UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended SeptemberJune 30, 2017.   2019.
 
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.)
Commission file number 333-181102-01 (American Campus Communities Operating Partnership L.P.)LP)
 
AMERICAN CAMPUS COMMUNITIES, INC.
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP
(Exact name of registrant as specified in its charter)
 
 Maryland (American Campus Communities, Inc.)
Maryland 76-0753089
Maryland (American(American Campus Communities Operating
Partnership L.P.)LP)
Maryland56-2473181
 
 76-0753089 (American Campus Communities, Inc.)
56-2473181 (American Campus Communities Operating
Partnership, L.P.)
 (State(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer Identification No.)
12700 Hill Country Blvd., Suite T-200
78738
Austin,TX
(Zip Code)
(Address of Principal Executive Offices) 
78738
(Zip Code)
 
(512) (512) 732-1000
Registrant'sRegistrants 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.
American Campus Communities, Inc.
Yesx
Noo
American Campus Communities Operating Partnership L.P.LP
Yesx
Noo
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
American Campus Communities, Inc.
Yesx
Noo
American Campus Communities Operating Partnership L.P.LP
Yesx
Noo
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 

American Campus Communities, Inc.                                                                                                                                    
Large accelerated filerx
Accelerated Filer o

Non-accelerated filer   o     (Do not check if a smaller reporting company) 
Smaller reporting company o
Non-accelerated filer   Smaller reporting company
 
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


American Campus Communities Operating Partnership L.P.LP
Large accelerated filero
Accelerated Filero
Non-accelerated filerx
     (Do not check if a smaller reporting company) 
Smaller reporting companyo
 
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
American Campus Communities, Inc.
Yeso
Nox
American Campus Communities Operating Partnership L.PLP
Yeso
Nox

Securities registered pursuant to Section 12(b) of the Act:                                                                                   
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, par value $.01 per shareACCNew York Stock Exchange

There were 136,426,506137,402,359 shares of the American Campus Communities, Inc.’s common stock with a par value of $0.01 per share outstanding as of the close of business on October 27, 2017.July 26, 2019.
 




EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended SeptemberJune 30, 20172019 of American Campus Communities, Inc. and American Campus Communities Operating Partnership L.P.LP. Unless stated otherwise or the context otherwise requires, references to “ACC” mean American Campus Communities, Inc., a Maryland corporation that has elected to be treated as a real estate investment trust (“REIT”) under the Internal Revenue Code, and references to “ACCOP” mean American Campus Communities Operating Partnership L.P.,LP, a Maryland limited partnership. References to the “Company,” “we,” “us” or “our” mean collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP. References to the “Operating Partnership” mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP. The following chart illustrates the Company’s and the Operating Partnership’s corporate structure:
companyflowchart3312017a04.jpg companyflowchart3312019a04.jpg
The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC. As of SeptemberJune 30, 2017,2019, ACC Holdings held an ownership interest in ACCOP of less than 1%. The limited partners of ACCOP are ACC and other limited partners consisting of current and former members of management and nonaffiliated third parties. As of SeptemberJune 30, 2017,2019, ACC owned an approximate 99.2%99.5% limited partnership interest in ACCOP. As the sole member of the general partner of ACCOP, ACC has exclusive control of ACCOP’s day-to-day management. Management operates the Company and the Operating Partnership as one business. The management of ACC consists of the same members as the management of ACCOP. The Company is structured as an umbrella partnership REIT (“UPREIT”) and ACC contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, ACC receives a number of units of the Operating Partnership (“OP Units,” see definition below) equal to the number of common shares it has issued in the equity offering. Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of OP Units in the Operating Partnership. Based on the terms of ACCOP’s partnership agreement, OP Units can be exchanged for ACC’s common shares on a one-for-one basis. The Company maintains a one-for-one relationship between the OP Units of the Operating Partnership issued to ACC and ACC Holdings and the common shares issued to the public. The Company believes that combining the reports on Form 10-Q of ACC and ACCOP into this single report provides the following benefits:

(1)enhances investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
(2)eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and
(3)creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.



ACC consolidates ACCOP for financial reporting purposes, and ACC essentially has no assets or liabilities other than its investment in ACCOP. Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements. However, the Company believes it is important to understand the few differences between the Company and the Operating Partnership in the context of how the entities operate as a consolidated company. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership. ACC also issues public equity from time to time and guarantees certain debt of ACCOP, as disclosed in this report. ACC does not have any indebtedness, as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from ACC’s equity offerings, which are contributed to the capital of ACCOP in exchange for OP Units on a one-for-one common share per OP Unit basis, the Operating Partnership generates all remaining capital required by the Company’s business. These sources include, but are not limited to, the Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its credit facility, the issuance of unsecured notes, and proceeds received from the disposition of certain properties. Noncontrolling interests, stockholders’ equity, and partners’ capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The noncontrolling interests in the Operating Partnership’s financial statements consist of the interests of unaffiliated partners in various consolidated joint ventures. The noncontrolling interests in the Company’s financial statements include the same noncontrolling interests at the Operating Partnership level and OP Unit holders of the Operating Partnership. The differences between stockholders’ equity and partners’ capital result from differences in the equity issued at the Company and Operating Partnership levels.


To help investors understand the significant differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership. A single set of consolidated notes to such financial statements is presented that includes separate discussions for the Company and the Operating Partnership when applicable (for example, noncontrolling interests, stockholders’ equity or partners’ capital, earnings per share or unit, etc.). A combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section is also included that presents discrete information related to each entity, as applicable. This report also includes separate Part I, Item 4 Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company operates its business through the Operating Partnership. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.




FORM 10-Q
FOR THE QUARTER ENDED SeptemberJune 30, 20172019
TABLE OF CONTENTS
 
 PAGE NO.
  
PART I. 
   
Item 1.Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries: 
   
 Consolidated Balance Sheets as of SeptemberJune 30, 20172019 (unaudited) and December 31, 20162018
   
 Consolidated Statements of Comprehensive Income for the three and ninesix months ended SeptemberJune 30, 20172019 and 20162018 (all unaudited)
   
 Consolidated StatementStatements of Changes in Equity for the ninethree months ended SeptemberMarch 31, 2019 and 2018 and June 30, 2017 (unaudited)2019 and 2018 (all unaudited)
   
 Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20172019 and 20162018 (all unaudited)
   
 Consolidated Financial Statements of American Campus Communities Operating Partnership L.P.LP and Subsidiaries: 
   
 Consolidated Balance Sheets as of SeptemberJune 30, 20172019 (unaudited) and December 31, 20162018
   
 Consolidated Statements of Comprehensive Income for the three and ninesix months ended SeptemberJune 30, 20172019 and 20162018 (all unaudited)
   
 Consolidated StatementStatements of Changes in Capital for the ninethree months ended SeptemberMarch 31, 2019 and 2018 and June 30, 2017 (unaudited)2019 and 2018 (all unaudited)
   
 Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20172019 and 20162018 (all unaudited)
   
 Notes to Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries and American Campus Communities Operating Partnership L.P.LP and Subsidiaries (unaudited)
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
   
Item 3.Quantitative and Qualitative Disclosure about Market Risk
   
Item 4.Controls and Procedures
  
PART II. 
   
Item 1.Legal Proceedings
   
Item 1A.Risk Factors
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
   
Item 3.Defaults Upon Senior Securities
   
Item 4.Mine Safety Disclosures
   
Item 5.Other Information
   
Item 6.Exhibits
  
SIGNATURES



AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)






 September 30, 2017 December 31, 2016 June 30, 2019 December 31, 2018
 (Unaudited)   (Unaudited)  
Assets        
        
Investments in real estate:        
Wholly-owned properties, net $6,262,077
 $5,427,014
Wholly-owned properties held for sale 
 25,350
Owned properties, net $6,676,217
 $6,583,397
On-campus participating properties, net 83,095
 85,797
 77,390
 77,637
Investments in real estate, net 6,345,172
 5,538,161
 6,753,607
 6,661,034
        
Cash and cash equivalents 16,341
 22,140
 51,541
 71,238
Restricted cash 25,824
 24,817
 37,185
 35,279
Student contracts receivable, net 15,531
 8,428
Student contracts receivable 9,446
 8,565
Other assets 284,023
 272,367
 531,118
 262,730
        
Total assets $6,686,891
 $5,865,913
 $7,382,897
 $7,038,846
        
Liabilities and equity  
  
  
  
        
Liabilities:  
  
  
  
Secured mortgage, construction and bond debt, net $662,874
 $688,195
 $872,922
 $853,084
Unsecured notes, net 1,190,296
 1,188,737
 1,983,895
 1,588,446
Unsecured term loans, net 646,675
 149,065
 198,945
 198,769
Unsecured revolving credit facility 266,440
 99,300
 185,600
 387,300
Accounts payable and accrued expenses 79,612
 76,614
 67,079
 88,767
Operating lease liabilities 285,224
 
Other liabilities 214,918
 158,437
 162,437
 191,233
Total liabilities 3,060,815
 2,360,348
 3,756,102
 3,307,599
        
Commitments and contingencies (Note 13) 

 

 


 


        
Redeemable noncontrolling interests 112,270
 55,078
 185,910
 184,446
        
Equity:  
  
  
  
American Campus Communities, Inc. and Subsidiaries stockholders' equity:  
  
Common stock, $0.01 par value, 800,000,000 shares authorized, 136,362,728 and 132,225,488 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 1,364
 1,322
American Campus Communities, Inc. and Subsidiaries stockholders’ equity:  
  
Common stock, $0.01 par value, 800,000,000 shares authorized, 137,200,511 and 136,967,286 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively 1,372
 1,370
Additional paid in capital 4,321,228
 4,118,842
 4,460,412
 4,458,240
Common stock held in rabbi trust, 63,778 and 20,181 shares at September 30, 2017 and December 31, 2016, respectively (2,944) (975)
Common stock held in rabbi trust, 75,535 and 69,603 shares at June 30, 2019 and December 31, 2018, respectively (3,368) (3,092)
Accumulated earnings and dividends (816,360) (670,137) (1,059,633) (971,070)
Accumulated other comprehensive loss (3,195) (4,067) (18,784) (4,397)
Total American Campus Communities, Inc. and Subsidiaries stockholders' equity 3,500,093
 3,444,985
Total American Campus Communities, Inc. and Subsidiaries stockholders’ equity 3,379,999
 3,481,051
Noncontrolling interests - partially owned properties 13,713
 5,502
 60,886
 65,750
Total equity 3,513,806
 3,450,487
 3,440,885
 3,546,801
        
Total liabilities and equity $6,686,891
 $5,865,913
 $7,382,897
 $7,038,846

     
Consolidated variable interest entities’ assets and debt included in the above balances:
     
Investments in real estate, net $1,061,651
 $1,042,585
Cash, cash equivalents and restricted cash $55,070
 $72,218
Other assets $18,922
 $11,918
Secured mortgage and construction debt, net $477,408
 $447,292
Accounts payable, accrued expenses and other liabilities $57,759
 $53,432


See accompanying notes to consolidated financial statements.


1

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands, except share and per share data)




 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 2017 2016 2017
2016 2019 2018 2019
2018
Revenues:                
Wholly-owned properties $183,569
 $185,694
 $531,556
 $546,078
Owned properties $203,156
 $189,488
 $427,575
 $395,020
On-campus participating properties 6,799
 6,758
 23,128
 23,018
 6,396
 6,182
 17,844
 16,625
Third-party development services 3,566
 773
 4,697
 3,929
 3,607
 2,202
 6,778
 3,048
Third-party management services 2,291
 2,376
 7,193
 7,039
 3,465
 2,452
 5,776
 5,183
Resident services 713
 810
 2,310
 2,325
 747
 735
 1,529
 1,592
Total revenues 196,938
 196,411
 568,884
 582,389
 217,371
 201,059
 459,502
 421,468
                
Operating expenses:  
  
  
  
  
  
  
  
Wholly-owned properties 99,423
 100,602
 249,552
 257,175
Owned properties 90,763
 86,136
 182,932
 174,196
On-campus participating properties 3,923
 3,784
 11,080
 10,125
 3,806
 3,730
 7,763
 7,155
Third-party development and management services 3,879
 3,340
 11,789
 10,638
 4,513
 3,544
 8,699
 7,742
General and administrative 8,684
 5,375
 25,200
 16,810
 8,115
 13,173
 15,430
 19,872
Depreciation and amortization 61,125
 52,067
 169,391
 159,486
 68,815
 63,537
 137,570
 128,316
Ground/facility leases 2,329
 1,965
 7,151
 6,736
 3,236
 2,733
 6,785
 5,575
Loss (gain) from disposition of real estate 282
 (42,314) 282
 (42,314)
Provision for real estate impairment 
 
 15,317
 
 
 
 3,201
 
Other operating income 
 (2,648) 
 (2,648)
Total operating expenses 179,363
 167,133
 489,480
 460,970
 179,530
 127,891
 362,662
 297,894
                
Operating income 17,575
 29,278
 79,404
 121,419
 37,841
 73,168
 96,840
 123,574
                
Nonoperating income and (expenses):  
  
  
  
Nonoperating income (expenses):  
  
  
  
Interest income 1,259
 1,272
 3,723
 4,026
 969
 1,243
 1,895
 2,466
Interest expense (18,654) (19,016) (47,944) (61,762) (27,068) (23,338) (54,129) (47,022)
Amortization of deferred financing costs (1,146) (1,344) (3,197) (5,238) (1,218) (2,214) (2,350) (3,628)
(Loss) gain from disposition of real estate 
 
 (632) 17,409
Total nonoperating expense (18,541) (19,088) (48,050) (45,565)
Loss from early extinguishment of debt 
 (784) 
 (784)
Total nonoperating expenses (27,317) (25,093) (54,584) (48,968)
                
(Loss) income before income taxes (966) 10,190
 31,354
 75,854
Income before income taxes 10,524
 48,075
 42,256
 74,606
Income tax provision (267) (345) (791) (1,035) (314) (2,085) (678) (2,366)
Net (loss) income (1,233) 9,845
 30,563
 74,819
Net income attributable to noncontrolling interests (79) (201) (587) (1,150)
Net (loss) income attributable to ACC, Inc. and Subsidiaries common stockholders $(1,312) $9,644
 $29,976
 $73,669
Net income 10,210
 45,990
 41,578
 72,240
Net loss (income) attributable to noncontrolling interests 176
 19
 (1,552) (304)
Net income attributable to ACC, Inc. and Subsidiaries common stockholders $10,386
 $46,009
 $40,026
 $71,936
                
Other comprehensive income (loss)  
  
  
  
Other comprehensive (loss) income  
  
  
  
Change in fair value of interest rate swaps and other 233
 1,271
 872
 (162) (8,593) 180
 (14,387) 645
Comprehensive (loss) income $(1,079) $10,915
 $30,848
 $73,507
Comprehensive income $1,793
 $46,189
 $25,639
 $72,581
                
Net (loss) income per share attributable to ACC, Inc. and Subsidiaries common stockholders  
  
  
  
Net income per share attributable to ACC, Inc. and Subsidiaries common shareholders  
  
  
  
Basic and diluted $0.07
 $0.33
 $0.28
 $0.52
        
Weighted-average common shares outstanding:  
  
  
  
Basic $(0.01) $0.07
 $0.21
 $0.57
 137,268,696
 136,677,255
 137,185,576
 136,599,816
Diluted $(0.01) $0.07
 $0.21
 $0.56
 138,243,388
 137,576,366
 138,198,134
 137,536,368
                
Weighted-average common shares outstanding  
  
  
  
Basic 136,421,198
 130,786,985
 134,708,361
 128,239,294
Diluted 136,421,198
 131,568,371
 135,585,850
 129,034,401
        
Distributions declared per common share $0.44
 $0.42
 $1.30
 $1.24


See accompanying notes to consolidated financial statements.


