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 March 31, 2008.
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 x |
Accelerated Filer
o |
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 36,686,376 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
May 5, 2008.
FORM
10-Q
FOR
THE QUARTER ENDED MARCH 31, 2008
TABLE
OF CONTENTS
|
PAGE
NO.
|
|
|
PART
I.
|
|
|
|
|
Item
1.
|
Consolidated
Financial Statements
|
|
|
|
|
|
Consolidated
Balance Sheets as of March 31, 2008 (unaudited) and December 31,
2007
|
1
|
|
|
|
|
Consolidated
Statements of Operations for the three months ended March 31, 2008 and
2007 (all unaudited)
|
2
|
|
|
|
|
Consolidated
Statements of Comprehensive Income for the three months ended March 31,
2008 and 2007 (all unaudited)
|
3
|
|
|
|
|
Consolidated
Statements of Cash Flows for the three months ended March 31, 2008 and
2007 (all unaudited)
|
4
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
5
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
19
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosure about Market Risk
|
33
|
|
|
|
Item
4.
|
Controls
and Procedures
|
33
|
|
|
PART
II.
|
|
|
|
|
Item
6.
|
Exhibits
|
33
|
|
|
SIGNATURES
|
34
|
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(in
thousands, except share and per share data)
|
|
March
31, 2008
|
|
|
December
31, 2007
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
in real estate:
|
|
|
|
|
|
|
Wholly-owned
properties, net
|
|
$ |
998,167 |
|
|
$ |
947,062 |
|
On-campus
participating properties, net
|
|
|
71,888 |
|
|
|
72,905 |
|
Investments
in real estate, net
|
|
|
1,070,055 |
|
|
|
1,019,967 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
13,039 |
|
|
|
12,073 |
|
Restricted
cash
|
|
|
15,618 |
|
|
|
13,855 |
|
Student
contracts receivable, net
|
|
|
2,641 |
|
|
|
3,657 |
|
Other
assets
|
|
|
27,344 |
|
|
|
26,744 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
1,128,697 |
|
|
$ |
1,076,296 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Secured
debt
|
|
$ |
568,137 |
|
|
$ |
533,430 |
|
Unsecured
revolving credit facility
|
|
|
36,600 |
|
|
|
9,600 |
|
Accounts
payable and accrued expenses
|
|
|
11,833 |
|
|
|
14,360 |
|
Other
liabilities
|
|
|
42,372 |
|
|
|
43,278 |
|
Total
liabilities
|
|
|
658,942 |
|
|
|
600,668 |
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
30,092 |
|
|
|
31,251 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Common
shares, $.01 par value, 800,000,000 shares authorized, 27,361,222 and
27,275,491 shares issued and outstanding at March 31, 2008 and
December
31, 2007, respectively
|
|
|
274 |
|
|
|
273 |
|
Additional
paid in capital
|
|
|
495,223 |
|
|
|
494,160 |
|
Accumulated
earnings and distributions
|
|
|
(52,612 |
) |
|
|
(48,181 |
) |
Accumulated
other comprehensive loss
|
|
|
(3,222 |
) |
|
|
(1,875 |
) |
Total
stockholders’ equity
|
|
|
439,663 |
|
|
|
444,377 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
1,128,697 |
|
|
$ |
1,076,296 |
|
See
accompanying notes to consolidated financial statements.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited,
in thousands, except share and per share data)
|
|
Three
Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Revenues:
|
|
|
|
|
|
|
Wholly-owned
properties
|
|
$ |
31,681 |
|
|
$ |
27,145 |
|
On-campus
participating properties
|
|
|
6,744 |
|
|
|
6,337 |
|
Third
party development services
|
|
|
1,620 |
|
|
|
369 |
|
Third
party development services – on-campus participating
properties
|
|
|
36 |
|
|
|
36 |
|
Third
party management services
|
|
|
922 |
|
|
|
722 |
|
Resident
services
|
|
|
438 |
|
|
|
341 |
|
Total
revenues
|
|
|
41,441 |
|
|
|
34,950 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Wholly-owned
properties
|
|
|
13,885 |
|
|
|
11,862 |
|
On-campus
participating properties
|
|
|
2,295 |
|
|
|
2,026 |
|
Third
party development and management services
|
|
|
2,108 |
|
|
|
1,294 |
|
General
and administrative
|
|
|
2,134 |
|
|
|
11,328 |
|
Depreciation
and amortization
|
|
|
8,029 |
|
|
|
6,970 |
|
Ground/facility
lease
|
|
|
359 |
|
|
|
295 |
|
Total
operating expenses
|
|
|
28,810 |
|
|
|
33,775 |
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
12,631 |
|
|
|
1,175 |
|
|
|
|
|
|
|
|
|
|
Nonoperating
income and (expenses):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
162 |
|
|
|
707 |
|
Interest
expense
|
|
|
(6,979 |
) |
|
|
(6,460 |
) |
Amortization
of deferred financing costs
|
|
|
(311 |
) |
|
|
(298 |
) |
Loss
from unconsolidated joint venture
|
|
|
(126 |
) |
|
|
- |
|
Total
nonoperating expenses
|
|
|
(7,254 |
) |
|
|
(6,051 |
) |
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes and minority interests
|
|
|
5,377 |
|
|
|
(4,876 |
) |
Income
tax provision
|
|
|
(60 |
) |
|
|
(60 |
) |
Minority
interests
|
|
|
(408 |
) |
|
|
258 |
|
Net
income (loss)
|
|
$ |
4,909 |
|
|
$ |
(4,678 |
) |
|
|
|
|
|
|
|
|
|
Income
(loss) per share – basic:
|
|
|
|
|
|
|
|
|
Net
income (loss) per share
|
|
$ |
0.18 |
|
|
$ |
(0.20 |
) |
Income
(loss) per share – diluted:
|
|
|
|
|
|
|
|
|
Net
income (loss) per share
|
|
$ |
0.18 |
|
|
$ |
(0.20 |
) |
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
27,331,896 |
|
|
|
22,942,737 |
|
Diluted
|
|
|
29,161,145 |
|
|
|
25,241,190 |
|
|
|
|
|
|
|
|
|
|
Distributions
declared per common share
|
|
$ |
0.3375 |
|
|
$ |
0.3375 |
|
See
accompanying notes to consolidated financial statements.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited,
in thousands)
|
|
Three Months Ended March
31,
|
|
|
|
2008
|
|
|
2007
|
|
Net
income (loss)
|
|
$ |
4,909 |
|
|
$ |
(4,678 |
) |
|
|
|
|
|
|
|
|
|
Other
comprehensive loss:
|
|
|
|
|
|
|
|
|
Change
in fair value of interest rate swaps
|
|
|
(1,287 |
) |
|
|
(802 |
) |
Net
comprehensive income (loss)
|
|
$ |
3,622 |
|
|
$ |
(5,480 |
) |
See
accompanying notes to consolidated financial statements.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited,
in thousands)
|
|
Three
Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Operating
activities
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
4,909 |
|
|
$ |
(4,678 |
) |
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Minority
interests share of income (loss)
|
|
|
408 |
|
|
|
(258 |
) |
Depreciation
and amortization
|
|
|
8,029 |
|
|
|
6,970 |
|
Amortization
of deferred financing costs and debt premiums/discounts
|
|
|
(70 |
) |
|
|
(70 |
) |
Share-based
compensation
|
|
|
411 |
|
|
|
229 |
|
Loss
from unconsolidated joint venture
|
|
|
126 |
|
|
|
- |
|
Amortization
of gain on interest rate swap termination
|
|
|
(60 |
) |
|
|
(30 |
) |
Income
tax provision
|
|
|
60 |
|
|
|
60 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
(1,609 |
) |
|
|
1,690 |
|
Student
contracts receivable, net
|
|
|
1,016 |
|
|
|
(3,320 |
) |
Other
assets
|
|
|
(906 |
) |
|
|
285 |
|
Accounts
payable and accrued expenses
|
|
|
(2,918 |
) |
|
|
4,390 |
|
Other
liabilities
|
|
|
(1,596 |
) |
|
|
(2,048 |
) |
Net
cash provided by operating activities
|
|
|
7,800 |
|
|
|
3,220 |
|
Investing
activities
|
|
|
|
|
|
|
|
|
Cash
paid for property acquisitions
|
|
|
(11,285 |
) |
|
|
(38,330 |
) |
Cash
paid for land purchase
|
|
|
(2,998 |
) |
|
|
- |
|
Investments
in wholly-owned properties
|
|
|
(35,322 |
) |
|
|
(17,113 |
) |
Investments
in on-campus participating properties
|
|
|
(52 |
) |
|
|
(65 |
) |
Purchase
of corporate furniture, fixtures and equipment
|
|
|
(190 |
) |
|
|
(235 |
) |
Net
cash used in investing activities
|
|
|
(49,847 |
) |
|
|
(55,743 |
) |
Financing
activities
|
|
|
|
|
|
|
|
|
Proceeds
from revolving credit facility, net of paydowns
|
|
|
27,000 |
|
|
|
- |
|
Proceeds
from construction loans
|
|
|
29,418 |
|
|
|
9,646 |
|
Principal
payments on debt
|
|
|
(1,597 |
) |
|
|
(1,569 |
) |
Change
in construction accounts payable
|
|
|
(1,774 |
) |
|
|
108 |
|
Debt
issuance and assumption costs
|
|
|
(93 |
) |
|
|
(1,153 |
) |
Distributions
to common and restricted stockholders
|
|
|
(9,334 |
) |
|
|
(7,791 |
) |
Distributions
to minority partners
|
|
|
(607 |
) |
|
|
(788 |
) |
Net
cash provided by (used in) financing activities
|
|
|
43,013 |
|
|
|
(1,547 |
) |
Net
change in cash and cash equivalents
|
|
|
966 |
|
|
|
(54,070 |
) |
Cash
and cash equivalents at beginning of period
|
|
|
12,073 |
|
|
|
79,107 |
|
Cash
and cash equivalents at end of period
|
|
$ |
13,039 |
|
|
$ |
25,037 |
|
Supplemental
disclosure of non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
Loans
