million,
bearing interest at a weighted average rate of 6.59%.
On-Campus
Participating Properties
Three
of
our on-campus participating properties are 100% financed with $55.0 million
of
outstanding project-based taxable bonds. Under the terms of these
financings, one of our special purpose subsidiaries publicly issued three
series
of taxable bonds and loaned the proceeds to three special purpose subsidiaries
that each hold a separate leasehold interest. Although a default in payment
by
these special purpose subsidiaries could result in a default under one or
more
series of bonds, the indebtedness of any of these special purpose subsidiaries
is not cross-defaulted or cross-collateralized with indebtedness of the Company,
the Operating Partnership or other special purpose subsidiaries. Repayment
of
principal and interest on these bonds is insured by MBIA, Inc. The
loans encumbering the leasehold interests are non-recourse, subject to customary
exceptions.
Cullen
Oaks Phase I and Phase II loans are currently encumbered by mortgage loans
with
balances as of September 30, 2007 of approximately $16.5 million and $16.7
million, respectively. In February 2007, we extended the maturity
date of these loans to February 2014. The loans bear interest at a
rate of LIBOR plus 1.35% and require payments of interest only through May
2008
and monthly payments of principal and interest from May 2008 through the
maturity date. In connection with these loan extensions, we
terminated the existing interest rate swap agreement on the Cullen Oaks Phase
I
loan and entered into a new interest rate swap agreement effective February
15,
2007 through February 15, 2014, that is designated to hedge our exposure
to
fluctuations on interest payments attributed to changes in interest rates
associated with payments on the Cullen Oaks Phase I and Phase II
loans. Under the terms of the interest rate swap agreement, we pay a
fixed rate of 6.69% and receive a floating rate of LIBOR plus
1.35%. Pursuant to the Leases, in the event the leasehold estate does
not achieve Financial Break Even (defined as revenues less operating expenses,
excluding management fees, less debt service), the applicable Lessor would
be
required to make a rental payment, also known as the Contingent Payment,
sufficient to achieve Financial Break Even. The Contingent Payment
provision remains in effect until such time as any financing placed on the
facilities would receive an investment grade rating without the Contingent
Payment provision. In the event that the Lessor is required to make a
Contingent Payment, future net cash flow distributions would be first applied
to
repay such Contingent Payments and then to unpaid management fees prior to
normal distributions. We have guaranteed payment of this property’s
indebtedness.
The
weighted average interest rate of the indebtedness encumbering our on-campus
participating properties was 7.17% at September 30, 2007.
Off
Balance Sheet Items
We
do not
have any off-balance sheet arrangements.
Funds
From Operations
As
defined by NAREIT, FFO represents income (loss) before allocation to minority
interests (computed in accordance with GAAP), excluding gains (or losses)
from
sales of property, plus real estate related depreciation and amortization
(excluding amortization of loan origination costs) 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. FFO is intended to exclude GAAP historical cost
depreciation and amortization of real estate and related assets, which assumes
that the value of real estate diminishes ratably over time. Historically,
however, real estate values have risen or fallen with market conditions.
Because
FFO excludes depreciation and amortization unique to real estate, gains and
losses from property dispositions and extraordinary items, it provides a
performance measure that, when compared year
over
year, reflects the impact to operations from trends in occupancy rates, rental
rates, operating costs, development activities and interest costs, providing
perspective not immediately apparent from net income.
We
compute FFO in accordance with standards established by the Board of Governors
of NAREIT in its March 1995 White Paper (as amended in November 1999 and
April
2002), which may differ from the methodology for calculating FFO utilized
by
other equity REITs and, accordingly, may not be comparable to such other
REITs.
Further, FFO does not represent amounts available for management’s discretionary
use because of needed capital replacement or expansion, debt service obligations
or other commitments and uncertainties. FFO should not be considered as an
alternative to net income (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
is it
indicative of funds available to fund our cash needs, including our ability
to
pay dividends or make distributions.