2

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN EQUITY
(unaudited, in thousands, except share data)





  
Common
Shares
 
Par Value of
Common
Shares
 
Additional Paid
in Capital
 Common Shares Held in Rabbi Trust Common Shares Held in Rabbi Trust at Cost 
Accumulated
Earnings and
Dividends
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests –
Partially Owned
Properties
 Total
Equity, December 31, 2016 132,225,488
 $1,322
 $4,118,842
 20,181
 $(975) $(670,137) $(4,067) $5,502
 $3,450,487
Adjustments to reflect redeemable noncontrolling interests at fair value 
 
 5,943
 
 
 
 
 
 5,943
Amortization of restricted stock awards 
 
 10,641
 
 
 
 
 
 10,641
Vesting of restricted stock awards and restricted stock units 165,884
 2
 (2,193) 43,597
 (1,969) 
 
 
 (4,160)
Distributions to common and restricted stockholders 
 
 
 
 
 (176,199) 
 
 (176,199)
Distributions to noncontrolling interests - partially owned properties 
 
 
 
 
 
 
 (212) (212)
Conversion of common and preferred operating partnership units to common stock 22,000
 
 154
 
 
 
 
 
 154
Net proceeds from sale of common stock 3,949,356
 40
 187,841
 
 
 
 
 
 187,881
Change in fair value of interest rate swaps and other 
 
 
 
 
 
 564
 
 564
Amortization of interest rate swap terminations 
 
 
 
 
 
 308
 
 308
Contributions by noncontrolling interest 
 
 
 
 
 
 
 8,158
 8,158
Net income 
 
 
 
 
 29,976
 
 265
 30,241
Equity, September 30, 2017 136,362,728

$1,364

$4,321,228
 63,778
 $(2,944)
$(816,360)
$(3,195)
$13,713

$3,513,806
  
Common
Shares
 
Par Value of
Common
Shares
 
Additional Paid
in Capital
 Common Shares Held in Rabbi Trust Common Shares Held in Rabbi Trust at Cost 
Accumulated
Earnings and
Dividends
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests –
Partially Owned
Properties
 Total
Equity, December 31, 2018 136,967,286
 $1,370
 $4,458,240
 69,603
 $(3,092) $(971,070) $(4,397) $65,750
 $3,546,801
Adjustments to reflect redeemable noncontrolling interests at fair value 
 
 (2,547) 
 
 
 
 
 (2,547)
Amortization of restricted stock awards 
 
 3,765
 
 
 
 
 
 3,765
Vesting of restricted stock awards 180,961
 
 (3,831) 
 
 
 
 
 (3,831)
Distributions to common and restricted stockholders and other ($0.46 per common share) 
 
 
 
 
 (63,611) 
 
 (63,611)
Contributions by noncontrolling interests - partially owned properties 
 
 
 
 
 
 
 625
 625
Distributions to noncontrolling interests - partially owned properties 
 
 
 
 
 
 
 (3,661) (3,661)
Conversion of common and preferred operating partnership units to common stock 42,271
 
 251
 
 
 
 
 
 251
Change in fair value of interest rate swaps and other 
 
 
 
 
 
 (5,794) 
 (5,794)
Deposits to deferred compensation plan, net of withdrawals (1,829) 
 70
 1,829
 (70) 
 
 
 
Net income 
 
 
 
 
 29,640
 
 1,469
 31,109
Equity, March 31, 2019 137,188,689

1,370

4,455,948
 71,432
 (3,162)
(1,005,041)
(10,191)
64,183

3,503,107
Adjustments to reflect redeemable noncontrolling interests at fair value 
 
 660
 
 
 
 
 
 660
Amortization of restricted stock awards and vesting of restricted stock units 15,925
 
 3,744
 
 
 
 
 
 3,744
Vesting of restricted stock awards 
 2
 (146) 
 
 
 
 
 (144)
Distributions to common and restricted stockholders and other ($0.47 per common share) 
 
 
 
 
 (64,978) 
 
 (64,978)
Contributions by noncontrolling interests - partially owned properties 
 
 
 
 
 
 
 79
 79
Distributions to noncontrolling interests - partially owned properties 
 
 
 
 
 
 
 (3,037) (3,037)
Change in fair value of interest rate swaps and other 
 
 
 
 
 
 4,566
 
 4,566
Termination of interest rate swaps 
 
 
 
 
 
 (13,159) 
 (13,159)
Deposits to deferred compensation plan, net of withdrawals (4,103) 
 206
 4,103
 (206) 
 
 
 
Net income (loss) 
 
 
 
 
 10,386
 
 (339) 10,047
Equity, June 30, 2019 137,200,511
 $1,372
 $4,460,412
 75,535
 $(3,368) $(1,059,633) $(18,784) $60,886
 $3,440,885











See accompanying notes to consolidated financial statements.


3

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited, in thousands, except share data)


  Common
Shares
 Par Value of
Common
Shares
 Additional Paid
in Capital
 Common Shares Held in Rabbi Trust Common Shares Held in Rabbi Trust at Cost Accumulated
Earnings and
Dividends
 Accumulated
Other
Comprehensive
Loss
 Noncontrolling
Interests –
Partially Owned
Properties
 Total
Equity, December 31, 2017 136,362,728
 $1,364
 $4,326,910
 63,778
 $(2,944) $(837,644) $(2,701) $13,973
 $3,498,958
Adjustments to reflect redeemable noncontrolling interests at fair value 
 
 4,526
 
 
 
 
 
 4,526
Amortization of restricted stock awards and vesting of restricted stock units 3,040
 
 3,443
 
 
 
 
 
 3,443
Vesting of restricted stock awards 165,263
 1
 (2,758) 
 
 
 
 
 (2,757)
Distributions to common and restricted stockholders and other ($0.44 per common share) 
 
 
 
 
 (60,564) 
 
 (60,564)
Contributions by noncontrolling interests - partially owned properties 
 
 
 
 
 
 
 9,515
 9,515
Distributions to noncontrolling interests - partially owned properties 
 
 
 
 
 
 
 (47) (47)
Conversion of common and preferred operating partnership units to common stock 68,448
 1
 477
 
 
 
 
 
 478
Change in fair value of interest rate swaps and other 
 
 
 
 
 
 465
 
 465
Withdrawals from deferred compensation plan, net of deposits 1,160
 
 (127) (1,160) 127
 
 
 
 
Net income 
 
 
 
 
 25,927
 
 113
 26,040
Equity, March 31, 2018 136,600,639
 1,366
 4,332,471
 62,618
 (2,817) (872,281) (2,236) 23,554
 3,480,057
Adjustments to reflect redeemable noncontrolling interests at fair value 
 
 (4,426) 
 
 
 
 
 (4,426)
Amortization of restricted stock awards and vesting of restricted stock units 21,590
 
 3,604
 
 
 
 
 
 3,604
Distributions to common and restricted stockholders and other ($0.46 per common share) 
 
 
 
 
 (63,252) 
 
 (63,252)
Contributions by noncontrolling interests - partially owned properties 
 
 
 
 
 
 
 198,021
 198,021
Distributions to noncontrolling interests - partially owned properties 
 
 
 
 
 
 
 (151,224) (151,224)
Change in ownership of consolidated subsidiary 
 
 175,529
 
 
 
 
 
 175,529
Change in fair value of interest rate swaps and other 
 
 
 
 
 
 180
 
 180
Deposits to deferred compensation plan, net of withdrawals (6,985) 
 275
 6,985
 (275) 
 
 
 
Net income (loss) 
 
 
 
 
 46,009
 
 (363) 45,646
Equity, June 30, 2018 136,615,244
 $1,366
 $4,507,453
 69,603
 $(3,092) $(889,524) $(2,056) $69,988
 $3,684,135

See accompanying notes to consolidated financial statements.

4

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)




  Nine Months Ended September 30,
  2017 2016
Operating activities    
Net income $30,563
 $74,819
Adjustments to reconcile net income to net cash provided by operating activities:  
  
Loss (gain) from disposition of real estate 632
 (17,409)
Provision for real estate impairment 15,317
 
Depreciation and amortization 169,391
 159,486
Amortization of deferred financing costs and debt premiums/discounts (2,691) (4,053)
Share-based compensation 11,401
 7,820
Income tax provision 791
 1,035
Amortization of interest rate swap terminations and other 308
 309
Changes in operating assets and liabilities:  
  
Restricted cash (566) (734)
Student contracts receivable, net (6,775) 1,750
Other assets (2,536) (5,112)
Accounts payable and accrued expenses (293) 2,769
Other liabilities 29,581
 22,157
Net cash provided by operating activities 245,123
 242,837
     
Investing activities  
  
Proceeds from disposition of properties 24,462
 72,640
Cash paid for acquisition of operating and under development properties (302,318) (96,604)
Cash paid for land acquisitions (8,886) (856)
Capital expenditures for wholly-owned properties (64,464) (45,155)
Investments in wholly-owned properties under development (409,174) (284,777)
Capital expenditures for on-campus participating properties (2,909) (2,510)
Investment in direct financing lease (759) (7,837)
Change in escrow deposits for real estate investments (727) 5,141
Change in restricted cash related to capital reserves (578) (1,099)
Purchase of corporate furniture, fixtures and equipment (4,997) (4,681)
Net cash used in investing activities (770,350) (365,738)
     
Financing activities  
  
Proceeds from sale of common stock 190,912
 803,189
Offering costs (2,374) (32,912)
Pay-off of mortgage and construction loans (99,185) (152,597)
Pay-off of unsecured term loans 
 (400,000)
Proceeds from unsecured term loan 500,000
 150,000
Proceeds from revolving credit facility 974,300
 123,400
Paydowns of revolving credit facility (807,160) (172,300)
Proceeds from construction loans 10,812
 
Scheduled principal payments on debt (9,718) (11,514)
Debt issuance and assumption costs (7,335) (744)
Contributions by noncontrolling interests 11,526
 
Taxes paid on net-share settlements (4,920) (2,977)
Distributions to common and restricted stockholders (176,199) (162,866)
Distributions to noncontrolling interests (61,231) (2,044)
Net cash provided by financing activities 519,428
 138,635
     
Net change in cash and cash equivalents (5,799) 15,734
Cash and cash equivalents at beginning of period 22,140
 16,659
Cash and cash equivalents at end of period $16,341
 $32,393
     
Supplemental disclosure of non-cash investing and financing activities  
  
Loans assumed in connection with property acquisitions $(80,296) $(10,012)
Conversion of common and preferred operating partnership units to common stock $154
 $5,441
Non-cash contribution from noncontrolling interest $120,618
 $
Non-cash consideration exchanged in purchase of land parcel $(3,071) $
Change in accrued construction in progress $24,753
 $32,941
Change in fair value of derivative instruments, net $564
 $(471)
Change in fair value of redeemable noncontrolling interests $5,943
 $(10,481)
     
Supplemental disclosure of cash flow information  
  
Cash paid for interest, net of amounts capitalized $49,562
 $69,884

  Six Months Ended June 30,
  2019 2018
Operating activities    
   Net income $41,578
 $72,240
   Adjustments to reconcile net income to net cash provided by operating activities:  
  
   Loss (gain) from disposition of real estate 282
 (42,314)
   Loss from early extinguishment of debt 
 784
   Provision for real estate impairment 3,201
 
   Depreciation and amortization 137,570
 128,316
   Amortization of deferred financing costs and debt premiums/discounts 53
 979
   Share-based compensation 7,509
 7,047
   Income tax provision 678
 2,366
   Amortization of interest rate swap terminations and other 268
 204
   Termination of interest rate swaps (13,159) 
   Changes in operating assets and liabilities: 

 

   Student contracts receivable (970) 886
   Other assets (4,723) (5,703)
   Accounts payable and accrued expenses (22,416) 10,060
   Other liabilities (1,492) (5,407)
Net cash provided by operating activities 148,379
 169,458
     
Investing activities  
  
   Proceeds from disposition of properties and land parcels 8,854
 242,284
   Capital expenditures for owned properties (24,427) (29,822)
   Investments in owned properties under development (220,925) (253,333)
   Capital expenditures for on-campus participating properties (767) (1,524)
   Other investing activities (2,342) (2,007)
Net cash used in investing activities (239,607) (44,402)
     
Financing activities  
  
   Proceeds from unsecured notes 398,816
 
   Pay-off of mortgage and construction loans 
 (55,892)
   Defeasance costs related to early extinguishment of debt 
 (2,726)
   Pay-off of unsecured term loans 
 (450,000)
   Proceeds from revolving credit facility 390,200
 458,300
   Paydowns of revolving credit facility (591,900) (534,600)
   Proceeds from construction loans 26,051
 61,550
   Proceeds from mortgage loans 
 330,000
   Scheduled principal payments on debt (4,017) (4,256)
   Debt issuance costs (6,562) (656)
   Contribution by noncontrolling interests 704
 374,405
   Taxes paid on net-share settlements (3,975) (2,757)
   Distributions paid to common and restricted stockholders (128,589) (123,816)
   Distributions paid to noncontrolling interests (7,291) (152,176)
Net cash provided by (used in) financing activities 73,437
 (102,624)
     
Net change in cash, cash equivalents, and restricted cash (17,791) 22,432
Cash, cash equivalents, and restricted cash at beginning of period 106,517
 64,772
Cash, cash equivalents, and restricted cash at end of period $88,726
 $87,204
     
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets    
Cash and cash equivalents $51,541
 $52,608
Restricted cash 37,185
 34,596
Total cash, cash equivalents, and restricted cash at end of period $88,726
 $87,204
     

See accompanying notes to consolidated financial statements.