assumed in connection with property acquisitions
|
|
$ |
(6,970 |
) |
|
$ |
(88,307 |
) |
Contribution
of land from minority partner in development joint venture
|
|
$ |
- |
|
|
$ |
2,756 |
|
Change
in fair value of derivative instruments, net
|
|
$ |
(1,287 |
) |
|
$ |
(802 |
) |
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
8,000 |
|
|
$ |
7,772 |
|
See
accompanying notes to consolidated financial statements.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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
March 31, 2008, the Company’s property portfolio contained 46 student housing
properties with approximately 29,300 beds and approximately 9,700 apartment
units, consisting of 40 owned off-campus properties that are in close proximity
to colleges and universities, two American Campus Equity (“ACETM”)
properties currently under development that will be operated under
ground/facility leases with a related university system 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, the Company also provides construction management and development
services, primarily for student housing properties owned by colleges and
universities, charitable foundations, and others. As of March 31,
2008, the Company provided third-party management and leasing services for 19
properties (seven of which the Company served as the third-party developer and
construction manager) that represented approximately 15,200 beds in
approximately 6,000 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 March 31,
2008, the Company’s total owned and managed portfolio included 65 properties
with approximately 44,500 beds in approximately 15,700 units.
2. Summary of Significant Accounting
Policies
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (“GAAP”) and
include the financial position, results of operations and cash flows of the
Company, the Operating Partnership and subsidiaries of the Operating
Partnership, including joint ventures in which the Company has a controlling
interest. Third-party equity interests in the Operating Partnership
and consolidated joint ventures are reflected as minority interests in the
consolidated financial statements. The Company also has a
non-controlling interest in an unconsolidated joint venture, which is accounted
for under the equity method. All significant intercompany amounts
have been eliminated. All dollar amounts in the tables herein, except
share and per share amounts, are stated in thousands unless otherwise
indicated.
New
Accounting Pronouncements
Effective
January 1, 2008, the Company adopted Statement of Financial Accounting Standard
(“SFAS”) No. 157, "Fair Value
Measurements" and SFAS No. 159, "The Fair Value Option for Financial
Assets and Financial Liabilities." SFAS No. 157 defines fair
value, establishes a framework for measuring fair value under GAAP, and expands
disclosures about fair value measurements. SFAS No. 159 permits an
entity to elect fair value as the initial and subsequent measurement method for
financial assets and liabilities. The Company has not elected the
fair value option for any financial instruments, however does reserve the right
to elect to measure future eligible financial assets or liabilities at fair
value. The adoption of SFAS No. 157 and SFAS No. 159 did not have a
material impact on the Company’s consolidated financial
statements. See Note 11 for a detailed discussion of fair value
disclosures.
Pending
Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141(R), "Business Combinations,"
which replaces SFAS No. 141, " Business Combinations,"
which, among other things, establishes principles and requirements for
how an acquirer entity recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed (including intangibles)
and any noncontrolling interests in the acquired entity. SFAS No. 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company is currently evaluating what impact the adoption
of SFAS No. 141(R) will have on its consolidated financial
statements.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51.” SFAS No.
160 amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It also amends certain of ARB 51’s consolidation procedures for
consistency with the requirements of SFAS No. 141(R). SFAS No. 160 is effective
for the Company beginning January 1, 2009. The Company is currently
evaluating what impact the adoption of SFAS No. 160 will have on its
consolidated financial statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities,” which is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. SFAS No. 161 will be effective for the Company beginning
January 1, 2009. The Company is currently evaluating what impact the
adoption of SFAS No. 161 will have on its consolidated financial statements, but
anticipates it will only result in additional disclosures regarding derivative
instruments.
Interim
Financial Statements
The
accompanying interim financial statements are unaudited, but have been prepared
in accordance with 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,
2007.
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
$1.7 million and $1.1 million was capitalized during the three months ended
March 31, 2008, and 2007, respectively. Amortization of deferred
financing costs totaling approximately $0.1 million and $80,000 was capitalized
during the three months ended March 31, 2008, and 2007,
respectively.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 March 31, 2008.
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 three months ended
March 31, 2008 and 2007, the Company capitalized approximately $0.2 million and
$1.2 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 and amortization expense in the
accompanying consolidated statements of operations. See Note 3 for a
detailed discussion of the property acquisitions completed during the three
months ended March 31, 2008.
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 March 31,
2008 and December 31, 2007, unamortized debt premiums were $4.9 million and $5.0
million, respectively, and unamortized debt discounts were $0.6 million and $0.7
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.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 March 31, 2008, the Company has deferred
approximately $3.6 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.
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.
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 and common and preferred units of limited
partnership interest in the Operating Partnership (“Common Units” and “Series A
Preferred Units,” respectively). See Note 6 for a discussion of
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 March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Basic
earnings per share calculation:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
4,909 |
|
|
$ |
(4,678 |
) |
|
|
|
|
|
|
|
|
|
Net
income (loss) – per share
|
|
$ |
0.18 |
|
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
27,331,896 |
|
|
|
22,942,737 |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share calculation:
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
4,909 |
|
|
$ |
(4,678 |
) |
Series
A Preferred Unit distributions
|
|
|
46 |
|
|
|
46 |
|
Net
income (loss) allocated to Common Units
|
|
|
260 |
|
|
|
(362 |
) |
Net
income (loss), as adjusted
|
|
$ |
5,215 |
|
|
$ |
(4,994 |
) |
|
|
|
|
|
|
|
|
|
Net
income (loss) – per share
|
|
$ |
0.18 |
|
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
27,331,896 |
|
|
|
22,942,737 |
|
Common
Units
|
|
|
1,448,627 |
|
|
|
2,183,490 |
|
Series
A Preferred Units
|
|
|
114,963 |
|
|
|
114,963 |
|
Restricted
stock awards (1)
|
|
|
265,659 |
|
|
|
- |
|
Diluted
weighted average common shares outstanding
|
|
|
29,161,145 |
|
|
|
25,241,190 |
|
|
(1)
|
153,360
weighted average restricted stock awards are excluded from diluted
weighted average common shares outstanding for the three months ended
March 31, 2007 because they would be anti-dilutive due to the Company’s
loss position for the period.
|
3. Property
Acquisitions
In
February 2008, the Company acquired a 144-unit, 528-bed property (Pirate’s
Place) located near the campus of East Carolina University in Greenville, North
Carolina, for a purchase price of $10.6 million, which excludes $0.8 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
approximately $7.0 million in fixed-rate mortgage debt with an annual interest
rate of 7.15% and remaining term to maturity of 14.9 years.
