News Column

American Campus Communities Posts Fourth Quarter and Year End 2013 Financial Results

February 17, 2014

American Campus Communities, Inc. announced the following financial results for the quarter and year ended December 31, 2013.

In a release on February 12, the company noted that highlights include:

Fourth Quarter 2013

-Increased quarterly FFOM to $70.7 million or $0.66 per fully diluted share compared to $57.1 million or $0.56 per fully diluted share in the fourth quarter prior year, an increase of 17.9 percent per share. Excluding fourth quarter acquisition expenses of $2.1 million in 2013 and $3.3 million in 2012, FFOM per fully diluted share would have been $0.68 and $0.59, respectively, an increase of 15.3 percent per share.

-Increased same store Net Operating Income (NOI) by 0.8 percent over the fourth quarter 2012.

-Achieved 96.7 percent same store occupancy as of December 31, 2013 compared to 96.8 percent for the same date prior year.

-Commenced construction on a 734-bed, $64.6 million, owned off- campus development pedestrian to the University of Oregon, which is slated for occupancy in Fall 2015.

-Completed the disposition of University Mills, a 481-bed non- core property located in Cedar Falls, Iowa serving students of the University of Northern Iowa, for $14.5 million. Subsequent to quarter end, disposed of Hawks Landing, a 484-bed non-core property located approximately one mile from Miami University of Ohio, for $17.3 million.

-Closed the previously announced 924-bed Park Point acquisition, located adjacent to the Rochester Institute of Technology, for $100.3 million.

-Completed the remaining $110.5 million previously announced pipeline acquisitions, which totaled 1,159 beds and 44,000 square feet of retail. The two core, mixed-use assets are pedestrian to the campuses of the University of North Texas and the University of Louisville.

Full Year 2013

-Increased full year FFOM to $236.6 million or $2.22 per fully diluted share compared to $165.0 million or $1.91 per fully diluted share for the full year 2012, an increase of 16.2 percent per share. Excluding acquisition expenses of $2.4 million in 2013 and $9.7 million in 2012, FFOM per fully diluted share would have been $2.24 and $2.02, respectively, an increase of 10.9 percent per share.

-Increased same store Net Operating Income (NOI) by 0.7 percent over the year ended December 31, 2012.

-Completed construction and opened seven owned core pedestrian developments totaling $311.9 million containing 3,945 beds, including three on-campus American Campus Equity (ACE) communities totaling $164.0 million and 2,013 beds. The average occupancy of the seven new developments was 98.1 percent as of December 31, 2013.

-Closed and placed into service two core pedestrian presale developments totaling $71.1 million, which were 96.9 percent occupied as of December 31, 2013. Executed a $32.3 million presale mezzanine development agreement to acquire a 526-bed core, pedestrian asset serving students of the University of Tennessee- Knoxville, to be delivered in Fall 2014.

-Acquired four core pedestrian off-campus properties containing 2,392 beds for a total purchase price of $237.2 million. The communities had an average age of 3.2 years, an average distance to campus of 0.1 miles and were 100 percent occupied as of December 31, 2013.

-Disposed of six owned non-core properties totaling 4,079 beds with an average age of 17.8 years for gross proceeds of $184.2 million.

-Commenced or continued construction on seven core pedestrian owned-development projects to be delivered in 2014 and 2015, totaling approximately $465.5 million and containing 5,097 beds with average distance to campus of 0.1 miles.

-Completed and delivered three on-campus third-party development projects totaling 1,156 beds, which earned a combined total of $4.9 million in third-party fees over the respective construction periods.

-In May, increased the quarterly common dividend to $1.44 per share on an annualized basis, an increase of 6.7 percent versus the previous quarterly dividend amount.

-Named 2013 Multifamily Development Firm of the Year by the National Association of Home Builders Multifamily Pillars of the Industry Awards.

-Named one of America's Top 100 Most Trustworthy Companies by Forbes based on results from GMI Ratings (GMI) analysis.