The
following table presents a reconciliation of our FFO to our net
income:
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Net
loss
|
|
$ |
(2,369 |
) |
|
$ |
(1,611 |
) |
|
$ |
(7,832 |
) |
|
$ |
(14 |
) |
Minority
interests
|
|
|
(77 |
) |
|
|
(149 |
) |
|
|
(309 |
) |
|
|
(202 |
) |
Real
estate related depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
depreciation and amortization
|
|
|
7,797
|
|
|
|
6,853
|
|
|
|
22,535
|
|
|
|
19,306
|
|
Corporate
furniture, fixtures, and equipment
depreciation
|
|
|
(122 |
) |
|
|
(142 |
) |
|
|
(391 |
) |
|
|
(397 |
) |
Funds
from operations (1)
|
|
$ |
5,229
|
|
|
$ |
4,951
|
|
|
$ |
14,003
|
|
|
$ |
18,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO
per share – diluted (1)
|
|
$ |
0.21
|
|
|
$ |
0.24
|
|
|
$ |
0.55
|
|
|
$ |
0.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding - diluted
|
|
|
25,493,713
|
|
|
|
20,637,239
|
|
|
|
25,437,569
|
|
|
|
19,495,171
|
|
|
(1)
|
During
the three and nine months ended September 30, 2007, we recorded
a
compensation charge and related tax impact of approximately $1.0
million
and $10.9 million, or $0.04 and $0.43 per fully diluted share,
respectively, related to the 2004 Outperformance Bonus
Plan. Excluding this compensation charge and related tax
impact, FFO for the three and nine months ended September 30, 2007
would
have been $6.2 million and $24.9 million, or $0.24 and $0.98 per
fully
diluted share, respectively. For a detailed discussion of the
2004 Outperformance Bonus Plan, refer to Note 9 in the accompanying
Notes
to Consolidated Financial Statements contained in Item 1
herein.
|
While
our
on-campus participating properties contributed $4.1 million and $4.0 to our
revenues for the three months ended September 30, 2007 and 2006, respectively,
and $14.2 million and $13.5 million to our revenues for the nine months ended
September 30, 2007 and 2006, respectively, under our participating ground
leases, we and the participating university systems each receive 50% of the
properties’ net cash available for distribution after payment of operating
expenses, debt service (which includes significant amounts towards repayment
of
principal) and capital expenditures. A substantial portion of our revenues
attributable to these properties is reflective of cash that is required to
be
used for capital expenditures and for the amortization of applicable property
indebtedness. These amounts do not increase our economic interest in these
properties or otherwise benefit us since our interest in the properties
terminates upon the repayment of the applicable property
indebtedness.
As
noted
above, FFO excludes GAAP historical cost depreciation and amortization of
real
estate and related assets because these GAAP items assume that the value
of real
estate diminishes over time. However, unlike the ownership of our
owned off-campus properties, the unique features of our ownership interest
in
our on-campus participating properties cause the value of these properties
to
diminish over time. For example, since the ground/facility leases
under which we operate the participating properties require the reinvestment
from operations of specified amounts for capital expenditures and for the
repayment of debt while our interest in these properties terminates upon
the
repayment of the debt, such capital expenditures do not increase the value
of
the property to us and mortgage debt amortization only increases the equity
of
the ground lessor. Accordingly, when considering our FFO, we believe it is
also
a meaningful measure of our performance to modify FFO to exclude the operations
of our on-campus participating properties and to consider their impact on
performance by including only that portion of our revenues from those properties
that are reflective of our share of net cash flow and the management fees
that
we receive, both of which increase and decrease with the operating measure
of
the properties, a measure referred to herein as FFOM.
Funds
From Operations—Modified for Operational Performance of On-Campus Participating
Properties:
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Funds
from operations
|
|
$ |
5,229
|
|
|
$ |
4,951
|
|
|
$ |
14,003
|
|
|
$ |
18,693
|
|
Elimination
of operations of on-campus participating properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss from on-campus participating properties
|
|
|
1,102
|
|
|
|
1,191
|
|
|
|
1,208
|
|
|
|
1,306
|
|
Amortization
of investment in on-campus participating properties
|
|
|
(1,068 |
) |
|
|
(1,037 |
) |
|
|
(3,194 |
) |
|
|
(3,083 |
) |
|
|
|
5,263
|
|
|
|
5,105
|
|
|
|
12,017
|
|
|
|
16,916
|
|
Modifications
to reflect operational performance of on-campus
participating
properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our
share of net cash flow (1)
|
|
|
473
|
|
|
|
238
|
|
|
|
1,263
|
|
|
|
676
|
|
Management
fees
|
|
|
189
|
|
|
|
171
|
|
|
|
652
|
|
|
|
615
|
|
On-campus
participating properties development fees (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
305
|
|
Impact
of on-campus participating properties
|
|
|
662
|
|
|
|
409
|
|
|
|
1,915
|
|
|
|
1,596
|
|
Funds
from operations – modified for operational performance
of
on-campus participating properties (“FFOM”) (3)
|
|
$ |
5,925
|
|
|
$ |
5,514
|
|
|
$ |
13,932
|
|
|
$ |
18,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFOM
per share – diluted (3)
|
|
$ |
0.23
|
|
|
$ |
0.27
|
|
|
$ |
0.55
|
|
|
$ |
0.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding – diluted
|
|
|
25,493,713
|
|
|
|
20,637,239
|
|
|
|
25,437,569
|
|
|
|
19,495,171
|
|
|
(1)
|
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.