In
February 2008, the Company also acquired a 68-unit, 161-bed property (Sunnyside
Commons) located near the campus of West Virginia University in Morgantown, West
Virginia, for a purchase price of $7.5 million, which excludes $0.6 million of
anticipated transaction costs, initial integration expenses and capital
expenditures necessary to bring this property up to the Company’s operating
standards. The Company did not assume any debt as part of this
transaction.
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 months ended March 31, 2008 and 2007 presents consolidated financial
information for the Company as if the property acquisitions discussed above, the
Company’s 2007 acquisitions and the Company’s October 2007 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 March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Total
revenues
|
|
$ |
41,766 |
|
|
$ |
37,640 |
|
Net
income (loss)
|
|
$ |
5,077 |
|
|
$ |
(4,813 |
) |
Net
income (loss) per share – basic
|
|
$ |
0.19 |
|
|
$ |
(0.18 |
) |
Net
income (loss) per share – diluted
|
|
$ |
0.18 |
|
|
$ |
(0.18 |
) |
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments
in Wholly-owned Properties
Wholly-owned
properties consisted of the following:
|
|
March
31, 2008
|
|
|
December
31, 2007
|
|
Land
|
|
$ |
113,197 |
|
|
$ |
102,109 |
|
Buildings
and improvements
|
|
|
779,423 |
|
|
|
768,551 |
|
Furniture,
fixtures and equipment
|
|
|
42,661 |
|
|
|
42,225 |
|
Construction
in progress
|
|
|
139,961 |
|
|
|
104,540 |
|
|
|
|
1,075,242 |
|
|
|
1,017,425 |
|
Less
accumulated depreciation
|
|
|
(77,075 |
) |
|
|
(70,363 |
) |
Wholly-owned
properties, net
|
|
$ |
998,167 |
|
|
$ |
947,062 |
|
5. 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 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.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On-campus
participating properties are as follows:
|
|
|
|
|
|
Historical
Cost
|
|
Lessor/University
|
|
Lease
Commencement
|
|
Required
Debt
Repayment
(1)
|
|
March
31, 2008
|
|
|
December
31, 2007
|
|
Texas
A&M University System /
Prairie
View A&M University (2)
|
|
2/1/96
|
|
9/1/23
|
|
$ |
38,516 |
|
|
$ |
38,499 |
|
Texas
A&M University System /
Texas
A&M International
|
|
2/1/96
|
|
9/1/23
|
|
|
6,043 |
|
|
|
6,039 |
|
Texas
A&M University System /
Prairie
View A&M University (3)
|
|
10/1/99
|
|
8/31/25 / 8/31/28
|
|
|
24,051 |
|
|
|
24,037 |
|
University
of Houston System /
University
of Houston (4)
|
|
9/27/00
|
|
8/31/35
|
|
|
34,708 |
|
|
|
34,691 |
|
|
|
|
|
|
|
|
103,318 |
|
|
|
103,266 |
|
Less
accumulated amortization
|
|
|
|
|
|
|
(31,430 |
) |
|
|
(30,361 |
) |
On-campus
participating properties, net
|
|
|
|
|
|
$ |
71,888 |
|
|
$ |
72,905 |
|
|
(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.
|
6.
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 sheets 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 Common Units and Series A Preferred Units. 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 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 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. As a result, 51,278 Common Units were converted into shares of
the Company’s common stock during the three months ended March 31,
2008. As of March 31, 2008 and December 31, 2007, approximately 5%
and 6%, 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 Common Units and Series A Preferred
Units.
Minority
interests also include the equity interests of unaffiliated joint venture
partners in four joint ventures. 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.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
7. Investment
in Unconsolidated Joint Venture
The
Company holds an equity interest in a joint venture that owns a military housing
privatization project with the United States Navy to design, develop, construct,
renovate, and manage unaccompanied soldier housing located on naval bases in
Norfolk and Newport News, Virginia. In December 2007, the joint
venture closed and obtained financing through taxable revenue bonds, at which
time definitive legal agreements were executed. The Company has
evaluated its investment in this joint venture and has concluded that the
underlying entity is a variable interest entity (“VIE”) as defined in FASB
Interpretation No. 46, “Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51, Consolidated Financial Statements” (“FIN
46”). Because the Company is not the primary beneficiary of the VIE,
the Company has accounted for its investment in accordance with the equity
method of accounting. The Company made an initial investment in this
joint venture of $1.6 million and is not obligated to make further capital
contributions. The Company’s return is limited to an 8.0% annual
return on its initial investment in the form of periodic cash
distributions. The Company’s investment in this joint venture is
included in Other Assets in the accompanying consolidated balance sheets, and
the Company’s share of the loss from this joint venture is reflected as Loss
from Unconsolidated Joint Venture in the accompanying consolidated statement of
operations for the three months ended March 31, 2008.
8. Debt
A summary
of the Company’s outstanding consolidated indebtedness, including unamortized
debt premiums and discounts, is as follows:
|
|
March
31, 2008
|
|
|
December
31, 2007
|
|
Debt
secured by wholly-owned properties:
|
|
|
|
|
|
|
Mortgage
loans payable
|
|
$ |
402,643 |
|
|
$ |
397,270 |
|
Construction
loans payable
|
|
|
73,069 |
|
|
|
43,652 |
|
|
|
|
475,712 |
|
|
|
440,922 |
|
Debt
secured by on-campus participating properties:
|
|
|
|
|
|
|
|
|
Mortgage
loans payable
|
|
|
33,156 |
|
|
|
33,156 |
|
Bonds
payable
|
|
|
55,030 |
|
|
|
55,030 |
|
|
|
|
88,186 |
|
|
|
88,186 |
|
Revolving
Credit Facility
|
|
|
36,600 |
|
|
|
9,600 |
|
Unamortized
debt premiums/discounts
|
|
|
4,239 |
|
|
|
4,322 |
|
Total
debt
|
|
$ |
604,737 |
|
|
$ |
543,030 |
|
Loan
Assumed in Conjunction with Property Acquisition
In
connection with the February 2008 acquisition of Pirate’s Place (see Note 3), a
wholly-owned property, the Company assumed approximately $7.0 million of
fixed-rate mortgage debt with an annual interest rate of 7.15% and January 2023
maturity date. Upon assumption of this debt, the Company recorded a
debt premium of approximately $0.3 million, to reflect the estimated fair value
of the debt assumed. This mortgage loan is secured by a lien on the
related property.
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 March 31, 2008, the balance outstanding on the
revolving credit facility totaled $36.6 million, bearing interest at a weighted
average rate of 4.06%, with remaining availability under the facility (subject
to the satisfaction of certain financial covenants) totaling approximately $78.1
million. In April 2008, the Company paid off the entire balance on
the revolving credit facility by using proceeds from an equity offering (See
Note 14).
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 March 31, 2008, the Company was in compliance with all
such covenants.
9. Incentive
Award Plan
Pursuant
to the 2004 Incentive Award Plan (the “Plan”), selected employees and directors
of the Company and the Company’s affiliates are granted stock options, RSUs,
RSAs, Common Units, profit interest units (“PIUs”), 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 March 31, 2008, 588,274 shares were
available for issuance under the Plan.
Restricted
Stock Units
Upon
initial appointment to the Board of Directors and reelection to the Board of
Directors at each Annual Meeting of Stockholders, each outside member of the
Board of Directors is granted RSUs. For all RSU grants to date, no
shares of stock were issued at the time of the RSU awards, and the Company was
not required to set aside a fund for the payment of any such award; however, the
stock was deemed to be awarded on the date of grant. Upon the
Settlement Date, which is three years from the date of grant, the Company will
deliver to the recipients a number of shares of common stock or cash, as
determined by the Compensation Committee of the Board of Directors, equal to the
number of RSUs held by the recipients. In addition, recipients of
RSUs are entitled to dividend equivalents equal to the cash distributions paid
by the Company on one share of common stock for each RSU issued, payable
currently or on the Settlement Date, as determined by the Compensation Committee
of the Board of Directors. There were no RSU grants or RSUs settled
during the three months ended March 31, 2008 and there were 18,786 RSUs
outstanding as of March 31, 2008.