45

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)


  Six Months Ended June 30,
  2019 2018
Supplemental disclosure of non-cash investing and financing activities  
  
Conversion of common and preferred operating partnership units to
common stock
 $251
 $478
Non-cash contribution from noncontrolling interest $
 $8,729
Accrued development costs and capital expenditures $39,646
 $57,788
Change in fair value of derivative instruments, net $(1,496) $441
Change in fair value of redeemable noncontrolling interest $(1,887) $100
Change in ownership of consolidated subsidiary $
 $(175,529)
Initial recognition of operating lease right of use assets $280,687
 $
Initial recognition of operating lease liabilities $279,982
 $
     
Supplemental disclosure of cash flow information  
  
Interest paid $54,186
 $49,728

See accompanying notes to consolidated financial statements.

6

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)





  June 30, 2019 December 31, 2018
  (Unaudited)  
Assets    
     
Investments in real estate:    
Owned properties, net $6,676,217
 $6,583,397
On-campus participating properties, net 77,390
 77,637
Investments in real estate, net 6,753,607
 6,661,034
     
Cash and cash equivalents 51,541
 71,238
Restricted cash 37,185
 35,279
Student contracts receivable 9,446
 8,565
Other assets 531,118
 262,730
     
Total assets $7,382,897
 $7,038,846
     
Liabilities and capital  
  
     
Liabilities:  
  
Secured mortgage, construction and bond debt, net $872,922
 $853,084
Unsecured notes, net 1,983,895
 1,588,446
Unsecured term loans, net 198,945
 198,769
Unsecured revolving credit facility 185,600
 387,300
Accounts payable and accrued expenses 67,079
 88,767
Operating lease liabilities 285,224
 
Other liabilities 162,437
 191,233
Total liabilities 3,756,102
 3,307,599
     
Commitments and contingencies (Note 13) 


 


     
Redeemable limited partners 185,910
 184,446
     
Capital:  
  
Partners’ capital:  
  
General partner - 12,222 OP units outstanding at both June 30, 2019 and December 31, 2018 48
 55
Limited partner - 137,263,824 and 137,024,667 OP units outstanding at June 30, 2019 and December 31, 2018, respectively 3,398,735
 3,485,393
Accumulated other comprehensive loss (18,784) (4,397)
Total partners’ capital 3,379,999
 3,481,051
Noncontrolling interests - partially owned properties 60,886
 65,750
Total capital 3,440,885
 3,546,801
     
Total liabilities and capital $7,382,897
 $7,038,846
  September 30, 2017 December 31, 2016
  (Unaudited)  
Assets    
     
Investments in real estate:    
Wholly-owned properties, net $6,262,077
 $5,427,014
Wholly-owned properties held for sale 
 25,350
On-campus participating properties, net 83,095
 85,797
Investments in real estate, net 6,345,172
 5,538,161
     
Cash and cash equivalents 16,341
 22,140
Restricted cash 25,824
 24,817
Student contracts receivable, net 15,531
 8,428
Other assets 284,023
 272,367
     
Total assets $6,686,891
 $5,865,913
     
Liabilities and capital  
  
     
Liabilities:  
  
Secured mortgage, construction and bond debt, net $662,874
 $688,195
Unsecured notes, net 1,190,296
 1,188,737
Unsecured term loans, net 646,675
 149,065
Unsecured revolving credit facility 266,440
 99,300
Accounts payable and accrued expenses 79,612
 76,614
Other liabilities 214,918
 158,437
Total liabilities 3,060,815
 2,360,348
     
Commitments and contingencies (Note 13) 

 

     
Redeemable limited partners 112,270
 55,078
     
Capital:  
  
Partners' capital:  
  
General partner - 12,222 OP units outstanding at both September 30, 2017 and December 31, 2016 69
 82
Limited partner - 136,414,284 and 132,233,447 OP units outstanding at September 30, 2017 and December 31, 2016, respectively 3,503,219
 3,448,970
Accumulated other comprehensive loss (3,195) (4,067)
Total partners' capital 3,500,093
 3,444,985
Noncontrolling interests - partially owned properties 13,713
 5,502
Total capital 3,513,806
 3,450,487
     
Total liabilities and capital $6,686,891
 $5,865,913
     
Consolidated variable interest entities’ assets and debt included in the above balances:
     
Investments in real estate, net $1,061,651
 $1,042,585
Cash, cash equivalents and restricted cash $55,070
 $72,218
Other assets $18,922
 $11,918
Secured mortgage and construction debt, net $477,408
 $447,292
Accounts payable, accrued expenses and other liabilities $57,759
 $53,432




See accompanying notes to consolidated financial statements.


57

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands, except unit and per unit data)





 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 2017 2016 2017 2016 2019 2018 2019 2018
Revenues:                
Wholly-owned properties $183,569
 $185,694
 $531,556
 $546,078
Owned properties $203,156
 $189,488
 $427,575
 $395,020
On-campus participating properties 6,799
 6,758
 23,128
 23,018
 6,396
 6,182
 17,844
 16,625
Third-party development services 3,566
 773
 4,697
 3,929
 3,607
 2,202
 6,778
 3,048
Third-party management services 2,291
 2,376
 7,193
 7,039
 3,465
 2,452
 5,776
 5,183
Resident services 713
 810
 2,310
 2,325
 747
 735
 1,529
 1,592
Total revenues 196,938
 196,411
 568,884
 582,389
 217,371
 201,059
 459,502
 421,468
                
Operating expenses:  
  
  
  
  
  
  
  
Wholly-owned properties 99,423
 100,602
 249,552
 257,175
Owned properties 90,763
 86,136
 182,932
 174,196
On-campus participating properties 3,923
 3,784
 11,080
 10,125
 3,806
 3,730
 7,763
 7,155
Third-party development and management services 3,879
 3,340
 11,789
 10,638
 4,513
 3,544
 8,699
 7,742
General and administrative 8,684
 5,375
 25,200
 16,810
 8,115
 13,173
 15,430
 19,872
Depreciation and amortization 61,125
 52,067
 169,391
 159,486
 68,815
 63,537
 137,570
 128,316
Ground/facility leases 2,329
 1,965
 7,151
 6,736
 3,236
 2,733
 6,785
 5,575
Loss (gain) from disposition of real estate 282
 (42,314) 282
 (42,314)
Provision for real estate impairment 
 
 15,317
 
 
 
 3,201
 
Other operating income 
 (2,648) 
 (2,648)
Total operating expenses 179,363
 167,133
 489,480
 460,970
 179,530
 127,891
 362,662
 297,894
                
Operating income 17,575
 29,278
 79,404
 121,419
 37,841
 73,168
 96,840
 123,574
                
Nonoperating income and (expenses):  
  
  
  
Nonoperating income (expenses):  
  
  
  
Interest income 1,259
 1,272
 3,723
 4,026
 969
 1,243
 1,895
 2,466
Interest expense (18,654) (19,016) (47,944) (61,762) (27,068) (23,338) (54,129) (47,022)
Amortization of deferred financing costs (1,146) (1,344) (3,197) (5,238) (1,218) (2,214) (2,350) (3,628)
(Loss) gain from disposition of real estate 
 
 (632) 17,409
Total nonoperating expense (18,541) (19,088) (48,050) (45,565)
(Loss) income before income taxes (966) 10,190
 31,354
 75,854
Loss from early extinguishment of debt 
 (784) 
 (784)
Total nonoperating expenses (27,317) (25,093) (54,584) (48,968)
Income before income taxes 10,524
 48,075
 42,256
 74,606
Income tax provision (267) (345) (791) (1,035) (314) (2,085) (678) (2,366)
Net (loss) income (1,233) 9,845
 30,563
 74,819
Net income attributable to noncontrolling interests – partially owned properties (57) (77) (259) (285)
Net (loss) income attributable to American Campus Communities Operating Partnership, L.P. (1,290) 9,768
 30,304
 74,534
Series A preferred unit distributions (31) (36) (93) (115)
Net (loss) income attributable to common unitholders $(1,321) $9,732
 $30,211
 $74,419
Net income 10,210
 45,990
 41,578
 72,240
Net loss (income) attributable to noncontrolling interests – partially owned properties 230
 366
 (1,338) 252
Net income attributable to American Campus Communities Operating Partnership LP 10,440
 46,356
 40,240
 72,492
Series A preferred units distributions (9) (31) (40) (62)
Net income attributable to common unitholders $10,431
 $46,325
 $40,200
 $72,430
                
Other comprehensive income (loss)  
  
  
  
Other comprehensive (loss) income  
  
  
  
Change in fair value of interest rate swaps and other 233
 1,271
 872
 (162) (8,593) 180
 (14,387) 645
Comprehensive (loss) income $(1,088) $11,003
 $31,083
 $74,257
Comprehensive income $1,838
 $46,505
 $25,813
 $73,075
                
Net (loss) income per unit attributable to common unitholders  
  
  
  
Basic $(0.01) $0.07
 $0.21
 $0.57
Diluted $(0.01) $0.07
 $0.21
 $0.56
Net income per share attributable to ACC, Inc. and Subsidiaries common shareholders  
  
  
  
Basic and diluted $0.07
 $0.33
 $0.28
 $0.52
                
Weighted-average common units outstanding  
  
  
  
  
  
  
  
Basic 137,432,872
 132,008,227
 135,731,609
 129,517,442
 137,863,484
 137,615,938
 137,780,364
 137,547,575
Diluted 137,432,872
 132,789,613
 136,609,098
 130,312,549
 138,838,176
 138,515,049
 138,792,922
 138,484,127
        
Distributions declared per Common Unit $0.44
 $0.42
 $1.30
 $1.24


See accompanying notes to consolidated financial statements.


68

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN CAPITAL
(unaudited, in thousands, except unit data)






          Accumulated Noncontrolling  
      Other Interests -  
  General Partner Limited Partner Comprehensive Partially Owned  
  Units Amount Units Amount Loss Properties Total
Capital, December 31, 2016 12,222
 $82
 132,233,447
 $3,448,970
 $(4,067) $5,502
 $3,450,487
Adjustments to reflect redeemable limited partners' interest at fair value 
 
 
 5,943
 
 
 5,943
Amortization of restricted stock awards 
 
 
 10,641
 
 
 10,641
Vesting of restricted stock awards and restricted stock units 
 
 209,481
 (4,160) 
 
 (4,160)
Distributions 
 (16) 
 (176,183) 
 
 (176,199)
Distributions to noncontrolling interests - partially owned properties 
 
 
 
 
 (212) (212)
Conversion of common and preferred operating partnership units to common stock 
 
 22,000
 154
 
 
 154
Issuance of units in exchange for contributions of equity offering proceeds 
 
 3,949,356
 187,881
 
 
 187,881
Change in fair value of interest rate swaps and other 
 
 
 
 564
 
 564
Amortization of interest rate swap terminations 
 
 
 
 308
 
 308
Contributions by noncontrolling interest 
 
 
 
 
 8,158
 8,158
Net income 
 3
 
 29,973
 
 265
 30,241
Capital as of September 30, 2017 12,222
 $69
 136,414,284
 $3,503,219
 $(3,195) $13,713
 $3,513,806
          Accumulated Noncontrolling  
      Other Interests -  
  General Partner Limited Partner Comprehensive Partially Owned  
  Units Amount Units Amount Loss Properties Total
Capital, December 31, 2018 12,222
 $55
 137,024,667
 $3,485,393
 $(4,397) $65,750
 $3,546,801
Adjustments to reflect redeemable limited partners’ interest at fair value 
 
 
 (2,547) 
 
 (2,547)
Amortization of restricted stock awards 
 
 
 3,765
 
 
 3,765
Vesting of restricted stock awards 
 
 180,961
 (3,831) 
 
 (3,831)
Distributions to common and restricted unit holders and other ($0.46 per common unit) 
 (6) 
 (63,605) 
 
 (63,611)
Contribution by noncontrolling interests - partially owned properties 
 
 
 
 
 625
 625
Distributions to noncontrolling joint venture partners 
 
 
 
 
 (3,661) (3,661)
Conversion of common and preferred operating partnership units to common stock 
 
 42,271
 251
 
 
 251
Change in fair value of interest rate swaps and other 
 
 
 
 (5,794) 
 (5,794)
Net income 
 3
 
 29,637
 
 1,469
 31,109
Capital, March 31, 2019 12,222
 52
 137,247,899
 3,449,063
 (10,191) 64,183
 3,503,107
Adjustments to reflect redeemable limited partners’ interest at fair value 
 
 
 660
 
 
 660
Amortization of restricted stock awards and vesting of restricted stock units 
 
 15,925
 3,744
 
 
 3,744
Vesting of restricted stock awards 
 
 
 (144) 
 
 (144)
Distributions to common and restricted unit holders and other ($0.47 per common unit) 
 (5) 
 (64,973) 
 
 (64,978)
Contribution by noncontrolling interests - partially owned properties 
 
 
 
 
 79
 79
Distributions to noncontrolling joint venture partners 
 
 
 
 
 (3,037) (3,037)
Change in fair value of interest rate swaps and other 
 
 
 
 4,566
 
 4,566
Termination of interest rate swaps 
 
 
 
 (13,159) 
 (13,159)
Net income (loss) 
 1
 
 10,385
 
 (339) 10,047
Capital, June 30, 2019 12,222
 48
 137,263,824
 3,398,735
 (18,784) 60,886
 3,440,885
















See accompanying notes to consolidated financial statements.