Fourth Quarter Operating Results

The company also noted, revenue for the 2013 fourth quarter totaled $182.7 million, up 22.4 percent from $149.3 million in the fourth quarter 2012 and operating income for the quarter increased $10.8 million or 28.4 percent over the prior year fourth quarter. The increase in revenues and operating income was primarily due to growth resulting from property acquisitions, recently completed development properties, and increased rental rates for the 2013- 2014 academic year. Net income for the 2013 fourth quarter totaled $27.8 million, or $0.26 per fully diluted share, compared with net income of $23.7 million, or $0.23 per fully diluted share, for the same quarter in 2012. The increase to net income as compared to the prior year quarter is primarily due to the increases in operating income discussed above, offset by an increase in interest expense related to loans assumed in connection with 2012 and 2013 property acquisitions and the $400 million senior unsecured notes offering in April 2013. FFO for the 2013 fourth quarter totaled $72.8 million, or $0.68 per fully diluted share, as compared to $58.5 million, or $0.57 per fully diluted share for the same quarter in 2012. FFOM for the 2013 fourth quarter was $70.7 million, or $0.66 per fully diluted share as compared to $57.1 million, or $0.56 per fully diluted share for the same quarter in 2012. Excluding acquisition- related costs, FFO for the 2013 fourth quarter totaled $74.9 million or $0.70 per fully diluted share and FFOM for the 2013 fourth quarter totaled $72.8 million or $0.68 per fully diluted share.

NOI for same store properties was $74.8 million in the quarter, up 0.8 percent from $74.2 million in the 2012 fourth quarter. Same store property revenues increased by 0.9 percent over the 2012 fourth quarter due to an increase in average rental rates for the 2013-2014 academic year. Same store property operating expenses increased by 1.0 percent over the prior year quarter. NOI for the total portfolio increased 22.2 percent to $96.7 million for the quarter from $79.1 million in the comparable period of 2012.

"Despite the complex integrations that occurred during 2013, we delivered double digit quarterly and full year per share growth in FFOM," said Bill Bayless, American Campus CEO. "Going forward, we are pleased with our robust preleasing activity on both our same store and new development properties, and look to continue this positive momentum to maximize rental revenue growth in the upcoming academic year. Additionally, as part of our goal of returning to more normalized operating expense levels, our 2014 operating budget targets a $5 million reduction of the prior year overages in the areas of marketing, repairs and maintenance, corporate travel, and acquisition integration expenses. These efforts along with prudent asset management initiatives should lead to improving operating margins moving into 2015 and beyond."

Portfolio Update

As of February 10, the company's same store portfolio was 57.7 percent applied for and 50.9 percent leased for the upcoming academic year compared to 49.5 percent applied for and 44.5 percent leased for the same date prior year, with a 2.1 percent current rental rate increase projected over the in-place rent.

"It is important to note that our preleasing activity is not only well ahead of last year's pace but is also 450 basis points ahead in leases when compared to our Fall 2012 lease up two years ago," said Bayless. "In fact, with our same store portfolio being 50.9 percent preleased, we have surpassed the level we achieved in any of the last 5 years. We hope this will dispel concerns that 2013's slower leasing velocity was a result of weakening industry fundamentals. We continue to believe that our sector is in the early stages of modernization and offers opportunities for consistent long-term value creation not seen in more mature sectors."

Developments

The company is progressing on the construction of its seven owned- development projects with expected deliveries in Fall 2014 and 2015. The developments total approximately $465.5 million, are all core Class A assets located on or pedestrian to campus in their respective markets and average less than 0.1 miles to campus.

The company commenced construction on a 734-bed core mixed-use development located across the street from the University of Oregon campus in Eugene. The $64.6 million community will feature state-of- the-art outdoor amenities including a two-tiered courtyard with a heated pool, spa and outdoor kitchen with a fire pit, as well as indoor amenities, which include a large fitness center, social and study spaces, and ample indoor bicycle parking. The development is scheduled for occupancy in Fall 2015.

Subsequent to year end, the company acquired the Boulder Outlook Hotel property, which is located pedestrian to the campus of the University of Colorado-Boulder, for $9.3 million. The property is fully-entitled for a 400-bed student housing community and the existing hotel operations will be run by a third-party manager. We are currently anticipating demolition and construction related activities to commence during the fourth quarter of 2014 or early 2015, with an anticipated delivery of Fall 2016.

Acquisitions

As previously announced, the company acquired Park Point at Rochester Institute of Technology, a fully occupied 924-bed community for $100.3 million. The core pedestrian property is adjacent to campus and located in a market that poses significant hurdles for future development due to federally and state protected wetlands throughout the immediate area. The proforma stabilized cap rate for the project is 6.1 percent nominal and 5.8 percent economic.