Restricted
Stock Awards
The
Company awards RSAs to its executive officers and certain employees that vest in
equal annual installments over a three to five year period. 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 recipients
continue to be employees of the Company. A summary of the Company’s
RSAs under the Plan as of March 31, 2008 and changes during the three months
ended March 31, 2008, is presented below:
|
|
Number
of
RSAs
|
|
Nonvested
balance at December 31, 2007
|
|
178,921 |
|
Granted
|
|
|
151,492 |
|
Vested
|
|
|
(32,353 |
) |
Forfeited
|
|
|
(12,548 |
) |
Nonvested
balance at March 31, 2008
|
|
285,512 |
|
In
accordance with SFAS No. 123(R), the Company recognizes the value of these
awards as an expense over the vesting periods, which amounted to approximately
$0.4 million and $0.2 million for the three months ended March 31, 2008 and
2007, respectively.
Common
Units/PIUs
PIUs were
issued to certain executive and senior officers upon consummation of the
IPO. In connection with the Company’s equity offering in July 2005,
all 121,000 PIUs were converted to Common Units, as contemplated in the OP
Agreement.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 months ended March 31, 2007, the Company
recorded a compensation charge of approximately $9.6 million, to reflect the
value of such awards. As a result of the October 2007 equity
offering, a book-up event occurred for tax purposes, resulting in the 132,400
PIUs being converted to Common Units.
Each
Common Unit is deemed equivalent to one share of the Company’s common
stock. Common Units receive the same quarterly per unit distribution
as the per share distributions on the Company’s common stock.
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). As of March 31,
2008, approximately $0.3 million of the $0.4 million gain was amortized from
accumulated other comprehensive income to earnings.
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 $3.4 million at March 31, 2008 and is reflected in other
liabilities in the accompanying consolidated balance
sheets. Ineffectiveness resulting from the Company’s hedges is not
material.
11. Fair
Value Disclosures
On
January 1, 2008, the Company adopted SFAS No. 157, which defines fair value,
establishes a framework for measuring fair value and also expands disclosures
about fair value measurements. SFAS No. 157 applies to reported
balances that are required or permitted to be measured at fair value under
existing accounting pronouncements; accordingly, the standard does not require
any new fair value measurements of reported balances. The following
table presents information about our liability measured at fair value on a
recurring basis as of March 31, 2008, and indicates the fair value hierarchy of
the valuation techniques utilized by us to determine such fair
value.
In
general, fair values determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or liabilities the Company
has the ability to access. Fair values determined by Level 2 inputs
utilize inputs other than quoted prices included in Level 1 that are observable
for the asset or liability, either directly or indirectly. Level 2
inputs include quoted prices for similar assets and liabilities in active
markets and inputs other than quoted prices observable for the asset or
liability, such as interest rates and yield curves observable at commonly quoted
intervals. Level 3 inputs are unobservable inputs for the asset or
liability, and include situations where there is little, if any, market activity
for the asset or liability. In instances in which the inputs used to
measure fair value may fall into different levels of the fair value hierarchy,
the level in the fair value hierarchy within which the fair value measurement in
its entirety has been determined is based on the lowest level input significant
to the fair value measurement in its entirety. The Company’s
assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment, and considers factors specific to
the asset or liability. Disclosures concerning assets and liabilities
measured at fair value are as follows:
Liability
Measured at Fair Value on a Recurring Basis at March 31, 2008
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets and
Liabilities
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Balance
at March
31,
2008
|
|
Liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instrument
|
|
$ |
- |
|
|
$ |
3,375 |
|
|
$ |
- |
|
|
$ |
3,375 |
|
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company uses derivative financial instruments, specifically interest rate swaps,
for nontrading purposes. The Company uses interest rate swaps to
manage interest rate risk arising from previously unhedged interest payments
associated with variable rate debt. Through March 31, 2008,
derivative financial instruments were designated and qualified as cash flow
hedges. Derivative contracts with positive net fair values inclusive
of net accrued interest receipts or payments, are recorded in other
assets. Derivative contracts with negative net fair values, inclusive
of net accrued interest payments or receipts, are recorded in other
liabilities. The valuation of these instruments is determined using
widely accepted valuation techniques including discounted cash flow analysis on
the expected cash flows of each derivative. This analysis reflects
the contractual terms of the derivatives, including the period to maturity, and
uses observable market-based inputs, including interest rate
curves. The fair values of interest rate swaps are determined using
the market standard methodology of netting the discounted future fixed cash
receipts (or payments) and the discounted expected variable cash payments (or
receipts). The variable cash payments (or receipts) are based on an expectation
of future interest rates (forward curves) derived from observable market
interest rate curves.
To comply
with the provisions of SFAS No. 157, the Company incorporates credit valuation
adjustments to appropriately reflect its own nonperformance risk and the
respective counterparty’s nonperformance risk in the fair value
measurements. In adjusting the fair value of its derivative contracts
for the effect of nonperformance risk, the Company has considered the impact of
netting and any applicable credit enhancements, such as collateral postings,
thresholds and guarantees.
Although
the Company has determined the majority of the inputs used to value its
derivative fall within Level 2 of the fair value hierarchy, the credit valuation
adjustment associated with its derivative utilizes Level 3 inputs, such as
estimates of current credit spreads to evaluate the likelihood of default by the
Company and its counterparty. However, as of March 31, 2008, the
Company has assessed the significance of the impact of the credit valuation
adjustment on the overall valuation of its derivative position and has
determined that the credit valuation adjustment is not significant to the
overall valuation of the Company’s derivative. As a result, the
Company has determined its derivative valuation in its entirety is classified in
Level 2 of the fair value hierarchy.
12. 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 $12.2 million
At March
31, 2008, 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.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Contingencies
Litigation: In the
normal course of business, the Company is subject to 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.
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.
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
13. Segments
The
Company defines business segments by their distinct customer base and service
provided. The Company has identified four reportable segments:
Wholly-Owned 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.
|
|
Three
Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Wholly-Owned
Properties
|
|
|
|
|
|
|
Rental
revenues
|
|
$ |
32,119 |
|
|
$ |
27,486 |
|
Interest
and other income
|
|
|
65 |
|
|
|
71 |
|
Total
revenues from external customers
|
|
|
32,184 |
|
|
|
27,557 |
|
Operating
expenses before depreciation and amortization
|
|
|
13,674 |
|
|
|
11,766 |
|
Interest
expense
|
|
|
6,068 |
|
|
|
5,464 |
|
Operating
income before depreciation, amortization, minority interests
and allocation of corporate overhead
|
|
$ |
12,442 |
|
|
$ |
10,327 |
|
Depreciation
and amortization
|
|
$ |
6,801 |
|
|
$ |
5,837 |
|
Capital
expenditures
|
|
$ |
38,320 |
|
|
$ |
17,113 |
|
Total
segment assets at March 31,
|
|
$ |
1,028,445 |
|
|
$ |
865,119 |
|
On-Campus
Participating Properties
|
|
|
|
|
|
|
|
|
Rental
revenues
|
|
$ |
6,744 |
|
|
$ |
6,337 |
|
Interest
and other income
|
|
|
79 |
|
|
|
78 |
|
Total
revenues from external customers
|
|
|
6,823 |
|
|
|
6,415 |
|
Operating
expenses before depreciation, amortization, ground/facility
lease, and allocation of corporate overhead
|
|
|
2,105 |
|
|
|
1,866 |
|
Ground/facility
lease
|
|
|
359 |
|
|
|
295 |
|
Interest
expense
|
|
|
1,562 |
|
|
|
1,573 |
|
Operating
income before depreciation, amortization, minority interests
and allocation of corporate overhead
|
|
$ |
2,797 |
|
|
$ |
2,681 |
|
Depreciation
and amortization
|
|
$ |
1,069 |
|
|
$ |
1,060 |
|
Capital
expenditures
|
|
$ |
52 |
|
|
$ |
65 |
|
Total
segment assets at March 31,
|
|
$ |
86,386 |
|
|
$ |
89,679 |
|
Development
Services
|
|
|
|
|
|
|
|
|
Development
and construction management fees from external
customers
|
|
$ |
1,656 |
|
|
$ |
405 |
|
Operating
expenses
|
|
|
2,148 |
|
|
|
1,213 |
|
Operating
loss before depreciation, amortization, minority
interests and allocation of corporate overhead
|
|
$ |
(492 |
) |
|
$ |
(808 |
) |
Total
segment assets at March 31,
|
|
$ |
6,640 |
|
|
$ |
1,344 |
|
Property
Management Services
|
|
|
|
|
|
|
|
|
Property
management fees from external customers
|
|
$ |
922 |
|
|
$ |
722 |
|
Intersegment
revenues
|
|
|
1,225 |
|
|
|
1
058 |
|
Total
revenues
|
|
|
2,147 |
|
|
|
1,780 |
|
Operating
expenses
|
|
|
915 |
|
|
|
694 |
|
Operating
income before depreciation, amortization, minority interests
and allocation of corporate overhead
|
|
$ |
1,232 |
|
|
$ |
1,086 |
|
Total
segment assets at March 31,
|
|
$ |
2,015 |
|
|
$ |
1,770 |
|
Reconciliations
|
|
|
|
|
|
|
|
|
Total
segment revenues
|
|
$ |
42,810 |
|
|
$ |
36,157 |
|
Unallocated
interest income earned on corporate cash
|
|
|
18 |
|
|
|
558 |
|
Elimination
of intersegment revenues
|
|
|
(1,225 |
) |
|
|
(1,058 |
) |
Total
consolidated revenues, including interest income
|
|
$ |
41,603 |
|
|
$ |
35,657 |
|
Segment
operating income before depreciation, amortization, minority
interests and allocation of corporate overhead
|
|
$ |
15,979 |
|
|
$ |
13,286 |
|
Depreciation
and amortization
|
|
|
(8,340 |
) |
|
|
(7,268 |
) |
Net
unallocated expenses relating to corporate overhead
|
|
|
(2,136 |
) |
|
|
(10,894 |
) |
Loss
from unconsolidated joint venture
|
|
|
(126 |
) |
|
|
- |
|
Income
tax provision
|
|
|
(60 |
) |
|
|
(60 |
) |
Minority
interests
|
|
|
(408 |
) |
|
|
258 |
|
Income
(loss) from continuing operations
|
|
$ |
4,909 |
|
|
$ |
(4,678 |
) |
Total
segment assets
|
|
$ |
1,123,486 |
|
|
$ |
957,912 |
|
Unallocated
corporate assets and assets held for sale
|
|
|
5,211 |
|
|
|
18,253 |
|
Total
assets
|
|
$ |
1,128,697 |
|
|
$ |
976,165 |
|
AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
14. Subsequent
Events
April 2008 Equity
Offering: On April 23, 2008, the Company completed an equity
offering, consisting of the sale of 9,200,000 shares of the Company’s common
stock at a price of $28.75 per share, including the exercise of 1,200,000 shares
issued as a result of the exercise of the underwriters’ overallotment option in
full at closing. The offering generated gross proceeds of $264.5
million. The aggregate proceeds to the Company, net of the
underwriting discount, structuring fee and estimated expenses of the offering,
were approximately $252.3 million.