79

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(unaudited, in thousands, except unit data)


          Accumulated Noncontrolling  
      Other Interests -  
  General Partner Limited Partner Comprehensive Partially Owned  
  Units Amount Units Amount Loss Properties Total
Capital, December 31, 2017 12,222
 $67
 136,414,284
 $3,487,619
 $(2,701) $13,973
 $3,498,958
Adjustments to reflect redeemable limited partners’ interest at fair value 
 
 
 4,526
 
 
 4,526
Amortization of restricted stock awards and vesting of restricted stock units 
 
 3,040
 3,443
 
 
 3,443
Vesting of restricted stock awards 
 
 165,263
 (2,757) 
 
 (2,757)
Distributions to common and restricted unit holders and other ($0.44 per common unit) 
 (5) 
 (60,559) 
 
 (60,564)
Contribution by noncontrolling interests - partially owned properties 
 
 
 
 
 9,515
 9,515
Distributions to noncontrolling joint venture partners 
 
 
 
 
 (47) (47)
Conversion of common and preferred operating partnership units to common stock 
 
 68,448
 478
 
 
 478
Change in fair value of interest rate swaps and other 
 
 
 
 465
 
 465
Net income 
 2
 
 25,925
 
 113
 26,040
Capital, March 31, 2018 12,222
 64
 136,651,035
 3,458,675
 (2,236) 23,554
 3,480,057
Adjustments to reflect redeemable limited partners’ interest at fair value 
 
 
 (4,426) 


 (4,426)
Amortization of restricted stock awards and vesting of restricted stock units 
 
 21,590
 3,604
 


 3,604
Distributions to common and restricted unit holders and other ($0.46 per common unit) 
 (6) 
 (63,246) 


 (63,252)
Contribution by noncontrolling interests - partially owned properties 
 
 
 
 

198,021
 198,021
Distributions to noncontrolling joint venture partners 
 
 
 
 

(151,224) (151,224)
Change in ownership of consolidated subsidiary 
 
 
 175,529
 


 175,529
Change in fair value of interest rate swaps and other 
 
 
 
 180


 180
Net income (loss) 
 4
 
 46,005
 

(363) 45,646
Capital, June 30, 2018 12,222
 62
 136,672,625
 3,616,141
 (2,056) 69,988
 3,684,135

See accompanying notes to consolidated financial statements.

10

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)




  Nine Months Ended September 30,
  2017 2016
Operating activities    
Net income $30,563
 $74,819
Adjustments to reconcile net income to net cash provided by operating activities:  
  
Loss (gain) from disposition of real estate 632
 (17,409)
Provision for real estate impairment 15,317
 
Depreciation and amortization 169,391
 159,486
Amortization of deferred financing costs and debt premiums/discounts (2,691) (4,053)
Share-based compensation 11,401
 7,820
Income tax provision 791
 1,035
Amortization of interest rate swap terminations and other 308
 309
Changes in operating assets and liabilities:  
  
Restricted cash (566) (734)
Student contracts receivable, net (6,775) 1,750
Other assets (2,536) (5,112)
Accounts payable and accrued expenses (293) 2,769
Other liabilities 29,581
 22,157
Net cash provided by operating activities 245,123
 242,837
     
Investing activities  
  
Proceeds from disposition of properties 24,462
 72,640
Cash paid for acquisition of operating and under development properties (302,318) (96,604)
Cash paid for land acquisitions (8,886) (856)
Capital expenditures for wholly-owned properties (64,464) (45,155)
Investments in wholly-owned properties under development (409,174) (284,777)
Capital expenditures for on-campus participating properties (2,909) (2,510)
Investment in direct financing lease (759) (7,837)
Change in escrow deposits for real estate investments (727) 5,141
Change in restricted cash related to capital reserves (578) (1,099)
Purchase of corporate furniture, fixtures and equipment (4,997) (4,681)
Net cash used in investing activities (770,350) (365,738)
     
Financing activities  
  
Proceeds from issuance of common units in exchange for contributions, net 188,538
 770,277
Pay-off of mortgage and construction loans (99,185) (152,597)
Pay-off of unsecured term loan 
 (400,000)
Proceeds from unsecured term loan 500,000
 150,000
Proceeds from revolving credit facility 974,300
 123,400
Paydowns of revolving credit facility (807,160) (172,300)
Proceeds from construction loans 10,812
 
Scheduled principal payments on debt (9,718) (11,514)
Debt issuance and assumption costs (7,335) (744)
Contributions by noncontrolling interests 11,526
 
Taxes paid on net-share settlements (4,920) (2,977)
Distributions paid to common and preferred unitholders (176,404) (163,493)
Distributions paid on unvested restricted stock awards (1,217) (1,051)
Distributions paid to noncontrolling interests - partially owned properties (59,809) (366)
Net cash provided by financing activities 519,428
 138,635
     
Net change in cash and cash equivalents (5,799) 15,734
Cash and cash equivalents at beginning of period 22,140
 16,659
Cash and cash equivalents at end of period $16,341
 $32,393
     
Supplemental disclosure of non-cash investing and financing activities  
  
Loans assumed in connection with property acquisitions $(80,296) $(10,012)
Conversion of common and preferred operating partnership units to common stock $154
 $5,441
Non-cash contribution from noncontrolling interest $120,618
 $
Non-cash consideration exchanged in purchase of land parcel $(3,071) $
Change in accrued construction in progress $24,753
 $32,941
Change in fair value of derivative instruments, net $564
 $(471)
Change in fair value of redeemable noncontrolling interests $5,943
 $(10,481)
     
Supplemental disclosure of cash flow information  
  
Cash paid for interest, net of amounts capitalized $49,562
 $69,884

  Six Months Ended June 30,
  2019 2018
Operating activities    
Net income $41,578
 $72,240
Adjustments to reconcile net income to net cash provided by operating activities:  
  
   Loss (gain) from disposition of real estate 282
 (42,314)
   Loss from early extinguishment of debt 
 784
   Provision for real estate impairment 3,201
 
   Depreciation and amortization 137,570
 128,316
   Amortization of deferred financing costs and debt premiums/discounts 53
 979
   Share-based compensation 7,509
 7,047
   Income tax provision 678
 2,366
   Amortization of interest rate swap terminations and other 268
 204
   Termination of interest rate swaps (13,159) 
   Changes in operating assets and liabilities:    
   Student contracts receivable (970) 886
   Other assets (4,723) (5,703)
   Accounts payable and accrued expenses (22,416) 10,060
   Other liabilities (1,492) (5,407)
Net cash provided by operating activities 148,379
 169,458
     
Investing activities  
  
   Proceeds from disposition of properties and land parcels 8,854
 242,284
   Capital expenditures for owned properties (24,427) (29,822)
   Investments in owned properties under development (220,925) (253,333)
   Capital expenditures for on-campus participating properties (767) (1,524)
   Other investing activities (2,342) (2,007)
Net cash used in investing activities (239,607) (44,402)
     
Financing activities  
  
   Proceeds from unsecured notes 398,816
 
   Pay-off of mortgage and construction loans 
 (55,892)
   Defeasance costs related to early extinguishment of debt 
 (2,726)
   Pay-off of unsecured term loans 
 (450,000)
   Proceeds from revolving credit facility 390,200
 458,300
   Paydowns of revolving credit facility (591,900) (534,600)
   Proceeds from construction loans 26,051
 61,550
   Proceeds from mortgage loans 
 330,000
   Scheduled principal payments on debt (4,017) (4,256)
   Debt issuance costs (6,562) (656)
   Contribution by noncontrolling interests 704
 374,405
   Taxes paid on net-share settlements (3,975) (2,757)
   Distributions paid to common and preferred unitholders (128,151) (123,838)
   Distributions paid on unvested restricted stock awards (1,031) (883)
   Distributions paid to noncontrolling interests - partially owned properties (6,698) (151,271)
Net cash provided by (used in) financing activities 73,437
 (102,624)
     
Net change in cash, cash equivalents, and restricted cash (17,791) 22,432
Cash, cash equivalents, and restricted cash at beginning of period 106,517
 64,772
Cash, cash equivalents, and restricted cash at end of period $88,726
 $87,204
     
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets    
Cash and cash equivalents $51,541
 $52,608
Restricted cash 37,185
 34,596
Total cash, cash equivalents, and restricted cash at end of period $88,726
 $87,204
     

See accompanying notes to consolidated financial statements.


811

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)


  Six Months Ended June 30,
  2019 2018
Supplemental disclosure of non-cash investing and financing activities  
  
Conversion of common and preferred operating partnership units to
common stock
 $251
 $478
Non-cash contribution from noncontrolling interest $
 $8,729
Accrued development costs and capital expenditures $39,646
 $57,788
Change in fair value of derivative instruments, net $(1,496) $441
Change in fair value of redeemable noncontrolling interest $(1,887) $100
Change in ownership of consolidated subsidiary $
 $(175,529)
Initial recognition of operating lease right of use assets $280,687
 $
Initial recognition of operating lease liabilities $279,982
 $
     
Supplemental disclosure of cash flow information  
  
Interest paid $54,186
 $49,728

See accompanying notes to consolidated financial statements.

12

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)






1. Organization and Description of Business
 
American Campus Communities, Inc. (“ACC”) is a real estate investment trust (“REIT”) that commenced operations effective with the completion of an initial public offering (“IPO”) on August 17, 2004.  Through ACC’s controlling interest in American Campus Communities Operating Partnership L.P.LP (“ACCOP”), ACC 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.  ACC 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.  ACC’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “ACC.”
 
The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC.  As of SeptemberJune 30, 2017,2019, ACC Holdings held an ownership interest in ACCOP of less than 1%. The limited partners of ACCOP are ACC and other limited partners consisting of current and former members of management and nonaffiliated third parties.  As of SeptemberJune 30, 2017,2019, ACC owned an approximate 99.2%99.5% limited partnership interest in ACCOP.  As the sole member of the general partner of ACCOP, ACC has exclusive control of ACCOP’s day-to-day management.  Management operates ACC and ACCOP as one business.  The management of ACC consists of the same members as the management of ACCOP.  ACC consolidates ACCOP for financial reporting purposes, and ACC does not have significant assets other than its investment in ACCOP.  Therefore, the assets and liabilities of ACC and ACCOP are the same on their respective financial statements.  References to the “Company” means collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP.  References to the “Operating Partnership” mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP.  Unless otherwise indicated, the accompanying Notes to the Consolidated Financial Statements apply to both the Company and the Operating Partnership.
 
As of SeptemberJune 30, 2017,2019, the Company’s property portfolio contained 166169 properties with approximately 102,500108,800 beds.  The Company’s property portfolio consisted of 130129 owned off-campus student housing properties that are in close proximity to colleges and universities, 3134 American Campus Equity (“ACE®ACE®”) properties operated under ground/facility leases, with 14 university systems and fivesix on-campus participating properties operated under ground/facility leases with the related university systems.  Of the 166169 properties, 12eight were under development as of SeptemberJune 30, 2017,2019, and when completed will consist of a total of approximately 8,3009,000 beds.  The Company’s communities contain modern housing units and are supported by a resident assistant system and other student-oriented programming, with many offering resort-style amenities.
 
Through one of ACC’s taxable REIT subsidiaries (“TRSs”), 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 SeptemberJune 30, 2017,2019, also through one of ACC’s TRSs, the Company provided third-party management and leasing services for 3834 properties that represented approximately 28,80024,300 beds.  Third-party management and leasing services are typically provided pursuant to management contracts that have initial terms that range from one year to five years.  As of SeptemberJune 30, 2017,2019, the Company’s total owned and third-party managed portfolio included 204203 properties with approximately 131,300133,100 beds.

2. Summary of Significant Accounting Policies
 
Basis of Presentation and use of Estimates
 
The accompanying consolidated financial statements, presented in U.S. dollars, are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and revenue and expenses during the reporting periods. The Company’s actual results could differ from those estimates and assumptions. All material intercompany transactions among consolidated entities have been eliminated. All dollar amounts in the tables herein, except share, per share, unit and per unit amounts, are stated in thousands unless otherwise indicated.



9

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




Principles of Consolidation


The Company’s consolidated financial statements include its accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which it has control. Investments acquired or created are evaluated based on the accounting guidance relating to variable interest entities (“VIEs”), which requires the consolidation of VIEs in which the Company is considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation using the voting interest model.


Recently Issued Accounting Pronouncements


In August 2017,The Company does not expect the following accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2017-12 (“ASU 2017-12”), “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The purpose of this ASU is to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition to that main objective, the amendments in this update make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The guidance is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after the issuance date of this update. All transition requirements and elections should be applied to hedging relationships existing on the date of adoption. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The Company is currently in the process of assessing the effects of this ASU, but does not anticipatehave a material impacteffect on its consolidated financial statements.statements:

Accounting Standards UpdateEffective Date
ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”January 1, 2020
ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”January 1, 2020
ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”January 1, 2020

In February 2017, the FASB issued
Recently Adopted Accounting Standards Update 2017-05 (“ASU 2017-05”), “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” The purpose of this ASU is to eliminate the diversity in practice in accounting for derecognition of a nonfinancial asset and in-substance nonfinancial assets (only when the asset or asset group does not meet the definition of a business or the transaction is not a sale to a customer). The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption for the fiscal years beginning after December 15, 2016 is permitted. This ASU is required to be adopted in conjunction with the Company’s adoption of ASU 2014-09, the new revenue recognition standard, which will be adopted as of January 1, 2018. Upon adoption of this ASU, application must be performed on a retrospective basis for each period presented in the Company’s financial statements or a retrospective basis with a cumulative-effect adjustment to retained earnings at the beginning of the fiscal year of adoption. The Company currently does not anticipate a material impact to its consolidated financial statements for property dispositions given the simplicity of the Company’s historical disposition transactions.Pronouncements


In February 2016, the FASB issued Accounting Standards UpdateASU 2016-02 (“ASU 2016-02”2016-12”), “Leases (Topic 842): Amendments to the FASB Accounting Standards Codification.” ASU 2016-02 amendsoutlines principles for the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheetsrecognition, measurement, presentation and making targeted changes to lessor accounting. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the datedisclosure of initial application, with an option to use certain transition relief. The guidance is effective for public business entities for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted.leases.  Subsequent to the issuance of ASU 2016-02, the FASB issued an additional Accounting Standards UpdateASUs clarifying aspects of the new lease accounting standard, which will beare effective upon adoption of ASU 2016-02. These lease-related ASUs are collectively referred to as the “New Leases Standard.”

The Company plansadopted the New Leases Standard on January 1, 2019, utilizing the modified retrospective transition approach. Under this approach, the Company elected to adopt ASU 2016-02apply the new standard to leases that were in place as of January 1, 2019. WhileResults for reporting periods beginning January 1, 2019 are presented under the New Leases Standard.  Upon adoption, the Company did not record an adjustment to beginning retained earnings.

In addition, the Company adopted the following additional practical expedients available for implementation:

An entity need not reassess whether any existing or expired contracts are or contain leases;
An entity need not reassess lease classification for any existing or expired leases; and
An entity need not reassess initial direct costs for any existing leases.

As Lessee:

Under the New Leases Standard, lessees classify leases as either operating or finance leases based on the principle of whether or not the lease is still evaluatingeffectively a financed purchase by the effect thatlessee. This classification determines whether lease expense is recognized on a straight-line basis over the updated standard will have on its consolidated financial statements and related disclosures, it expectsterm of the lease (operating lease) or under the effective interest method (finance lease). In addition, the New Leases Standard requires lessees to recognize right-of-use assets and related lease liabilities on its consolidated balance sheets related tofor leases with a term greater than 12 months regardless of their lease classification.
Upon adoption of the New Leases Standard on January 1, 2019, the Company was a lessee under 28 ground leases and two corporate office headquarters leases for which it recorded $278.2 million inright of use assets (“ROU Assets”), which are included in other assets on the accompanying consolidated balance sheet, and $277.5 million of operating lease liabilities. 
Because the Company’s existing leases under which it is the lessee.