|
|
|
|
|
(2)
|
Development
and construction management fees, including construction savings
earned
under the general construction contract, related to Cullen Oaks
Phase II
on-campus participating property, which was completed in August
2005.
|
|
|
|
|
(3)
|
During
the three and nine months ended September 30, 2007, we recorded
a
compensation charge and related tax impact of approximately $1.0
million
and $10.9 million, or $0.04 and $0.43 per fully diluted share,
respectively, related to the 2004 Outperformance Bonus
Plan. Excluding this compensation charge and related tax
impact, FFOM for the three and nine months ended September 30,
2007 would
have been $6.9 million and $24.8 million, or $0.27 and $0.98 per
fully
diluted share, respectively. For a detailed discussion of the
2004 Outperformance Bonus Plan, refer to Note 9 in the accompanying
Notes
to Consolidated Financial Statements contained in Item 1
herein.
|
This
narrower measure of performance measures our profitability for these properties
in a manner that is similar to the measure of our profitability from our
services business where we similarly incur no initial or ongoing capital
investment in a property and derive only consequential benefits from capital
expenditures and debt amortization. We believe, however, that this narrower
measure of performance is inappropriate in traditional real estate ownership
structures where debt amortization and capital expenditures enhance the property
owner’s long-term profitability from its investment.
Our
FFOM
may have limitations as an analytical tool because it reflects the unique
contractual calculation of net cash flow from our on-campus participating
properties, which is different from that of our off campus owned
properties. Additionally, FFOM reflects features of our ownership
interests in our on-campus participating properties that are unique to us.
Companies that are considered to be in our industry may not have similar
ownership structures; and therefore those companies may not calculate a FFOM
in
the same manner that we do, or at all, limiting its usefulness as a comparative
measure. We compensate for these limitations by relying primarily on our
GAAP
and FFO results and using our modified FFO only supplementally.
Inflation
Our
leases do not typically provide for rent escalations. However, they
typically do not have terms that extend beyond 12 months. Accordingly, although
on a short term basis we would be required to bear the impact of rising costs
resulting from inflation, we have the opportunity to raise rental rates at
least
annually to offset such rising costs. However, a weak economic environment
or
declining student enrollment at our principal universities may limit our
ability
to raise rental rates.
Market
risk is the risk of loss from adverse changes in market prices and interest
rates. Our future earnings and cash flows are dependent upon
prevailing market rates. Accordingly, we manage our market risk by
matching projected cash inflows from operating, investing and financing
activities with projected cash outflows for debt service, acquisitions, capital
expenditures, distributions to stockholders and unitholders, and other cash
requirements. The majority of our outstanding debt has fixed interest
rates, which minimizes the risk of fluctuating interest rates. Our
exposure to market risk includes interest rate fluctuations in connection
with
our revolving credit facility and variable rate construction loans and our
ability to incur more debt without stockholder approval, thereby increasing
our
debt service obligations, which could adversely affect our cash
flows. No material changes have occurred in relation to market
risk since our Annual Report on Form 10-K for the year ended December 31,
2006.
Evaluation
of Disclosure Controls and Procedures
As
required by SEC Rule 13a-15(b), we have carried out an evaluation, under
the supervision and with the participation of management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of the
end of
the quarter covered by this report. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls
and
procedures for the quarter covered by this report were effective at the
reasonable assurance level.
There
has
been no change in our internal controls over financial reporting during our
most
recent fiscal quarter that has materially affected, or is reasonably likely
to
materially affect, our internal controls over financial reporting.
PART
II. OTHER INFORMATION
Exhibit
|
|
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Number
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Description
of Document
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31.1
|
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Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
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31.2
|
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
32.1
|
|
Certification
of Chief Executive Officer Pursuant to 18 U. S. C. Section 1350,
as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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AMERICAN
CAMPUS COMMUNITIES, INC.
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|
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By:
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/s/
William C. Bayless, Jr.
|
|
|
|
|
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William
C. Bayless, Jr.
President
and Chief Executive
Officer
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|
|
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By:
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/s/
Jonathan A. Graf
|
|
|
|
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Jonathan
A. Graf
Executive
Vice President, Chief
Financial
Officer and Treasurer
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|
|
|
|
|
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40