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking
Statements
This
report contains forward-looking statements within the meaning of the federal
securities laws. We caution investors that any forward-looking statements
presented in this report, or which management may make orally or in writing from
time to time, are based on management’s beliefs and assumptions made by, and
information currently available to, management. When used, the words
“anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,”
“project,” “should,” “will,” “result” and similar expressions, 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
March 31, 2008, our property portfolio contained 46 student housing properties
with approximately 29,300 beds and approximately 9,700 apartment units,
consisting of 40 owned off-campus properties that are in close proximity to
colleges and universities, two ACE properties currently under development that
will be operated under ground/facility leases with a related university system
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,
primarily for student housing properties owned by colleges and universities,
charitable foundations, and others. As of March 31, 2008, we provided
third-party management and leasing services for 19 properties (seven of which
the Company served as the third-party developer and construction manager) that
represented approximately 15,200 beds in approximately 6,000
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 March 31, 2008, our total
owned and managed portfolio included 65 properties with approximately 44,500
beds in approximately 15,700 units.
Third-Party
Development Services
Our
third-party development and construction management services as of March 31,
2008 consisted of five projects under contract and currently in progress with
fees ranging from $0.2 million to $3.5 million. As of March 31, 2008,
fees of approximately $3.2 million remained to be earned by us with respect to
these projects, which have scheduled completion dates of July 2008 through March
2010.
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
wholly-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
February 2008, we acquired a 144-unit, 528-bed property (Pirate’s Place) located
near the campus of East Carolina University in Greenville, North Carolina, for a
purchase price of $10.6 million, which excludes $0.8 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 approximately $7.0 million in fixed-rate
mortgage debt with an annual interest rate of 7.15% and remaining term to
maturity of 14.9 years.
In
February 2008, we also acquired a 68-unit, 161-bed property (Sunnyside Commons)
located near the campus of West Virginia University in Morgantown, West
Virginia, for a purchase price of $7.5 million, which excludes $0.6 million of
anticipated transaction costs, initial integration expenses and capital
expenditures necessary to bring this property up to our operating
standards. We did not assume any debt as part of this
transaction.
Owned
Development Activities
Overview: As of
March 31, 2008, we were in the process of constructing one owned off-campus
property and two ACE properties that will be operated under ground/facility
leases with a related university system. We estimate that the total
development costs relating to these activities will be approximately $298.8
million. As of March 31, 2008, we have incurred development costs of
approximately $142.1 million in connection with these properties, with the
remaining development costs estimated at approximately $156.7
million. The activities are described below:
Villas at Chestnut Ridge: As
of March 31, 2008, 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 is scheduled to complete construction and
open for occupancy in August 2008 and serve students attending State University
of New York - Buffalo. As of March 31, 2008, the project was
approximately 85% complete, and we estimate that remaining development costs
will be approximately $10.2 million. As of March 31, 2008, 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.
Vista del Sol: As of March
31, 2008, our Vista del Sol ACE property was under construction with total
development costs estimated to be approximately $137.5 million. The
project is scheduled to complete construction and open for occupancy in August
2008 and serve students attending Arizona State University. As of
March 31, 2008, the project was approximately 79% complete, and we estimate that
remaining development costs will be approximately $40.4 million. As
of March 31, 2008, 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.
Barrett Honors
College: As of March 31, 2008, our Barrett Honors College ACE
property was under construction with total development costs estimated to be
approximately $126.5 million. The project is scheduled to complete
construction and open for occupancy in August 2009 and serve students attending
Arizona State University. As of March 31, 2008, the project was
approximately 12% complete, and we estimate that remaining development costs
will be approximately $106.1 million. As of March 31, 2008, we have
funded 100% of the project’s development costs internally and will fund the
remaining development costs internally.
Property
Operations
As
of March 31, 2008, our property portfolio consisted of the
following:
|
|
PROPERTY
|
|
YR
ACQUIRED
/DEVELOPED
(1)
|
|
LOCATION
|
|
PRIMARY
UNIVERSITY SERVED
|
|
UNITS
|
|
BEDS
|
Wholly-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
Tech 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
|
|
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 (2)
|
|
2007
|
|
Newark,
NJ
|
|
Rutgers
University, NJIT, Essex CCC
|
|
234
|
|
838
|
38.
Sunnyside Commons (3)
|
|
2008
|
|
Morgantown,
WV
|
|
West
Virginia University
|
|
68
|
|
161
|
39.
Pirate’s Place (3)
|
|
2008
|
|
Greenville,
NC
|
|
East
Carolina University
|
|
144
|
|
528
|
40.
Vista del Sol (4)
|
|
2008
|
|
Tempe,
AZ
|
|
Arizona
State University
|
|
613
|
|
1,866
|
41.
Villas at Chestnut Ridge (4)
|
|
2008
|
|
Amherst,
NY
|
|
State
University of New York - Buffalo
|
|
196
|
|
552
|
42.
Barrett Honors College (5)
|
|
2009
|
|
Tempe,
AZ
|
|
Arizona
State University
|
|
601
|
|
1,720
|
Total
wholly-owned properties
|
|
|
|
|
|
|
|
7,868
|
|
24,827
|
PROPERTY
|
|
YEAR
ACQUIRED
/
DEVELOPED
(1)
|
|
LOCATION
|
|
PRIMARY
UNIVERSITY SERVED
|
|
UNITS
|
|
BEDS
|
|
|
|
|
|
|
|
|
|
|
|
On-campus
participating properties:
|
|
|
|
|
|
|
|
|
|
|
43.
University Village—PVAMU
|
|
1996
/ 97 / 98
|
|
Prairie
View, TX
|
|
Prairie
View A&M University
|
|
612
|
|
1,920
|
44.
University College—PVAMU
|
|
2000
/ 2003
|
|
Prairie
View, TX
|
|
Prairie
View A&M University
|
|
756
|
|
1,470
|
45.
University Village—TAMIU
|
|
1997
|
|
Laredo,
TX
|
|
Texas
A&M International University
|
|
84
|
|
250
|
46.