In May 2014, the FASB issued Accounting Standards Update 2014-09 (“ASU 2014-09”), “Revenue From Contracts With Customers (Topic 606)”.  ASU 2014-09 provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries.  ASU 2014-09 requires an entity to recognize revenue to reflect the transfer of goods or services to customers at an amount the entity expectslessee will continue to be paid in exchangeclassified as operating leases, the timing and pattern of lease expense recognition (straight-line basis) will remain unchanged. However, for those goods and services and provide enhanced disclosures, allany leases entered into or modified after January 1, 2019 the leases will need to provide more comprehensive guidance for transactions such as service revenue and contract modifications. Subsequent tobe evaluated under the issuance of ASU 2014-09, the FASB has issued multiple Accounting Standards Updates clarifying multiple aspects of the new revenue recognition standard, which include the deferral of the effective date by one year.  ASU 2014-09, as amended by subsequent Accounting Standards Updates, is effective for public entities for interim and annual periods beginning after December 15, 2017New Leases Standard and may be applied using either a full retrospective or modified retrospective approach upon adoption.classified as finance leases depending on the terms of the transactions.

10

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)






As Lessor:

Under the New Leases Standard, the accounting for lessors remained largely unchanged from current GAAP; however, ASU 2016-02 required that lessors expense, on an as-incurred basis, certain initial direct costs that are not incremental in negotiating a lease. Under the prior standard, these costs were capitalizable and therefore the New Leases Standard resulted in certain of these costs being expensed as incurred after adoption. For the Company, these costs include internal leasing payroll costs incurred for owned and presale development projects, as well as certain legal expenses incurred when negotiating commercial leases. 
The New Leases Standard also requires lessors to evaluate collectability of all operating lease payments in a contract at lease commencement and thereafter. If the operating lease payments are deemed not probable of collection, adjustments are recognized as a reduction to lease income. This resulted in the reclassification of the provision for uncollectible accounts from operating expenses to revenue.  This adjustment is reflected on a prospective basis in the accompanying consolidated statements of comprehensive income, starting on January 1, 2019. The provision for uncollectible accounts for owned properties was $1.7 million and $1.8 million for the three months ended June 30, 2019 and 2018, respectively, and was $2.8 million and $2.7 million for the six months ended June 30, 2019 and 2018, respectively. The provision for uncollectible accounts for on-campus participating properties for both the three months ended June 30, 2019 and 2018 was $0.1 million. The provision for uncollectible accounts for on-campus participating properties was a $0.7 million benefit and a $0.2 million expense for the six months ended June 30, 2019 and 2018, respectively.
The New Leases Standard provides a practical expedient that allows lessors to not separate certain lease and non-lease components if certain criteria are met. The Company plansassessed the criteria and determined that the timing and pattern of transfer for common area maintenance and the related rental revenue is the same. Therefore, the Company elected the practical expedient which resulted in no change to adopt the newhow revenue standard using the modified retrospective approach as of January 1, 2018 and is currently evaluating each of its revenue streams to identify any differences in the timing, measurement or presentation of revenue recognition under the new standard. The Company does not expect the adoption of this standard to have a significant impact on its consolidated financial statements, as a substantial portion of its revenue consists of rental income from leasing arrangements, which is specifically excluded from ASU 2014-09, and will be evaluated with the adoption of the lease accounting standard, ASU 2016-02, discussed above. The Company anticipates the primary effects of the new standard will be associated with the Company’s non-leasing revenue streams, which represent less than 5% of consolidated total revenues.recorded.


In addition, the Company does not expect the following accounting pronouncements to have a material effect on its consolidated financial statements:

ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.”
ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.”
ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.”
ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”

Recently Adopted Accounting Pronouncements

On January 1, 2017, the Company adopted Accounting Standards Update 2017-01 (“ASU 2017-01”), “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The amendments in this guidance clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years; early adoption is permitted. ASU 2017-01 will be applied prospectively to any transactions occurring subsequent to January 1, 2017. Under the new standard, the Company expects that most property acquisitions will be accounted for as asset acquisitions, and as a result, most transaction costs will be capitalized rather than expensed. The impact on the Company’s consolidated financial statements will depend on the size and volume of future acquisition activity.

Other
In addition, on January 1, 2017,2019, the Company adopted the following accounting pronouncements which did not have a material effect on the Company’s consolidated financial statements:


ASU 2017-03, “Accounting Changes and Error Corrections2018-02, “Income Statement - Reporting Comprehensive Income (Topic 250) and Investments — Equity Method and Joint Ventures (Topic 323)220): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update).”Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”
ASU 2016-05,2017-12, “Derivatives and Hedging (Topic 815): EffectTargeted Improvements to Accounting for Hedging Activities”

The SEC issued the Disclosure Update and Simplification rule in 2018 to remove inconsistencies between US GAAP and SEC
regulations. This rule was effective November 5, 2018 and eliminated Rule 3-15(a)(1) of Derivative Contract NovationsRegulation S-X, which required REITs to present separately all gains and losses on Existing Hedge Accounting Relationships.”sales of properties outside of continuing operations on the Statement of Comprehensive Income. The adoption of this rule resulted in the presentation of gains and losses from disposition of real estate within operating income on the Consolidated Statements of Comprehensive Income. Prior year amounts have reclassified to conform to current presentation.


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 of the Company 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, 2016.2018.
 
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.

11

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




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 are 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

 
Project costs directly associated with the development and construction of an owned real estate project, which include interest, property taxes, and amortization of deferred financefinancing 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 $3.4$3.7 million and $3.3$4.0 million was capitalized during the three months ended SeptemberJune 30, 20172019 and 2016,2018, respectively, and interest totaling approximately $13.5$6.4 million and $9.0$7.0 million was capitalized during the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, respectively.
 
Management assesses whether there has been an impairment in the value of the Company’s investments in real estate whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Impairment is recognized when estimated expected future undiscounted cash flows are less than the carrying value of the property, or when a property meets the criteria to be classified as held for sale, at which time an impairment charge is recognized for any excess of the carrying value of the property over the expected net proceeds from the disposal.  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 thereIn the case of any impairment, the valuation would be based on Level 3 inputs. There were no impairment indicatorsimpairments of the carrying values of itsthe Company's investments in real estate as of SeptemberJune 30, 2017,2019, other than a $15.3$3.2 million impairment charge recorded duringon March 31, 2019 concurrent with the second quarter 2017classification of one owned property as held for one property that issale.

Long-Lived Assets–Held for Sale
Long-lived assets to be disposed of are classified as held for sale in the process of being transferred to the lenderperiod in settlement of the property’s $27.4 million mortgage loan that matured in August 2017 (see Note 7).

The Company evaluates each acquisition to determine if the integrated set of assets and activities acquired meet the definition of a business under ASU 2017-01.  If eitherwhich all of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:are met:


a.Management, having the authority to approve the action, commits to a plan to sell the asset.
Substantially all
b.The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets.

c.An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated.

d.The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year.

e.The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value.

f.Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Concurrent with this classification, the asset is recorded at the lower of cost or fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets; or
The integrated set of assetsless estimated selling costs, and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e. revenue generated before and after the transaction).

Property acquisitions deemed to qualify as a business are accounted for as business combinations, and the related acquisition costs are expensed as incurred.depreciation ceases. The Company allocates the purchase pricedid not have any properties classified as held for sale as of properties acquired in business combinations to net tangible and identified intangible assets based on their fair values.  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, the Company’s own analysis of recently acquired and existing comparable properties in the Company’s portfolio, and other market data.  Information obtained about each property as a result of due diligence, marketing and leasing activities is also considered.  The value allocated to land is generally based on the actual purchase price if acquired separately, or market research/comparables if acquired as part of an existing operating property.  The value allocated to building is based on the fair value determined on an “as-if vacant” basis, which is estimated using a replacement cost approach that relies upon assumptions that the Company believes are consistent with current market conditions for similar properties. The value allocated to furniture, fixtures, and equipment is based on an estimate of the fair value of the appliances and fixtures inside the units. The Company has determined these estimates are primarily based upon unobservable inputs and therefore are considered to be Level 3 inputs within the fair value hierarchy. June 30, 2019.



12

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




AcquisitionsRestricted Cash
Restricted cash consists of properties that dofunds held in trust and invested in low risk investments, generally consisting of government backed securities, as permitted by the indentures of trusts, which were established in connection with three bond issues for the Company’s on-campus participating properties.  Additionally, restricted cash includes escrow accounts held by lenders and resident security deposits, as required by law in certain states.  Restricted cash also consists of escrow deposits made in connection with potential property acquisitions and development opportunities.  These escrow deposits are invested in interest-bearing accounts at federally-insured banks.  Realized and unrealized gains and losses are not meetmaterial for the definition of a business are accounted for as asset acquisitions.  The accounting model for asset acquisitions is similar to the accounting model for business combinations except that the acquisition consideration (including transaction costs) is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis.  The relative fair values used to allocate the cost of an asset acquisition are determined using the same methodologies and assumptions as those utilized to determine fair value in a business combination. periods presented.


Redeemable noncontrolling interestsConsolidated VIEs


The Company follows guidance issued by the FASB regarding the classificationhas investments in various entities that qualify as VIEs for accounting purposes and measurement of redeemable securities. Under this guidance, securities that are redeemable for cash or other assets, at the option of the holder and not solely within the control of the issuer, must be classified outside of permanent equity as redeemable noncontrolling interests. The Company makes this determination based on terms in the applicable agreements, specifically in relation to redemption provisions. The Company initially records the redeemable noncontrolling interests at fair value. The carrying amount of the redeemable noncontrolling interest is subsequently adjusted to the redemption value (assuming the noncontrolling interest is redeemable at the balance sheet date), with the corresponding offset for changes in fair value recorded in additional paid in capital. Reductions in fair value are recorded only to the extent that the Company has previously recorded increases in fair value above the redeemable noncontrolling interests’ initial basis. As the changes in redemption value are based on fair value, there is no effect on the Company’s earnings per share. Redeemable noncontrolling interests on the accompanying consolidated balance sheets of ACC are referred to as redeemable limited partners on the consolidated balance sheets of the Operating Partnership. Refer to Note 9 for a more detailed discussion of redeemable noncontrolling interests for both ACC and the Operating Partnership.

Pre-development Expenditures

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, at which time the Company capitalizes the costs.  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 unablethe primary beneficiary and therefore includes the entities in its consolidated financial statements.  These VIEs include the Operating Partnership, six joint ventures that own a total of 15 operating properties, two properties subject to successfully obtainpresale arrangements, and six properties owned under the required permitson-campus participating property structure.  The VIE assets and authorizations.  As such, management evaluatesliabilities consolidated within the statusCompany's assets and liabilities are disclosed at the bottom 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 comprehensive income.  As of September 30, 2017, the Company has deferred approximately $5.6 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.Consolidated Balance Sheets.   


Earnings per Share – Company
 
Basic earnings per share is computed using net income attributable to common stockholders and the weighted average number of shares of the Company’s common stock outstanding during the period.  Diluted earnings per share reflects common shares issuable from the assumed conversion of American Campus Communities Operating Partnership Units (“OP Units”) and common share awards granted.  Only those items having a dilutive impact on basic earnings per share are included in diluted earnings per share.
 
The following potentially dilutive securities were outstanding for the three and ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, but were not included in the computation of diluted earnings per share because the effects of their inclusion would be anti-dilutive. 
  Three Months Ended
June 30,
 Six Months Ended
June 30,
  2019 2018 2019 2018
Common OP Units (Note 8) 594,788
 938,683
 594,788
 947,759
Preferred OP Units (Note 8) 35,242
 77,513
 49,722
 77,513
Total potentially dilutive securities 630,030
 1,016,196
 644,510
 1,025,272

  Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
  2017 2016 2017 2016
Common OP Units (Note 9) 1,011,674
 1,221,242
 1,023,248
 1,278,148
Preferred OP Units (Note 9) 77,513
 87,767
 77,513
 95,212
Unvested restricted stock awards (Note10) 818,547
 
 
 
Total potentially dilutive securities 1,907,734
 1,309,009
 1,100,761
 1,373,360


13

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)





 The following is a summary of the elements used in calculating basic and diluted earnings per share:
  Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
  2017 2016 2017 2016
Numerator – basic and diluted earnings per share:        
Net (loss) income $(1,233) $9,845
 $30,563
 $74,819
Net income attributable to noncontrolling interests (79) (201) (587) (1,150)
Net (loss) income attributable to common stockholders (1,312) 9,644
 29,976
 73,669
Amount allocated to participating securities (360) (329) (1,217) (1,051)
Net (loss) income attributable to common stockholders $(1,672) $9,315
 $28,759
 $72,618
         
Denominator:  
  
  
  
Basic weighted average common shares outstanding 136,421,198
 130,786,985
 134,708,361
 128,239,294
Unvested restricted stock awards (Note 10) 
 781,386
 877,489
 795,107
Diluted weighted average common shares outstanding 136,421,198
 131,568,371
 135,585,850
 129,034,401
         
Earnings per share:        
Net (loss) income attributable to common stockholders - basic $(0.01) $0.07
 $0.21
 $0.57
Net (loss) income attributable to common stockholders - diluted $(0.01) $0.07
 $0.21
 $0.56
  Three Months Ended
June 30,
 Six Months Ended
June 30,
  2019 2018 2019 2018
Numerator – basic and diluted earnings per share:        
Net income $10,210
 $45,990
 $41,578
 $72,240
Net loss (income) attributable to noncontrolling interests 176
 19
 (1,552) (304)
Net income attributable to common stockholders 10,386
 46,009
 40,026
 71,936
Amount allocated to participating securities (458) (377) (1,031) (883)
Net income attributable to common stockholders $9,928
 $45,632
 $38,995
 $71,053
         
Denominator:  
  
  
  
Basic weighted average common shares outstanding 137,268,696
 136,677,255
 137,185,576
 136,599,816
Unvested restricted stock awards (Note 9) 974,692
 899,111
 1,012,558
 936,552
Diluted weighted average common shares outstanding 138,243,388
 137,576,366
 138,198,134
 137,536,368
         
Earnings per share:        
Net income attributable to common stockholders - basic and diluted $0.07
 $0.33
 $0.28
 $0.52

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Earnings per Unit – Operating Partnership
 
Basic earnings per OP Unit is computed using net income attributable to common unitholders and the weighted average number of common units outstanding during the period.  Diluted earnings per OP Unit reflects the potential dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units or resulted in the issuance of OP Units and then shared in the earnings of the Operating Partnership.


