American Campus Communities, Inc. (NYSE: ACC), the nations largest owner and manager of high-quality student housing properties, today provided an update regarding the novel coronavirus (COVID-19) and announced the completion of the disposition of The Varsity for $148.0 million.
The company recently released a COVID-19 Statement, which outlines efforts to support its residents and employees impacted by the pandemic, including:
- Waiving all late fees and financial-related eviction proceedings temporarily and working with residents and families who endure financial hardship on a case by case basis.
- Ensuring our residents continue to have housing in an environment conducive to academic success as the universities we serve temporarily move toward on-line and alternate methods of delivering the academic curriculum to complete the spring semester.
- Adopting relevant guidelines regarding social distancing issued by the CDC and communicated all guidelines to residents.
- Following CDC guidelines for daily cleaning and disinfecting, which include everything from hand-washing hygiene and cleaning product specifications to open area cleaning procedures.
- Adapting our policies and procedures to be sensitive to the potential financial hardship that many of our residents and their families might experience.
- Limiting employee hours on-site, but not reducing compensation, and limiting in-person contact while continuing essential activities such as emergency work orders and life/safety maintenance.
- Providing employees with extended emergency leave.
Our hearts go out to all of our residents and their families who will experience hardships as a result of the COVID-19 pandemic. To assist, we will be waiving all late fees and financial-related eviction proceedings at this time and will work with residents and families who endure financial hardship on a case by case basis, said Bill Bayless, American Campus Communities CEO. Our primary focus is on supporting our residents, employees and university partners during this tumultuous time.
With nearly all of the universities we serve moving to some form of on-line education to deliver their academic curriculums, permitting students to complete and earn full credit for the spring semester, it is our goal to ensure that our residents can continue to receive academic instruction, complete their coursework, and have a home conducive to their academic success. As such, a large majority of our communities are designed to deliver a minimum of 200 megabits per resident with a maximum of 1 gigabit per resident at some of our communities. Ensuring adequate broadband service for our residents to continue to receive academic instruction and to complete their coursework has become the top priority of our IT department. At our on-campus properties, we are working hand-in-hand with each of our client universities to facilitate their administrative, financial and student policy objectives during this crisis.
Capital Recycling and Balance Sheet Liquidity
On March 20, 2020, the company completed the previously announced disposition of The Varsity, a 901-bed property serving students attending the University of Maryland in College Park. The property was sold for $148.0 million, representing an economic cap rate of 4.1 percent based on in-place rental revenue, escalated trailing-12 operating expenses and historical average capital expenditures.
This sale completes the companys planned 2020 capital sourcing transactions, which also included the previously completed issuance of $400.0 million of 10-year unsecured notes at a yield of 2.872 percent and redemption of $400.0 million of 3.350% unsecured notes that were due to mature in October 2020. These completed transactions support the companys strong, investment-grade balance sheet with ample liquidity. As of March 24, 2020, the Company had approximately $150 million in cash and over $390 million available on its unsecured revolving credit facility. The company has no remaining debt maturities in 2020 and approximately $230 million in planned development expenditures for the remainder of the year.
Academic Year 2020-2021 Preleasing Update
As of March 24, 2020, the companys same store wholly-owned portfolio was 72.5 percent preleased compared to 69.2 percent preleased for the same date prior year, which to date has been at a pace consistent with the previously stated opening same store rental revenue growth range of 1.5 percent to 3.0 percent for the 2020-2021 academic year.
While it is not our policy to provide interim preleasing updates, with the current circumstances surrounding COVID-19 we felt it was important to provide an update at this time, said Jennifer Beese, American Campus Communities COO. Our leasing velocity has been very strong this year. As of March 24, 2020, our same store preleasing is approximately 3,200 beds ahead of the prior year velocity. With many universities extending their spring break an additional week and state and local municipalities issuing shelter in place orders, we have seen a slow-down in physical traffic, and while we continue to conduct leasing through virtual channels, we expect slower leasing velocity until shelter in place orders are lifted. We are pleased that our current leasing status provides some level of cushion as this intermittent change in leasing velocity for the fall takes place. With regard to the current spring semester, we are attempting to accommodate students who have been displaced due to on-campus residence hall closures where we have available space.
2020 Development Update
The company continues construction on its owned development pipeline that includes $279.7 million of deliveries in May through August 2020. At present, these projects remain on-time and on-budget and the company has not experienced supply chain disruption or labor shortages that would impact delivery. The company is staying abreast of the policies of our partner institutions and municipalities regarding access to development sites and inspections, which have been accessible and continue to date. Due to the evolving environment and uncertainties related to COVID-19, these circumstances are subject to change.
Given the uncertain scope, duration and rapidly evolving nature of the economic impacts of the COVID-19 pandemic and the related university housing policy changes, the company is unable to fully determine or quantify the potential financial impact to its business at this time. The company currently expects first quarter 2020 results to be in-line with previously announced guidance; however, due to the current uncertainty surrounding the pandemic, the company is withdrawing its full year 2020 outlook and does not plan to provide an update to its full year 2020 outlook until there is further clarity on the impact of the pandemic.
Non-GAAP Financial Measures
The National Association of Real Estate Investment Trusts (“NAREIT”) currently defines Funds from Operations (“FFO”) as net income or loss attributable to common shares computed in accordance with generally accepted accounting principles (“GAAP”), excluding gains or losses from depreciable operating property sales, impairment charges and real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We present FFO because we consider it an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. We also believe it is meaningful to present a measure we refer to as FFO-Modified, or (FFOM), which reflects certain adjustments related to the economic performance of our on-campus participating properties and excludes property acquisition costs and other non-cash items, as we determine in good faith. FFO and FFOM should not be considered as alternatives to net income or loss computed in accordance with GAAP as an indicator of our financial performance or to cash flow from operating activities computed in accordance with GAAP as an indicator of our liquidity, nor are these measures indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions.
The company defines property net operating income (NOI) as property revenues less direct property operating expenses, excluding depreciation, but including allocated corporate general and administrative expenses.
About American Campus Communities
American Campus Communities, Inc. is the largest owner, manager and developer of high-quality student housing communities in the United States. The company is a fully integrated, self-managed and self-administered equity real estate investment trust (REIT) with expertise in the design, finance, development, construction management and operational management of student housing properties. As of December 31, 2019, American Campus Communities owned 167 student housing properties containing approximately 112,800 beds. Including its owned and third-party managed properties, ACC’s total managed portfolio consisted of 203 properties with approximately 139,300 beds. Visit www.americancampus.com.
In addition to historical information, this press release contains forward-looking statements under the applicable federal securities law. These statements are based on managements current expectations and assumptions regarding markets in which American Campus Communities, Inc. (the Company) operates, operational strategies, anticipated events and trends, the economy, and other future conditions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. These risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward looking-statements include those related to the COVID-19 pandemic, about which there are still many unknowns, including the duration of the pandemic and the extent of its impact, and those discussed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading Risk Factors and under the heading Business – Forward-looking Statements and subsequent quarterly reports on Form 10-Q. We undertake no obligation to publicly update any forward-looking statements, including our preleasing activity or expected first quarter 2020 operating results, whether as a result of new information, future events, or otherwise.
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