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
|
|
|
|
|
|
|
|
9,731
|
|
29,346
|
|
(1)
|
As
of March 31, 2008, the average age of our operating properties was
approximately 7.3 years.
|
|
|
|
|
(2)
|
Construction
was completed and property commenced operations in August
2007.
|
|
|
|
|
(3)
|
Property
was acquired in February 2008.
|
|
|
|
|
(4)
|
Currently
under development with a scheduled completion date of August
2008.
|
|
|
|
|
(5)
|
Currently
under development with a scheduled completion date of August
2009.
|
Results
of Operations
Comparison
of the Three Months Ended March 31, 2008 and March 31, 2007
The
following table presents our results of operations for the three months ended
March 31, 2008 and 2007, including the amount and percentage change in these
results between the two periods:
|
|
Three
Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
($)
|
|
|
Change
(%)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-owned
properties
|
|
$ |
31,681 |
|
|
$ |
27,145 |
|
|
$ |
4,536 |
|
|
|
16.7 |
% |
On-campus
participating properties
|
|
|
6,744 |
|
|
|
6,337 |
|
|
|
407 |
|
|
|
6.4 |
% |
Third
party development services
|
|
|
1,656 |
|
|
|
405 |
|
|
|
1,251 |
|
|
|
308.9 |
% |
Third
party management services
|
|
|
922 |
|
|
|
722 |
|
|
|
200 |
|
|
|
27.7 |
% |
Resident
services
|
|
|
438 |
|
|
|
341 |
|
|
|
97 |
|
|
|
28.4 |
% |
Total
revenues
|
|
|
41,441 |
|
|
|
34,950 |
|
|
|
6,491 |
|
|
|
18.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-owned
properties
|
|
|
13,885 |
|
|
|
11,862 |
|
|
|
2,023 |
|
|
|
17.1 |
% |
On-campus
participating properties
|
|
|
2,295 |
|
|
|
2,026 |
|
|
|
269 |
|
|
|
13.3 |
% |
Third
party development and management services
|
|
|
2,108 |
|
|
|
1,294 |
|
|
|
814 |
|
|
|
62.9 |
% |
General
and administrative
|
|
|
2,134 |
|
|
|
11,328 |
|
|
|
(9,194 |
) |
|
|
(81.2 |
%) |
Depreciation
and amortization
|
|
|
8,029 |
|
|
|
6,970 |
|
|
|
1,059 |
|
|
|
15.2 |
% |
Ground/facility
leases
|
|
|
359 |
|
|
|
295 |
|
|
|
64 |
|
|
|
21.7 |
% |
Total
operating expenses
|
|
|
28,810 |
|
|
|
33,775 |
|
|
|
(4,965 |
) |
|
|
(14.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
12,631 |
|
|
|
1,175 |
|
|
|
11,456 |
|
|
|
975.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
income and (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
162 |
|
|
|
707 |
|
|
|
(545 |
) |
|
|
(77.1 |
%) |
Interest
expense
|
|
|
(6,979 |
) |
|
|
(6,460 |
) |
|
|
(519 |
) |
|
|
8.0 |
% |
Amortization
of deferred financing costs
|
|
|
(311 |
) |
|
|
(298 |
) |
|
|
(13 |
) |
|
|
4.4 |
% |
Loss
from unconsolidated joint venture
|
|
|
(126 |
) |
|
|
- |
|
|
|
(126 |
) |
|
|
100.0 |
% |
Total
nonoperating expenses
|
|
|
(7,254 |
) |
|
|
(6,051 |
) |
|
|
(1,203 |
) |
|
|
19.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income tax provision and minority interests
|
|
|
5,377 |
|
|
|
(4,876 |
) |
|
|
10,253 |
|
|
|
(210.3 |
%) |
Income
tax provision
|
|
|
(60 |
) |
|
|
(60 |
) |
|
|
- |
|
|
|
0.0 |
% |
Minority
interests
|
|
|
(408 |
) |
|
|
258 |
|
|
|
(666 |
) |
|
|
(258.1 |
%) |
Net
income (loss)
|
|
$ |
4,909 |
|
|
$ |
(4,678 |
) |
|
$ |
9,587 |
|
|
|
(204.9 |
%) |
Wholly-Owned
Properties Operations
Revenues
from our wholly-owned properties for the three months ended March 31, 2008
compared with the same period in 2007 increased by $4.5 million primarily due to
the acquisition of two properties during the three months ended March 31, 2008,
the acquisition of four properties during the three months ended March 2007, and
the completion of construction and opening of University Centre in August
2007. Operating expenses increased approximately $2.0 million for the
three months ended March 31, 2008 compared with the same period in 2007,
primarily due to the same factors which affected the increase in
revenues.
New Property
Operations. We acquired two properties in February 2008, a
528-bed property (Pirate’s Place) located near the campus of East Carolina
University in Greenville, North Carolina and a 161-bed property (Sunnyside
Commons) located near the campus of West Virginia University in Morgantown, West
Virginia. In January 2007, we acquired a 752-bed property (Village on
Sixth) located near the campus of Marshall University in Huntington, West
Virginia. In addition, 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”). Finally, in August 2007, we
completed construction of and opened University Centre, an 838-bed property
serving students attending Rutgers University, NJIT and various surrounding
educational institutions. These new properties contributed $3.6
million of additional revenues and $1.9 million of additional operating expenses
during the three months ended March 31, 2008 as compared to the three months
ended March 31, 2007.
Same Store Property Operations
(Excluding New Property Activity). We had 32 properties
containing 16,440 beds which were operating during both the three months ended
March 31, 2008 and 2007. These properties produced revenues of $26.4
million and $25.4 million during the three months ended March 31, 2008 and 2007,
respectively, an increase of $1.0 million. This increase was
primarily due to an increase in average rental rates during the three months
ended March 31, 2008 as compared to the same period in 2007, as well as the
improved lease up for the 2007/08 academic year, which resulted in average
occupancy rates increasing to 98.4% during the three months ended March 31, 2008
from 97.4% during the three months ended March 31, 2007. Revenues in
2008 will be dependent on 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 $11.0
million during both the three month periods ended March 31, 2008 and
2007. We anticipate that operating expenses for the full year 2008
will increase slightly as compared with 2007 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 March
31, 2008 and 2007. Revenues from our same store on-campus
participating properties increased to $6.7 million during the three months ended
March 31, 2008 from $6.3 million for the three months ended March 31, 2007, an
increase of $0.4 million. This increase was primarily due to an
increase in average occupancy from 93.3% during the three months ended March 31,
2007 to 94.4% for the three months ended March 31, 2008, as well as an increase
in average rental rates during the three months ended March 31, 2008 as compared
to the same period in 2007.
At these
properties, operating expenses increased by $0.3 million from $2.0 million
during the three months ended March 31, 2007 to $2.3 million for the three month
ended March 31, 2008. This increase was primarily the result of an
increase in bad debt expense at each of our on-campus participating
properties. We anticipate that operating expenses for the full year
2008 will increase slightly as compared with 2007 as a result of expected
increases in insurance costs, utility costs and general inflation.
Third
Party Development Services Revenue
Third
party development services revenue increased by $1.3 million from $0.4 million
during the three months ended March 31, 2007 to $1.7 million for the three
months ended March 31, 2008. We had five projects in progress during
the three months ended March 31, 2008 with an average contractual fee of
approximately $2.1 million, as compared to the three months ended March 31, 2007
in which we had four projects in progress with an average contractual fee of
$1.6 million. We anticipate third-party development services revenue
for the full year 2008 to increase due to awards in 2007 that are expected to
commence during the remainder of 2008.
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 Revenues
Third
party management services revenues increased by $0.2 million from $0.7 million
for the three months ended March 31, 2007 to $0.9 million for the three months
ended March 31, 2008. This increase was primarily the result of the
commencement of four management contracts in the fourth quarter of
2007. We anticipate that third-party management services revenues for
the full year 2008 will increase as compared with 2007, primarily as a result of
the previously mentioned contracts obtained during the fourth quarter of 2007
and new contracts anticipated to be obtained during 2008.