14

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



The following is a summary of the elements used in calculating basic and diluted earnings per unit: 
  Three Months Ended
June 30,
 Six Months Ended
June 30,
  2019 2018 2019 2018
Numerator – basic and diluted earnings per unit:        
Net income $10,210
 $45,990
 $41,578
 $72,240
Net loss (income) attributable to noncontrolling interests – partially owned properties 230
 366
 (1,338) 252
Series A preferred unit distributions (9) (31) (40) (62)
Amount allocated to participating securities (458) (377) (1,031) (883)
Net income attributable to common unitholders $9,973
 $45,948
 $39,169
 $71,547
         
Denominator:  
  
  
  
Basic weighted average common units outstanding 137,863,484
 137,615,938
 137,780,364
 137,547,575
Unvested restricted stock awards (Note 9) 974,692
 899,111
 1,012,558
 936,552
Diluted weighted average common units outstanding 138,838,176
 138,515,049
 138,792,922
 138,484,127
  Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
  2017 2016 2017 2016
Numerator – basic and diluted earnings per unit:        
Net (loss) income $(1,233) $9,845
 $30,563
 $74,819
Net income attributable to noncontrolling interests – partially owned properties (57) (77) (259) (285)
Series A preferred unit distributions (31) (36) (93) (115)
Amount allocated to participating securities (360) (329) (1,217) (1,051)
Net (loss) income attributable to common unitholders $(1,681) $9,403
 $28,994
 $73,368
         
Denominator:  
  
  
  
Basic weighted average common units outstanding 137,432,872
 132,008,227
 135,731,609
 129,517,442
Unvested restricted stock awards (Note 10) 
 781,386
 877,489
 795,107
Diluted weighted average common units outstanding 137,432,872
 132,789,613
 136,609,098
 130,312,549
Earnings per unit:        
Net income attributable to common unitholders - basic and diluted $0.07
 $0.33
 $0.28
 $0.52

Earnings per unit:        
Net (loss) income attributable to common unitholders - basic $(0.01) $0.07
 $0.21
 $0.57
Net (loss) income attributable to common unitholders - diluted $(0.01) $0.07
 $0.21
 $0.56


3. Acquisitions and Joint Venture Investments
  
Core Transaction Overview: Presale Development Projects: During the third quarter of 2017,six months ended June 30, 2018, the Company executed an agreemententered into two presale agreements to acquire a portfolio of seven student housingpurchase two properties from affiliates of Core Spaces and DRW Real Estate Investments (the “Core Transaction”).  The transaction included the purchase of 100% of the ownership interests in two operating properties, the purchase of partial ownership interests in two operating properties through a joint venture arrangement (with one property being subject to a purchase optionunder development that had not been exercised as of September 30, 2017), and the purchase of partial ownership interests in three in-process development properties through a joint venture arrangement.   In total, the Core Transaction propertieswhen completed will contain 3,776783 beds. The initial investment made at closing was $265.4 million, andCompany is obligated to purchase the Company expects to invest a total of $590.6 million over a two year period including the initial investment.

Core Transaction Property Acquisitions: In August 2017, the Company purchased 100% of the ownership interests in two properties for a total purchase price of approximately $146.1 million. Total cash consideration was approximately $144.3 million. The difference between$107.3 million, which includes the contractedcontractual purchase price and the cash consideration is due tocost of elected upgrades, as long as the developer meets certain construction completion deadlines and other assets and liabilities that were notclosing conditions. As part of the contractual purchase price, but were acquired inpresale agreement, the transactions, as well as transaction costs capitalized as partCompany provided $15.6 million of mezzanine financing to one of the acquisitions. A list of these two properties acquired as part of the Core Transaction is as follows:projects.
PropertyLocationPrimary University ServedAcquisition DateBeds
Hub EugeneEugene, ORUniversity of OregonAugust 2017513
StateFort Collins, COColorado State UniversityAugust 2017665
1,178

Core Transaction Joint Ventures: As mentioned above, during the third quarter of 2017 as part of the Core Transaction, the Company funded initial investments in two joint ventures. The joint venture transactions involved the joint venture partner making a non-cash contribution of properties and the Company making a cash contribution to the joint ventures in exchange for its membership interests. Both joint ventures were determined to be VIEs, with the Company being the primary beneficiary. As such, both joint ventures are included in the Company’s consolidated financial statements contained herein. Additionally, the partners’ ownership interests in each of the joint ventures are accounted for as redeemable noncontrolling interests. For further discussion, refer to Note 9.

15

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



The first joint venture (the “Core JV I”) holds one property (The James) that completed construction and opened for operations in August 2017. The Company's initial investment was $95.1 million for an approximate 68% interest in the joint venture, part of which was used to pay off the property's $68.7 million construction loan at closing. The transaction also provided the Company with an option to cause the joint venture partner to contribute a second property, Hub U District Seattle, to the joint venture during the fourth quarter 2017. As mentioned in Note 15, the Company exercised this option and the contribution of the property to the joint venture is anticipated to close during the fourth quarter 2017. The Company's initial investment in the property will be approximately $40.6 million. Additionally, the Company has an option to purchase the remaining ownership interests in the joint venture in the fourth quarter of 2019 under a put/call agreement with the joint venture partner for an amount to be determined by the fair market value of the properties at the date of exercise. The value of the remaining ownership interests upon exercise of the option is anticipated to approximate $68.8 million.

The second joint venture (the “Core JV II”) holds three in-process development properties that are currently under construction and are scheduled to complete construction and open for operations in Fall 2018. The Company's initial investment was $24.2 million for an approximate 58% interest in the joint venture. Upon the initial funding, the Company assumed sole operational control, while the partner retained certain limited decision making abilities, including responsibility for the development and delivery of the properties within an agreed-upon budget and completion timeline. The joint venture partner has also provided a payment guarantee for the construction loans that are partially financing the construction of the properties. Subsequent to the successful completion and delivery of the assets, which is expected to occur in September 2018, the Company anticipates increasing its investment in Core JV II by $130.6 million as a result of paying off the construction loans. Additionally, the Company has an option to purchase the remaining ownership interests in the joint venture in the third quarter of 2019 under a put/call agreement with the joint venture partner for an amount to be determined by the fair market value of the properties at the date of exercise. The value of the remaining ownership interests upon exercise of the option is anticipated to approximate $85.2 million.

A list of the properties contributed to joint ventures as part of the Core Transaction are as follows:
PropertyLocationPrimary University ServedActual or Targeted Completion DateBeds
Core JV I:
The JamesMadison, WIUniversity of Wisconsin - MadisonAugust 2017850
Hub U District Seattle(1)
Seattle, WAUniversity of WashingtonSeptember 2017248
1,098
Core JV II:
Hub Ann ArborAnn Arbor, MIUniversity of MichiganSeptember 2018310
Hub FlagstaffFlagstaff, AZNorthern Arizona UniversitySeptember 2018591
Hub West LafayetteWest Lafayette, INPurdue UniversitySeptember 2018599
1,500
2,598
(1)
Subject to an option that had not been exercised as of September 30, 2017 (see Note 15).

Other 2017 Property Acquisitions: During the nine months ended September 30, 2017, the Company acquired two additional wholly-owned properties containing 982 beds for approximately $158.5 million. Total cash consideration was approximately $158.0 million. The difference between the contracted purchase price and the cash consideration is due to other assets and liabilities that were not part of the contractual purchase price, but were acquired in the transactions, as well as transaction costs capitalized as part of the acquisitions.

A list of these properties is outlined below:
PropertyLocationPrimary University ServedAcquisition DateBeds
The ArlieArlington, TXUniversity of Texas ArlingtonApril 2017598
TWELVE at U DistrictSeattle, WAUniversity of WashingtonJune 2017384
982


16

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


2017 Land Acquisitions: During the nine months ended September 30, 2017, the Company purchased five land parcels with a fair value of $12.0 million for total cash consideration of approximately $8.9 million. The difference between the fair value of the land and the cash consideration represents non-cash consideration. In addition, the Company made an initial investment of $9.0 million in a joint venture that holds a land parcel with fair value of $12.0 million.

2016 Acquisition Activity: During the nine months ended September 30, 2016, the Company acquired University Crossings, a wholly-owned property containing 546 beds that is located adjacent to the University of North Carolina in Charlotte, NC for approximately $40.0 million. Also during the nine months ended September 30, 2016, the Company secured three in-process development properties containing 1,593 beds for a combined purchase price of approximately $66.0 million. As part of these transactions, the Company assumed approximately $10.0 million of fixed rate mortgage debt.


4. Property Dispositions

During the nine months ended September 30, 2017,Property Dispositions:

In May 2019, the Company sold the following wholly-ownedCollege Club Townhomes, an owned property located near Florida A&M University in Tallahassee, Florida, containing 544 beds for approximately $25.0$9.5 million, resulting in net proceeds of approximately $24.5$8.9 million. The net loss on this disposition totaled approximately $0.6$0.3 million. Concurrent with the classification of this property as held for sale in December 2016,March 2019, the Company reduced the property’s carrying amount to its estimated fair value less estimated selling costs and recorded an impairment charge of $4.9 million:$3.2 million.
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

PropertyLocationPrimary University ServedBeds
The Province - DaytonDayton, OHWright State University657



During the nine months ended September 30, 2016,In May 2018, the Company sold two wholly-owneda portfolio of three owned properties containing 1,3241,338 beds for a total sales price of approximately $73.8$245.0 million, resulting in net proceeds of approximately $72.6$242.3 million. The combined net gain on these dispositionsthe portfolio disposition totaled approximately $17.4$42.3 million. Additionally,

Joint Venture Activity:

In May 2018, the Company hadexecuted an agreement to enter into a joint venture arrangement with Allianz Real Estate (the “ACC / Allianz Joint Venture Transaction”). The transaction included the sale of a partial ownership interest in a portfolio of 19 wholly-ownedseven owned properties, classifiedcontaining 4,611 beds, through a joint venture arrangement. The joint venture transaction involved the joint venture partner making a cash contribution of approximately $373.1 million in exchange for a 45% ownership interest. As part of the transaction, the joint venture issued $330 million of secured mortgage debt.

The joint venture was determined to be a VIE. As the Company retained control of the properties after the joint venture transaction, it was deemed the primary beneficiary. As such, the Company’s contribution of the properties to the joint venture was recorded at net book value, and the joint venture is included in the Company’s consolidated financial statements contained herein. The joint venture partner’s ownership interest in the joint venture is accounted for as held for sale as of September 30, 2016.noncontrolling interest.


5. Investments in Wholly-OwnedOwned Properties
 
Wholly-ownedOwned properties, both wholly-owned and those owned through investments in VIEs, consisted of the following: 
 September 30, 2017 December 31, 2016  June 30, 2019 December 31, 2018
Land (1) (2)
 $649,597
 $568,266
 
Land (1)
 $651,599
 $653,522
Buildings and improvements 5,986,682
 5,065,137
  6,484,801
 6,486,106
Furniture, fixtures and equipment 366,581
 303,240
  374,557
 371,429
Construction in progress (2)
 273,367
 349,498
  515,822
 302,902
 7,276,227
 6,286,141
  8,026,779
 7,813,959
Accumulated depreciation (1,014,150) (859,127) 
Wholly-owned properties, net $6,262,077
 $5,427,014
(3) 
Less accumulated depreciation (1,350,562) (1,230,562)
Owned properties, net
 $6,676,217
 $6,583,397
(1) 
The land balance above includes undeveloped land parcels with book values of approximately $45.5$54.4 million and $38.5$54.5 million as of SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.  It also includes land totaling approximately $29.9 million and $61.2$10.3 million as of Septemberboth June 30, 20172019 and December 31, 2016, respectively,2018 related to properties under development.
(2)

Land includes $19.3 million as of September 30, 2017 and construction in progress includes $60.0 million and $1.9 million as of September 30, 2017 and December 31, 2016, respectively, related to in-process development properties, held by entities determined to be VIEs. The entities that own the properties are deemed to be VIEs, and the Company is determined to be the primary beneficiary of the VIEs.
(3)
Excludes the net book value of one property classified as held for sale in the accompanying consolidated balance sheets at December 31, 2016.


17

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




6. On-Campus Participating Properties
On-campus participating properties are as follows: 
      Historical Cost
Lessor/University 
Lease
Commencement
 Required Debt
Repayment
 September 30, 2017 December 31, 2016
Texas A&M University System / Prairie View A&M University (1)
 2/1/1996 9/1/2023 $46,446
 $45,310
Texas A&M University System / Texas A&M International 2/1/1996 9/1/2023 7,271
 7,215
Texas A&M University System / Prairie View A&M University (2)
 10/1/1999 8/31/2025 29,207
 28,627
  8/31/2028  
University of Houston System / University of Houston (3)
 9/27/2000 8/31/2035 38,328
 37,960
West Virginia University System / West Virginia University 7/16/2013 7/16/2045 44,597
 43,817
      165,849
 162,929
Accumulated amortization     (82,754) (77,132)
On-campus participating properties, net   $83,095
 $85,797
(1)
Consists of three phases placed in service between 1996 and 1998.
(2)
Consists of two phases placed in service in 2000 and 2003.
(3)
Consists of two phases placed in service in 2001 and 2005.