In November, the company closed on the $59.2 million pipeline acquisition of Cardinal Towne, a 545-bed community located pedestrian to the academic core of the University of Louisville. The community, which was built in 2011 - 2012 was 100 percent leased for this academic year. In addition to its superior location, the property features approximately 33,000 square feet of student oriented retail, which is currently 100 percent leased, a community center with fitness center, theater room, game room, swimming pool and garage parking. The company is targeting a proforma cap rate of 6.0 percent nominal and 5.6 percent economic.

Also in November, finalizing the remaining pipeline acquisitions, the company acquired U Centre at Fry Street for $51.3 million. The community, which opened in 2012, is fully occupied for the current academic year and is located across the street from the core campus of the University of North Texas in Denton. The pedestrian property features a clubhouse with two-story fitness center, business center, game room, resort-style swimming pool and 11,000 square feet of student-oriented retail, and offers spacious floor plans with bed/ bath parity. The company is targeting a proforma year one cap rate of 5.8 percent nominal and 5.5 percent economic.

Dispositions

In November, the company sold University Mills, a non-core 481- bed community serving students attending the University of Northern Iowa, for a total sales price of $14.5 million. Concurrent with closing the company retired $8.1 million in outstanding debt. The property was sold at a cap rate of 5.7 percent economic based on in- place rental revenue and trailing-12 operating expenses.

Subsequent to quarter end, the company sold Hawks Landing, a 484- bed community serving students attending Miami University of Ohio, for a total sales price of $17.3 million including $15.6 million in outstanding debt. The property, originally constructed in 1994, was acquired as part of the GMH Communities Trust transaction in 2008 and is located approximately one mile from campus. The property was sold at a cap rate of 6.4 percent economic based on in-place rental revenue and trailing-12 operating expenses.

Third-party Services

Subsequent to year end, the company executed an interim services agreement for a third-party on-campus development project at Texas A&M University-Corpus Christi. The company expects to commence construction during the second quarter of 2014 although the full scope, fees and construction period have not been finalized.

Capital Markets

In December, the company amended and expanded its combined revolver and term loan unsecured credit facility. The amendment included expanding the revolver by $50 million to $500 million and extending the revolver maturity date to March 1, 2018, which may be extended by 12 months at the company's option. In addition, the company entered into a new $250 million term loan facility II, which matures March 1, 2019. The term loan facility I remains $350 million with maturity in January 2017 and may be extended at American Campus' option for two 12-month periods. The amended facility has an accordion feature that allows American Campus to expand the new $1.1 billion facility by up to an additional $500 million. The optional extensions and accordion feature are subject to the satisfaction of certain conditions in the facility. Each loan bears interest at a variable rate with spreads reflecting current market terms, which are more favorable than those contained in the prior facility. These borrowing rates float at a margin over LIBOR based on a grid tied to the company's credit rating. Based on American Campus' current Baa3/ BBB- rating, the all-in LIBOR margin at closing was 155 basis points on the revolving credit facility and 150 basis points on the term loan facilities.

At-The-Market (ATM) Share Offering Program

The company did not sell any shares under the ATM Share Offering Program during the fourth quarter.

2014 Outlook

The company believes that the financial results for the fiscal year ending December 31, may be affected by, among other factors:

-national and regional economic trends and events;

-the timing of acquisitions and/or dispositions;

-interest rate risk;

-the timing of commencement and completion of construction on owned development projects;

-the ability of the company to be awarded and the timing of the commencement of construction on third-party development projects;

-university enrollment, funding and policy trends;

-the ability of the company to earn third-party management revenues;

-the amount of income recognized by the taxable REIT subsidiaries and any corresponding income tax expense;

-the ability of the company to integrate acquired properties;

-the outcome of legal proceedings arising in the normal course of business; and

-the success of releasing the company's owned properties for the 2014-2015 academic year.

Based upon these factors, management anticipates that fiscal year 2014 FFO will be in the range of $2.31 to $2.39 per fully diluted share and FFOM will be in the range of $2.27 to $2.35 per fully diluted share. For additional details regarding the company's 2014 outlook, please see pages 22-23 of the Supplemental Analyst Package 4Q 2013. All guidance is based on the current expectations and judgment of the company's management team.

American Campus Communities, Inc. is an owner and manager of student housing communities in the United States.

More information:

americancampus.com

studenthousing.com

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