Third
Party Development and Management Services Expenses
Third
party development and management services expenses increased by $0.8 million,
from $1.3 million during the three months ended March 31, 2007, to $2.1 million
for the three months ended March 31, 2008. This increase was
primarily due to an increase in payroll and related costs of $0.5 million as a
result of an increase in projects in progress and management
contracts. In addition, expenses incurred for the West Virginia
University projects increased by approximately $0.2 million as a result of the
progress of those projects during the respective periods. Third-party
development and management services expenses for the full year 2008 will be
dependent on the level of awards we pursue, and as previously mentioned, any
pre-development costs charged against income for projects which do not
close.
General and
Administrative
General
and administrative expenses decreased approximately $9.2 million, from $11.3
million during the three months ended March 31, 2007, to $2.1 million for the
three months ended March 31, 2008. This decrease was primarily due to
a compensation charge of $9.6 million recorded during the three months ended
March 31, 2007 related to the Company’s 2004 Outperformance Bonus
Plan. This decrease was offset by 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 wholly-owned property portfolio from the property
acquisitions in 2007 and 2008 and the completion of a wholly-owned development
project in August 2007. We anticipate general and administrative
expenses to decrease for the full year 2008 as a result of the $10.4 million
Outperformance Bonus Plan compensation charge recorded in 2007, offset by
anticipated increases in payroll and other related costs in 2008 as a result of
the previously mentioned increases in corporate staffing levels experienced as a
result of the recent growth of our wholly-owned portfolio and the expected
acquisition of GMH Communities Trust in the second quarter of 2008.
Depreciation
and Amortization
Depreciation
and amortization increased by $1.0 million, from $7.0 million during the three
months ended March 31, 2007 to $8.0 million for the three months ended March 31,
2008. This increase was due to the acquisition of two properties in
February 2008, the acquisition of four properties during the first quarter 2007
and the completion of construction and opening of a wholly-owned development
project in August 2007. In conjunction with the acquisition of two
properties in February 2008 and four properties in the first quarter of 2007, 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 $0.1 million and $0.3 million of additional
depreciation and amortization expense for the three months ended March 31, 2008
and 2007, respectively, a decrease of $0.2 million. We expect
depreciation and amortization to increase for the full year 2008 as a result of
a full year’s depreciation on properties acquired and placed in service during
2007, the $18.1 million of recently completed 2008 acquisitions and the addition
of the GMH properties to our portfolio.
Interest
Income
Interest
income decreased by $0.5 million, from $0.7 million during the three months
ended March 31, 2007 to $0.2 million for the three months ended March 31,
2008. This decrease was primarily due to interest earned during the
three months ended March 31, 2007 on the remaining proceeds from our September
2006 equity offering and net proceeds from the disposition of a wholly-owned
property in December 2006.
Interest
Expense
Interest
expense increased $0.5 million, from $6.5 million during the three months ended
March 31, 2007, to $7.0 million for the three months ended March 31,
2008. This increase was primarily due to additional interest incurred
during the three months ended March 31 2008 associated with debt assumed or
incurred in connection with the previously mentioned 2008 and 2007 property
acquisitions, net of the amortization of debt premiums and discounts recorded to
reflect the market value of debt assumed. In addition, there was a
$0.2 million increase in interest expense on our revolving credit facility due
to a zero balance on our revolving credit facility during the three months ended
March 31, 2007. These increases were offset by a $0.3 million
increase in capitalized interest as a result of more owned development activity
during the three months ended March 31, 2008 as compared to the same period in
2007. We anticipate that interest expense will increase for the full
year 2008 due to interest expense assumed or incurred in connection with
property acquisitions discussed above and the debt to be incurred in connection
with the Merger, including the debt to be assumed in connection with the
addition of the GMH properties to our portfolio.
Loss
from Unconsolidated Joint Venture
We own an
equity interest in a joint venture that owns a military housing privatization
project with the United States Navy, as discussed in Note 7 in the accompanying
Notes to Consolidated Financial Statements contained in Item 1
herein. In December 2007, the joint venture closed and obtained
financing through taxable revenue bonds and our share of the loss from the joint
venture is reflected under loss from unconsolidated joint venture in the
consolidated statement of operations for the three months ended March 31,
2008.
Minority
Interests
The
variance in minority interests is primarily due to the Company being in a net
income position for the three months ended March 31, 2008 as compared to a net
loss position for the three months ended March 31, 2007. 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. See Note 6 in the accompanying Notes to Consolidated
Financial Statements contained in Item 1 herein for a detailed discussion of
minority interests.
Cash
Flows
Comparison
of Three Months Ended March 31, 2008 and March 31, 2007
Operating
Activities
For the
three months ended March 31, 2008, net cash provided by operating activities
before changes in working capital accounts provided approximately $13.8 million,
as compared to $2.2 million for the three months ended March 31, 2007, an
increase of $11.6 million. Changes in working capital accounts utilized
$6.0 million for the three months ended march 31, 2008 while working capital
accounts provided $1.0 million for the three months ended March 31, 2007, a
decrease of $7.0 million. These changes were primarily due to the timing
of financial aid received from Prairie View A&M University during the
respective periods.
Investing
Activities
Investing
activities utilized $49.8 million and $55.7 million for the three months ended
March 31, 2008 and 2007, respectively. The decrease in cash utilized
in investing activities during the three months ended March 31, 2008 related
primarily to a $24.0 million decrease in the use of cash to acquire
properties. We acquired four properties during the first quarter of
2007 as compared to two properties during the first quarter of
2008. This decrease was offset by an $18.0 million increase in cash
used to fund the construction of our wholly owned development
properties. Three wholly-owned properties were under development
throughout the first quarter of 2008, while two wholly-owned properties were
under development throughout the first quarter of 2007 and another property
began development toward the end of the first quarter of 2007, one of which was
completed in Fall 2007. For the three months ended March 31, 2008 and
2007, our cash utilized in investing activities was comprised of the
following:
|
|
Three
Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Property
and land acquisitions
|
|
$ |
(14,283 |
) |
|
$ |
(38,330 |
) |
Capital
expenditures for on-campus participating properties
|
|
|
(52 |
) |
|
|
(65 |
) |
Capital
expenditures for wholly-owned properties
|
|
|
(888 |
) |
|
|
(637 |
) |
Investment
in wholly-owned properties under development
|
|
|
(34,434 |
) |
|
|
(16,476 |
) |
Purchase
of corporate furniture, fixtures, and equipment
|
|
|
(190 |
) |
|
|
(235 |
) |
Total
|
|
$ |
(49,847 |
) |
|
$ |
(55,743 |
) |
Financing
Activities
Cash
provided by financing activities totaled $43.0 million for the three months
ended March 31, 2008 as compared to $1.5 million of cash used for financing
activities during the three months ended March 31, 2007. The increase
in cash provided by financing activities was primarily the result of a $27.0
million increase in proceeds received from our revolving credit facility, which
was used to fund the acquisition of two properties in February 2008 and to fund
the construction of Barrett Honors College, one of our owned ACE development
properties. In addition, there was a $19.8 million increase in
proceeds from construction loans used to fund the construction of Vista del Sol,
our other owned ACE development and Villas at Chestnut Ridge, an owned
off-campus development property. These increases were offset by a
$1.5 million increase in distributions to common and restricted stockholders as
a result of the October 2007 equity offering.
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 months ended March 31, 2008 and 2007:
|
|
Three
Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Revenues
|
|
$ |
6,744 |
|
|
$ |
6,337 |
|
Direct
operating expenses (1)
|
|
|
(2,105 |
) |
|
|
(1,866 |
) |
Amortization
|
|
|
(1,069 |
) |
|
|
(1,061 |
) |
Amortization
of deferred financing costs
|
|
|
(46 |
) |
|
|
(43 |
) |
Ground/facility
leases (2)
|
|
|
(359 |
) |
|
|
(295 |
) |
Net
operating income
|
|
|
3,165 |
|
|
|
3,072 |
|
Interest
income
|
|
|
79 |
|
|
|
78 |
|
Interest
expense
(3)
|
|
|
(1,562 |
) |
|
|
(1,573 |
) |
Net
income
|
|
$ |
1,682 |
|
|
$ |
1,577 |
|
|
(1)
|
Excludes
property management fees of $0.3 million for both the three month periods
ended March 31, 2008 and 2007. 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 $2.0 million and $2.2
million for the three months ended March 31, 2008 and 2007,
respectively.
|
Liquidity
and Capital Resources
Cash
Balances and Liquidity
As of
March 31, 2008, excluding our on-campus participating properties, we had $18.1
million in cash and cash equivalents and restricted cash as compared to $18.4
million in cash and cash equivalents and restricted cash as of December 31,
2007. 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 March 31, 2008 also
included $0.4 million of funds held in escrow in connection with potential
development opportunities.