18

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


7. Debt
 
A summary of the Company’s outstanding consolidated indebtedness, including unamortized debt premiums and discounts, is as follows: 
  June 30, 2019 December 31, 2018
Debt secured by owned properties:    
Mortgage loans payable:    
Unpaid principal balance $724,091
 $727,163
Unamortized deferred financing costs (1,842) (1,757)
Unamortized debt premiums 9,088
 11,579
  731,337
 736,985
Construction loans payable (1)
 48,258
 22,207
Unamortized deferred financing costs (155) (480)
  779,440
 758,712
Debt secured by on-campus participating properties:  
  
Mortgage loans payable (2)
 66,924
 67,867
Bonds payable (2)
 27,030
 27,030
Unamortized deferred financing costs (472) (525)
  93,482
 94,372
Total secured mortgage, construction and bond debt 872,922
 853,084
Unsecured notes, net of unamortized OID and deferred financing costs (3)
 1,983,895
 1,588,446
Unsecured term loans, net of unamortized deferred financing costs (4)
 198,945
 198,769
Unsecured revolving credit facility 185,600
 387,300
Total debt, net $3,241,362
 $3,027,599
  September 30, 2017 December 31, 2016 
Debt secured by wholly-owned properties:     
Mortgage loans payable:     
Unpaid principal balance $523,328
 $559,642
 
Unamortized deferred financing costs (2,349) (3,040) 
Unamortized debt premiums 20,697
 26,830
 
  541,676
 583,432
 
Construction loans payable (1)
 22,422
 
 
Unamortized deferred financing costs (1,382) 
 
  562,716
 583,432
 
Debt secured by on-campus participating properties:  
  
 
Mortgage loans payable 70,257
 71,662
 
Bonds payable 30,575
 33,870
 
Unamortized deferred financing costs (674) (769) 
  100,158
 104,763
 
Total secured mortgage, construction and bond debt 662,874
 688,195
 
Unsecured notes, net of unamortized OID and deferred financing costs (2)
 1,190,296
 1,188,737
 
Unsecured term loans, net of unamortized deferred financing costs (3)
 646,675
 149,065
 
Unsecured revolving credit facility 266,440
 99,300
 
Total debt, net $2,766,285
 $2,125,297
 

 
(1) 
Construction loans payable relatesrelate to construction loans partially financing the development of four in-processtwo presale development properties.projects. These properties are owned by entities determined to be VIEs for which the Company is the primary beneficiary, including one of the joint ventures formed as part of the Core Transaction discussed in Note 3.beneficiary. The creditors of these construction loans do not have recourse to the assets of the Company.
(2) 
The creditors of mortgage loans payable and bonds payable related to on-campus participating properties do not have recourse to the assets of the Company.
(3)
Includes net unamortized original issue discount (“OID”) of $1.7$2.6 million and $1.6 million at SeptemberJune 30, 20172019 and $1.9 million at December 31, 2016,2018, respectively, and net unamortized deferred financing costs of $8.0$13.5 million and $10.0 million at SeptemberJune 30, 20172019 and $9.3 million at December 31, 2016.2018, respectively.
(3)(4) 
Includes net unamortized deferred financing costs of $3.3$1.1 million and $1.2 million at SeptemberJune 30, 20172019 and $0.9 million at December 31, 2016.2018, respectively.


Mortgage and Construction Loans Payable     


During the nine months ended September 30, 2017,In January 2019, the Company paid off approximately $30.5refinanced $70.0 million of variable rate debt on one wholly-owned property, extending the maturity to January 2024. The Company entered into an interest rate swap contract to hedge the variable rate cash flows associated with interest payments on this LIBOR-based mortgage loan, resulting in a fixed rate mortgage debt secured by one wholly-owned property. In the third quarter of 2017, as part of the Core Transaction discussed in detail in4.00%. Refer to Note 3, Core JV I paid off $68.7 million of construction debt with proceeds from the Company's initial investment in the joint venture. During the nine months ended September 30, 2016, the Company paid off approximately $152.6 million of fixed rate mortgage debt secured by nine wholly-owned properties.10 for information related to derivatives.


In May 2017, the lender of the non-recourse mortgage loan secured by Blanton Common, a wholly-owned property located near Valdosta State University which was acquiredincluded as part of the GMH student housing transaction in 2008, sent a formal notice of default and initiated foreclosure proceedings. The property generatesgenerated insufficient cash flow to cover the debt service on the mortgage, which had a balance of $27.4 million at September 30, 2017default and a contractual maturity date of August 2017.  In May 2017, the lender began receiving the net operating cash flows of the property each month in lieu of scheduled monthly mortgage payments. In June 2017, the Company recorded an impairment charge for this property of $15.3 million. In August 2017, the property transferred to receivership and a third-party manager began managing the property on behalf of the lender. As of September 30, 2017,In July 2019, the Company was cooperating withtransferred the lender to allow for a consensual foreclosure process upon which the property will be surrendered to the lender in satisfactionsettlement of the property's $27.4 million mortgage loan. As discussed in Note 2, in

During the six months ended June 2017,30, 2018, the Company recorded an impairment charge for thispaid off approximately $55.9 million of fixed rate mortgage debt secured by three owned properties. Additionally, during the six months ended June 30, 2018, the Company paid $2.7 million in debt defeasance costs associated with the early pay-off of mortgage loans in connection with the sale of one owned property of $15.3 million.and one owned property included in the ACC / Allianz Joint Venture Transaction (see Note 4). These costs were partially offset by the net



19

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




write-off of $1.9 million of premiums and deferred financing costs, resulting in a loss from early extinguishment of debt of $0.8 million.

Unsecured Notes

In June 2019, the Operating Partnership closed a $400 million offering of senior unsecured notes under its existing shelf registration. These 7-year notes were issued at 99.704 percent of par value with a coupon of 3.300 percent and a yield of 3.347 percent, and are fully and unconditionally guaranteed by the Company.  Net proceeds from the notes totaled approximately $394.0 million, after deducting the underwriting discount and offering expenses which will be amortized over the term of the unsecured notes. The net proceeds were used to repay borrowings under the Company’s revolving credit facility.

The Company has issued the following senior unsecured notes:
Date Issued Amount % of Par Value Coupon Yield Original Issue Discount Term (Years) Amount % of Par Value Coupon Yield Original Issue Discount Term (Years)
April 2013 $400,000
 99.659 3.750% 3.791% $1,364
 10 $400,000
 99.659 3.750% 3.791% $1,364
 10
June 2014 400,000
 99.861 4.125% 4.269%
(1) 
556
 10 400,000
 99.861 4.125% 4.269%
(1) 
556
 10
September 2015 400,000
 99.811 3.350% 3.391% 756
 5 400,000
 99.811 3.350% 3.391% 756
 5
October 2017 400,000
 99.912 3.625% 3.635% 352
 10
June 2019 400,000
 99.704 3.300% 3.680%
(1) 
1,184
 7
 $1,200,000
     $2,676
  $2,000,000
     $4,212
 
(1) 
The yield includes the effect of the amortization of interest rate swap terminations (see Note 11)10).


The notes are fully and unconditionally guaranteed by the Company.  Interest on the notes is payable semi-annually. The terms of the unsecured notes include certain financial covenants that require the Operating Partnership to limit the amount of total debt and secured debt as a percentage of total asset value, as defined.  In addition, the Operating Partnership must maintain a minimum ratio of unencumbered asset value to unsecured debt, as well as a minimum interest coverage level. As of SeptemberJune 30, 2017,2019, the Company was in compliance with all such covenants.
  
Unsecured Revolving Credit Facility


In January 2017,February 2019, the Company entered intoexercised the Fifth Amended and Restated Credit Agreement (the “Agreement”). Pursuantoption under the existing credit agreement to increase the Agreement,capacity of the Company increased the size of its unsecured revolving credit facility from $500$700 million to $700 million, which$1 billion. It may be expanded by up to an additional $500$200 million upon the satisfaction of certain conditions. In connection with the Agreement, theThe maturity date of the revolving credit facility was extended from March 2018 tois March 2022.


The unsecured revolving credit facility bears interest at a variable rate, at the Company’s option, based upon a base rate of one-, two-, three- or six-month LIBOR, plus, in each case, a spread based upon the Company’s investment grade rating from either Moody’s Investor Services, Inc. or Standard & Poor’s Rating Group. Additionally, the Company is required to pay a facility fee of 0.20% per annum on the $700 million$1 billion revolving credit facility.  As of SeptemberJune 30, 2017,2019, the revolving credit facility bore interest at a weighted average annual rate of 2.44% (1.24%3.60% (2.40% + 1.00% spread + 0.20% facility fee), and availability under the revolving credit facility totaled $433.6$814.4 million.


The terms of the unsecured credit facility include certain restrictions and covenants, which limit, among other items, the incurrence of additional indebtedness and liens.  The facility contains customary affirmative and negative covenants and also contains financial covenants that, among other things, require the Company to maintain certain maximum leverage ratios and minimum ratios of “EBITDA” (earnings before interest, taxes, depreciation and amortization) to fixed charges.  The financial covenants also include a minimum asset value requirement, a maximum secured debt ratio, and a minimum unsecured debt service coverage ratio.  As of SeptemberJune 30, 2017,2019, the Company was in compliance with all such covenants.


Unsecured Term Loans


TheIn May 2018, the Company has arepaid the $300 million unsecured term loan (“Term Loan III Facility”) and the $150 million unsecured term loan (“Term Loan I Facility”) which has an accordion feature that allowswere due to mature in September 2018 and March 2021, respectively, using the Company to expandproceeds from the amount by up to an additional $50 million, subject tosale of a partial interest in a portfolio of seven owned properties and the satisfactionportfolio sale of certain conditions. The maturity datethree owned properties (see Note
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


4). In connection with the pay-off of the Term Loan IIII Facility is March 2021. The weighted average annual rate on theand Term Loan I Facility, was 2.33% (1.23% + 1.10% spread) at September 30, 2017. 

In June 2017, the Company entered intoaccelerated the amortization of $0.9 million of deferred financing costs.

The Company is currently party to an Unsecured Term Loan Credit Agreement (the “New Term“Term Loan II Facility”) totaling $200 million. The maturity date of the New Term Loan II Facility ismillion which matures in June 2022. The agreement has an accordion feature that allows the Company to expand the amount by up to an additional $100 million, subject to the satisfaction of certain conditions. The weighted average annual rate on the New Term Loan II Facility was 2.34% (1.24% + 1.10% spread), at September 30, 2017.

In September 2017, the Company entered into an Unsecured Term Loan Credit Agreement (“Term Loan III Facility”) totaling $300 million. The maturity date of the Term Loan III Facility is September 2018, and can be extended for two one-year periods at the Company’s option, subject to the satisfaction of certain conditions. The agreement has an accordion feature that allows the

20

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Company to expand the amount by up to an additional $100 million, subject to the satisfaction of certain conditions. The weighted average annual rate on this term loan was 2.34% (1.24%3.51% (2.41% + 1.10% spread) at SeptemberJune 30, 2017.2019.

The terms of the term loan facilitiesfacility described above include certain restrictions and covenants consistent with those of the unsecured revolving credit facility discussed above. As of SeptemberJune 30, 2017,2019, the Company was in compliance with all such covenants.


8.7. Stockholders’ Equity / Partners’ Capital
 
Stockholders’ Equity - Company


In June 2015,May 2018, the Company established anrenewed its at-the-market share offering program (the “ATM Equity Program”) through which the Company may issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $500 million.  The shares that may be sold under this program include shares of common stock of the Company with an aggregate offering price of approximately $233.0 million that were not sold under the Company's previous ATM equity program that expired in May 2018. Actual sales under the program will depend on a variety of factors including, but not limited to, market conditions, the trading price of the Company’s common stock and determinations of the appropriate sources of funding for the Company.  


The following table presentsThere was no activity under the Company’s ATM Equity Program during the three and ninesix months ended SeptemberJune 30, 20172019 and 2016:
  Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
  2017 2016 2017 2016
Total net proceeds $1,135
 $62,374
 $188,538
 $62,374
Commissions paid to sales agents $14
 $790
 $2,374
 $790
Weighted average price per share $48.09
 $50.98
 $48.34
 $50.98
Shares of common stock sold 23,900
 1,239,000
 3,949,356
 1,239,000

2018. As of SeptemberJune 30, 2017,2019, the Company had approximately $233.0$500.0 million available for issuance under its ATM Equity Program.

In February 2016, ACC completed an equity offering, consisting of the sale of 17,940,000 shares of ACC’s common stock at a price of $41.25 per share, including 2,340,000 shares issued as a result of the exercise of the underwriters’ overallotment option in full at closing. The offering generated gross proceeds of approximately $740.0 million. The aggregate proceeds to ACC, net of the underwriting discount and expenses of the offering, were approximately $707.3 million.


In 2015, the Company established a Non-Qualified Deferred Compensation Plan (“Deferred Compensation Plan”) maintained for the benefit of certain employees and members of the Company’s Board of Directors, in which vested share awards (see Note 10)9), salary and other cash amounts earned may be deposited. Deferred Compensation Plan assets are held in a rabbi trust, which is subject to the claims of the Company’s creditors in the event of bankruptcy or insolvency. The shares held in the Deferred Compensation Plan are classified within stockholders’ equity in a manner similar to the manner in which treasury stock is classified. Subsequent changes in the fair value of the shares are not recognized. During the ninesix months ended SeptemberJune 30, 2017, 43,5972019, 13,277 and 7,345 shares of ACC’s commonvested stock were deposited into and withdrawn from the Deferred Compensation Plan.Plan, respectively. As of SeptemberJune 30, 2017, 63,7782019, 75,535 shares of ACC’s common stock were held in the Deferred Compensation Plan.

Partners’ Capital – Operating Partnership
In connection with the equity offering and ATM Equity Program discussed above, ACCOP issued a number of American Campus Operating Partnership Common OP Units (“Common OP Units”) to ACC equivalent to the number of common shares issued by ACC.


9. Noncontrolling Interests
Interests in Consolidated Real Estate Joint Ventures and Presale Arrangements

Noncontrolling interests - partially owned properties: As of September 30, 2017, the Operating Partnership consolidates three joint ventures that own and operate three owned off-campus properties. Additionally, in December 2016, the Company entered

21

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




8. Noncontrolling Interests

Interests in Consolidated Real Estate Joint Ventures and Presale Arrangements

Noncontrolling interests - partially owned properties: As of June 30, 2019, the Operating Partnership consolidates four joint ventures that own and operate ten owned off-campus properties. Additionally, the Company has entered into a pre-sale agreementtwo presale agreements to purchase The Edge at Stadium Centre.two in-process development properties. The portion of net assets attributable to the third-party partners in these arrangements is classified as “noncontrolling interests - partially owned properties” within equity and capital on the accompanying consolidated balance sheets of ACC and the Operating Partnership, respectively.


Redeemable noncontrolling interests (ACC) / redeemable limited partners (Operating Partnership): As partIn the third quarter of the Core Transaction discussed in detail in Note 3,2017, the Company entered into two joint venture arrangements in the third quarter of 2017.ventures (the “Core Joint Ventures”). The companyCompany is consolidating these joint ventures and the noncontrolling interest holder in each of these consolidated joint ventures has the option to redeem its noncontrolling interest in the entities through the exercise of put options. The options will be exercisable in the third and fourth quarter of 2019, and the redemption price is based on the fair value of the properties at the time of option exercise. As the exercise of the options is outside of the Company’s control, the portion of net assets attributable to the third-party partner in each of the joint venturesCore Joint Ventures is classified as “redeemable noncontrolling interests” and “redeemable limited partners” in the mezzanine section of the accompanying consolidated balance sheets of ACC and the Operating Partnership, respectively. The redeemable noncontrolling interests related to the joint venture partners in the Core Transaction are marked to their redemption value at each balance sheet date.  The redemption value is based on the fair value of the underlying properties held by the joint ventures.  This analysis incorporates information obtained from a number of sources, including the Company’s analysis of comparable properties in the Company’s portfolio, estimations of net operating results of the properties, capitalization rates, discount rates, and other market data. During the ninesix months ended SeptemberJune 30, 2017,2019, there were no changes in the redemption value of redeemable noncontrolling interestsinterest that resulted from a change in the fair value of the net assets held by consolidated joint ventures. For further discussion on accounting for changes in redemption value, refer to Note 2.the Core Joint Ventures.