As of
March 31, 2008, our short-term liquidity needs included, but were not limited
to, the following: (i) cash consideration of approximately $240.0 million
payable to shareholders and unitholders of GMH Communities Trust in connection
with the pending acquisition, expected to occur in the second quarter of 2008,
(ii) remaining estimated transaction costs of approximately $55.0 million
associated with the pending acquisition of GMH Communities Trust, (iii)
anticipated distribution payments to our common and restricted stockholders
totaling approximately $37.4 million based on an anticipated annual distribution
of $1.35 per share based on the number of our shares outstanding as of March 31,
2008, including those distributions required to maintain our REIT status and
satisfy our current distribution policy, (iv) anticipated distribution payments
to our Operating Partnership unitholders totaling approximately $2.1 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 March 31, 2008,
(v) development costs for Barrett Honors College over the next 12 months,
estimated to be approximately $85.3 million, and (vi) funds for other potential
future acquisitions and development projects. We expect to meet our
short-term liquidity requirements by (i) using the remaining proceeds from our
April 2008 equity offering which generated net proceeds of approximately $252.3
million, (ii) entering into a joint venture with Fidelity in which we will
contribute 15 GMH student housing properties to the joint venture and will
receive proceeds of approximately $105.0 million and retain a 10% equity
interest, (iii) potentially disposing of properties, (iv) borrowing under our
existing revolving credit facility, (v) borrowing under a $100.0 million
committed term loan facility expected to close in the second quarter of 2008,
and (vi) utilizing net cash provided by operations.
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 and committed term loan 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. We anticipate increasing the size of the facility to $160
million in the second quarter of 2008. 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 March 31, 2008, the balance outstanding on the
revolving credit facility totaled $36.6 million, bearing interest at a weighted
average rate of 4.06%, with remaining availability under the facility (subject
to the satisfaction of certain financial covenants) totaling approximately $78.1
million. In April 2008, we paid off the entire balance on the
revolving credit facility by using proceeds from an equity offering (See Note
14).
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, as adjusted, for any four consecutive quarters. The
financial covenants also include consolidated net worth and leverage ratio
tests. As of March 31, 2008, 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 March 31, 2008, we have deferred approximately $3.6
million in pre-development costs related to third-party and owned development
projects that have not yet commenced construction.
Indebtedness
As of
March 31, 2008, we had approximately $600.5 million of outstanding consolidated
indebtedness (excluding net unamortized debt premiums/discounts of approximately
$4.2 million), comprised of a $36.6 million balance on our unsecured revolving
credit facility, $475.7 million in mortgage and construction loans secured by 33
of our wholly-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 March 31, 2008 was 6.07%. As of March 31, 2008,
approximately 18.1% of our total consolidated indebtedness was variable rate
debt, comprised of our revolving credit facility and our Vista del Sol and
Villas at Chestnut Ridge construction loans discussed below.
Wholly-Owned
Properties
The
weighted average interest rate of the $475.7 million of wholly-owned mortgage
and construction debt was 6.02% as of March 31, 2008. 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; in certain cases
prepayment is allowed, subject to prepayment penalties.
The
development and construction of Vista del Sol, an ACE 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 interest rate may be reduced to LIBOR plus
1.20% once construction of the property is complete and certain operations
hurdles are met. 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 March 31, 2008, the balance outstanding on
the construction loan totaled $52.8 million, bearing interest at a weighted
average rate of 4.14%.
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 March 31, 2008,
the balance outstanding on the construction loan totaled $20.2 million, bearing
interest at a weighted average rate of 4.32%.
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 March 31, 2008 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 March 31, 2008.
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
(loss):
|
|
Three
Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Net
income (loss)
|
|
$ |
4,909 |
|
|
$ |
(4,678 |
) |
Minority
interests
|
|
|
408 |
|
|
|
(258 |
) |
Loss
from unconsolidated joint venture (1)
|
|
|
126 |
|
|
|
- |
|
FFO
from unconsolidated joint venture (1)
|
|
|
(126 |
) |
|
|
- |
|
Real
estate related depreciation and amortization:
|
|
|
|
|
|
|
|
|
Total
depreciation and amortization
|
|
|
8,029 |
|
|
|
6,970 |
|
Corporate
furniture, fixtures, and equipment depreciation
|
|
|
(181 |
) |
|
|
(94 |
) |
Funds
from operations (“FFO”) (2)
|
|
$ |
13,165 |
|
|
$ |
1,940 |
|
|
|
|
|
|
|
|
|
|
FFO
per share – diluted (2)
|
|
$ |
0.45 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding – diluted
|
|
|
29,161,145 |
|
|
|
25,394,550 |
|
|
(1)
|
Represents
an unconsolidated joint venture which closed in December
2007. Our share of the FFO from this unconsolidated joint
venture is included for purposes of calculating FFO but is excluded for
purposes of calculating FFOM, as management believes this amount does not
accurately reflect our participation in the economics of the
transaction. For the three months ended March 31, 2008, our
share of the venture’s FFO equals our share of the net loss, as there was
no depreciation expense incurred during the period.
|
|
|
|
|
(2)
|
During
the three months ended March 31, 2007, we recorded a compensation charge
of approximately $9.6 million, or $0.38 per fully diluted share, related
to the 2004 Outperformance Bonus Plan. Excluding this
compensation charge, FFO for the three months ended March 31, 2007 would
have been $11.6 million, or $0.46 per fully diluted
share.
|
While our
on-campus participating properties contributed $6.7 million and $6.3 to our
revenues for the three months ended March 31, 2008 and 2007, 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 March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Funds
from operations
|
|
$ |
13,165 |
|
|
$ |
1,940 |
|
Elimination
of operations of on-campus participating properties and unconsolidated
joint venture:
|
|
|
|
|
|
|
|
|
Net
income from on-campus participating properties
|
|
|
(1,682 |
) |
|
|
(1,577 |
) |
Amortization
of investment in on-campus participating properties
|
|
|
(1,069 |
) |
|
|
(1,061 |
) |
FFO
from unconsolidated joint venture (1)
|
|
|
126 |
|
|
|
- |
|
|
|
|
10,540 |
|
|
|
(698 |
) |
Modifications
to reflect operational performance of on-campus participating
properties:
|
|
|
|
|
|
|
|
|
Our
share of net cash flow (2)
|
|
|
359 |
|
|
|
295 |
|
Management
fees
|
|
|
308 |
|
|
|
290 |
|
Impact
of on-campus participating properties
|
|
|
667 |
|
|
|
585 |
|
Funds
from operations – modified for operational performance of on-campus
participating properties (“FFOM”) (3)
|
|
$ |
11,207 |
|
|
$ |
(113 |
) |
|
|
|
|
|
|
|
|
|
FFOM
per share – diluted (3)
|
|
$ |
0.38 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding – diluted
|
|
|
29,161,145 |
|
|
|
25,394,550 |
|
|
(1)
|
Represents
an unconsolidated joint venture which closed in December
2007. Our share of the FFO from this unconsolidated joint
venture is included for purposes of calculating FFO but is excluded for
purposes of calculating FFOM, as management believes this amount does not
accurately reflect our participation in the economics of the
transaction. For the three months ended March 31, 2008, our
share of the venture’s FFO equals our share of the net loss, as there was
no depreciation expense incurred during the period.
|
|
|
|
|
(2)
|
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.
|
|
|
|
|
(3)
|
During
the three months ended March 31, 2007, we recorded a compensation charge
of approximately $9.6 million, or $0.38 per fully diluted share, related
to the 2004 Outperformance Bonus Plan. Excluding this
compensation charge, FFOM for the three months ended March 31, 2007 would
have been $9.5 million, or $0.38 per fully diluted
share.
|
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.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
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,
2007.
Item
4. Controls and Procedures
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
Item
6. Exhibits
Exhibit
|
|
|
Number
|
|
Description of Document
|
31.1
|
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
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.
|
SIGNATURES
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.
|
AMERICAN
CAMPUS COMMUNITIES, INC.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
William C. Bayless, Jr.
|
|
|
|
William
C. Bayless, Jr.
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Jonathan A. Graf
|
|
|
|
Jonathan
A. Graf
|
|
|
|
Executive
Vice President,
|
|
|
|
Chief
Financial Officer and
Treasurer
|