The third-party partners’ share of the income or loss of the joint ventures described above is calculated based on the partners'partners’ economic interest in the joint ventures, and is included in “net income attributable to noncontrolling interests” on the consolidated statements of comprehensive income of ACC, and is reported as “net income attributable to noncontrolling interests - partially owned properties” on the consolidated statements of comprehensive income of the Operating Partnership.


Operating Partnership Ownership


Also included in redeemable noncontrolling interests (ACC) / redeemable limited partners (Operating Partnership) are OP Units for which the Operating Partnership is required, either by contract or securities law, to deliver registered common shares of ACC to the exchanging OP unit holder, or for which the Operating Partnership has the intent or history of exchanging such units for cash. The units classified as such include Series A Preferred Units (“Preferred OP Units”) as well as Common OP Units. The value of redeemable noncontrolling interests (ACC) / redeemable limited partners (Operating Partnership) related to OP Units on the accompanying consolidated balance sheets is reported at the greater of fair value, which is based on the closing market value of the Company’s common stock at period end, or historical cost at the end of each reporting period. The OP Unitholders’ share of the income or loss of the Company is included in “net income attributable to noncontrolling interests” on the consolidated statements of comprehensive income of ACC.


As of both SeptemberJune 30, 20172019 and December 31, 2016,2018, approximately 0.8%0.5% of the equity interests of the Operating Partnership were held by owners of Common OP Units and Preferred OP Units not held by ACC or ACC Holdings. During the ninesix months ended SeptemberJune 30, 2017, 22,000 Common2019, 42,271 Preferred OP Units were converted into an equal number of shares of ACC’s common stock. During the year ended December 31, 2016, 280,9152018, 412,343 Common OP Units and 31,846 Preferred OP Units were converted into an equal number of shares of ACC’s common stock.


AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Below is a table summarizing the activity of redeemable noncontrolling interests (ACC) / redeemable limited partners (Operating Partnership) for the ninethree months ended SeptemberMarch 31, 2019 and 2018 and June 30, 2017,2019 and 2018, which includes both the redeemable joint venture partners and OP Units discussed above: 
Balance, December 31, 2018$184,446
Net income259
Distributions(305)
Conversion of OP Units into shares of ACC common stock(252)
Adjustments to reflect OP Units at fair value2,547
Balance, March 31, 2019$186,695
Net income163
Distributions(288)
Adjustments to reflect OP Units at fair value(660)
Balance, June 30, 2019$185,910

December 31, 2016$55,078
Net income322
Distributions(61,019)
Conversion of redeemable limited partner units into shares of ACC common stock(154)
Contribution of properties from noncontrolling interest123,986
Adjustments to reflect redeemable limited partner units at fair value(5,943)
September 30, 2017$112,270


22
Balance, December 31, 2017$132,169
Net income210
Distributions(376)
Conversion of OP Units into shares of ACC common stock(478)
Adjustments to reflect OP Units at fair value(4,526)
Balance, March 31, 2018$126,999
Net income344
Distributions(531)
Contributions from noncontrolling interests71
Adjustments to reflect OP Units at fair value4,426
Balance, June 30, 2018$131,309



AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


10.9. Incentive Award Plan


In May 2018, the Company’s stockholders approved the American Campus Communities, Inc. 2018 Incentive Award Plan (the “2018 Plan”).  The 2018 Plan replaced the Company’s 2010 Incentive Award Plan (the “2010 Plan”). The 2018 Plan provides for the grant of various stock-based incentive awards to selected employees and directors of the Company and the Company’s affiliates.  The types of awards that may be granted under the 2018 Plan include incentive stock options, nonqualified stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), profits interest units (“PIUs”) and other stock-based awards.  The Company has reserved a total 3.5 million shares of the Company’s common stock for issuance pursuant to the 2018 Plan, subject to certain adjustments for changes in the Company’s capital structure, as defined in the 2018 Plan.  Upon approval of the 2018 Plan, all remaining authorized shares that were not granted under the 2010 Plan were forfeited and are no longer available for issuance as new awards.

Restricted Stock Units (“RSUs”)


Upon reelection to the Board of Directors in May 2017,2019, all members of the Company’s Board of Directors were granted RSUs in accordance with the American Campus Communities, Inc. 2010 Incentive Award Plan (the “Plan”).2018 Plan.  These RSUs were valued at $150,000$162,500 for the Chairman of the Board of Directors and at $105,000$117,500 for all other members.  Additionally, effective July 1, 2017, the Board of Directors’ compensation program was revised to reflect an increase in RSUs of $10,000 for all members of the Board of Directors.  The number of RSUs was determined based on the fair market value of the Company’s stock on the date of grant, as defined in the 2018 Plan.  All awards vested and settled immediately on the date of grant, and the Company delivered shares of common stock, and cash, as determined by the Compensation Committee of the Board of Directors.  A compensation charge of approximately $0.9$0.8 million was recorded during the ninesix months ended SeptemberJune 30, 20172019 related to these awards and is included in general and administrative expenses on the Company’s consolidated statements of comprehensive income.awards.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


A summary of ACC’s RSUs under the Plan as of SeptemberJune 30, 20172019 and activity during the ninesix months then ended is presented below:
 Number of RSUs
Outstanding at December 31, 20162018

Granted18,22118,419

Settled in common shares(16,29515,925)
Settled in cash(1,9262,494)
Outstanding at SeptemberJune 30, 20172019




Restricted Stock Awards (“RSAs”)
 
A summary of RSAs under the Plan as of SeptemberJune 30, 20172019 and activity during the ninesix months then ended is presented below:
 Number of RSAs
Nonvested balance at December 31, 20162018773,101862,680

Granted344,688386,271

Vested (1)
(193,186266,556)
Forfeited(1)
(110,8757,759)
Nonvested balance at SeptemberJune 30, 20172019813,728974,636


(1)Includes shares withheld to satisfy tax obligations upon vesting.

The fair value of RSAs is calculated based on the closing market value of ACC’s common stock on the date of grant.  The fair value of these awards is amortized to expense over the vesting periods, which amounted to approximately $2.4 million and $2.2 millionperiods. Amortization expense for the three months ended SeptemberJune 30, 20172019 and 2016,2018 amounted to approximately $2.9 million and $2.8 million, respectively, and $10.6$6.7 million and $7.1$6.1 million for the ninesix months ended September 30, 2017 and 2016, respectively. The amortization of restricted stock awards for the nine months ended September 30, 2017 includes $2.4 million of contractual executive separation and retirement charges incurred with regard to the retirement of the Company’s former Chief Financial Officer, representing the June 30, 2017 vesting of 46,976 RSAs, net of shares withheld for taxes, related to the retirement.2019 and 2018, respectively. 
 
11.10. Derivative Instruments and Hedging Activities
 
The Company is exposed to certain risks arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities.  The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments.  Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

23

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




Cash Flow Hedges of Interest Rate Risk
 
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.  To accomplish this objective, the Company primarily uses interest rate swaps and forward starting swaps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  Forward starting swaps are used to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a forecasted issuance of debt. As disclosed in Note 2, the adoption of ASU 2017-12 did not have a material effect on the Company’s consolidated financial statements. The effective portion of changeschange in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in other comprehensive income (“OCI”) (outside of earnings) and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of changes inearnings within the fair valuesame income statement line item as the earnings effect of the derivative is recognized directly in earnings. Ineffectiveness resulting from the derivative instruments summarized below was immaterial for both the three and nine month periods ended September 30, 2017 and 2016.hedged transaction.


AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


The following table summarizes the Company’s outstanding interest rate swap contracts which are included in other liabilities on the accompanying consolidated balance sheets as of SeptemberJune 30, 2017: 2019:
Hedged Debt Instrument Effective Date Maturity Date Pay Fixed Rate 
Receive Floating
Rate Index
 
Current Notional
Amount
 Fair Value Effective Date Maturity Date Pay Fixed Rate 
Receive Floating
Rate Index
 Current Notional Amount Fair Value
Cullen Oaks mortgage loan Feb 18, 2014 Feb 15, 2021 2.2750% LIBOR - 1 month $13,830
 $(224) 
Feb 18, 2014
 
Feb 15, 2021
 2.2750% LIBOR - 1 month $12,878
 $(114)
Cullen Oaks mortgage loan Feb 18, 2014 Feb 15, 2021 2.2750% LIBOR - 1 month 13,973
 (226) 
Feb 18, 2014
 
Feb 15, 2021
 2.2750% LIBOR - 1 month 13,010
 (115)
Park Point mortgage loan Nov 1, 2013 Oct 5, 2018 1.5450% LIBOR - 1 month 70,000
 (60) 
Feb 1, 2019
 
Jan 16, 2024
 2.7475% LIBOR - 1 month 70,000
 (3,448)
       Total $97,803
 $(510)       Total $95,888
 $(3,677)


In January 2017,December 2018, the Company entered into three forward starting interest rate swapsswap contracts with notional amounts totaling $200 million designated to hedge the Company's exposure to increasing interest rates related to interest payments on an anticipated issuance of unsecured notes. In connection with the Term Loan I Facility expired, andissuance of unsecured notes in June 2019, as discussed in Note 6, the remaining immaterial balanceCompany terminated the swap contracts resulting in payments to counterparties totaling approximately $13.2 million, which were recorded in accumulated other comprehensive income was reclassified into earnings.loss and will be amortized to interest expense over the term of the swap contracts based on the June 2019 issuance and expected additional issuances. Amortization of the loss for these three swaps totaled approximately $0.1 million for both the three and six months ended June 30, 2019.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of SeptemberJune 30, 20172019 and December 31, 2016:2018:
  Asset Derivatives Liability Derivatives
    Fair Value as of   Fair Value as of
Description Balance Sheet Location 6/30/2019 12/31/2018 Balance Sheet Location 6/30/2019 12/31/2018
             
Interest rate swap contracts Other assets $
 $101
 Other liabilities $3,677
 $
Forward starting swap contracts Other assets 
 
 Other liabilities 
 2,287
Total derivatives designated
as hedging instruments
   $
 $101
   $3,677
 $2,287

  Liability Derivatives
    Fair Value as of
Description Balance Sheet
Location
 September 30, 2017 December 31, 2016
Interest rate swaps contracts Other liabilities $510
 $1,099
Total derivatives designated
  as hedging instruments
   $510
 $1,099


The table below presents the effect of the Company’s derivative financial instruments on the accompanying consolidated statements of comprehensive income for the three and six months ended June 30, 2019 and 2018.
  Three Months Ended June 30, Six Months Ended June 30,
Description 2019 2018 2019 2018
Change in fair value of derivatives recognized in OCI $4,400
 $78
 $(1,496) $441
Termination of interest rate swap payment recognized in OCI $(13,159) $
 $(13,159) $
Amortization of interest rate swap terminations (1)
 $166
 $102
 $268
 $204
Interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $27,068
 $23,338
 $54,129
 $47,022

(1)
Represents amortization from OCI into interest expense.

Credit-risk-related Contingent Features
The Company has agreements with some of its derivative counterparties that contain a provision such that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. Similarly, the Company has agreements with some of its derivative counterparties that contain a provision such that the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.

12.
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


11.  Fair Value Disclosures


There have been no significant changes in the Company’s policies and valuation techniques utilized to determine fair value from what was disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018.

Financial Instruments Carried at Fair Value


The following table presents information about the Company’s financial instruments measured at fair value on a recurring basis as of SeptemberJune 30, 20172019 and December 31, 2016,2018, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. In general,There were no Level 1 measurements for the periods presented, and the Company had no transfers between Levels 1, 2 or 3 during the periods presented.

  Fair Value Measurements as of
 June 30, 2019 December 31, 2018
  Level 2 Level 3   Level 2 Level 3  
   Significant Other Observable Inputs Significant Unobservable Inputs Total 
Significant Other
Observable Inputs
 
Significant
Unobservable
Inputs
 Total
Assets:            
Derivative financial instruments $
 $
 $
 $101
 $
 $101
Liabilities:  
  
  
  
  
  
Derivative financial instruments $3,677
(1) 
$
 $3,677
 $2,287
(1) 
$
 $2,287
Mezzanine:  
  
  
  
  
  
Redeemable noncontrolling interests (Company)/Redeemable limited partners (Operating Partnership) $29,082
(2) 
$156,828
(3) 
$185,910
 $27,828
(2) 
$156,618
(3) 
$184,446


(1)
Valued using discounted cash flow analyses with observable market-based inputs of interest rate curves and option volatility, as well as credit valuation adjustments to reflect nonperformance risk.
(2)
Represents the OP Unit component of redeemable noncontrolling interests which is based on the fair value of the Company’s common stock at the balance sheet date. Represents a quoted price for a similar asset in an active market. Refer to Note 8.
(3)
Represents the Core Joint Ventures component of redeemable noncontrolling interests which is valued using primarily unobservable inputs, including the Company’s analysis of comparable properties in the Company’s portfolio, estimations of net operating results of the properties, capitalization rates, discount rates, and other market data.  Refer to Note 8.
Financial Instruments Not Carried at Fair Value
As of June 30, 2019 and December 31, 2018, the carrying values for the following instruments represent fair values determined by Level 1 inputs utilize quoted prices (unadjusted)due to the short maturity of the instruments: Cash and Cash Equivalents, Restricted Cash, Student Contracts Receivable, certain items in active markets for identical assets or liabilitiesOther Assets (including receivables, deposits, and prepaid expenses), Accounts Payable, Accrued Expenses, and Other Liabilities.

As of June 30, 2019 and December 31, 2018, the Company has the ability to access.  Faircarrying 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 forfollowing instruments represent fair values due the asset or liability, such asvariable 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 levelsrate feature 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 inputinstruments: Construction Loans Payable, Unsecured Revolving Credit Facility, Mortgage Loans Payable (variable rate), and Unsecured Term Loans.


24

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




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 financial instruments measured at fair value are as follows: 
   Fair Value Measurements as of
  September 30, 2017 December 31, 2016
  
Quoted Prices in
Active Markets for
Identical Assets and
Liabilities (Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Total 
Quoted Prices in
Active Markets for
Identical Assets and
Liabilities (Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
 
Total
Liabilities:  
  
  
  
  
  
  
  
Derivative financial instruments $
 $510
 $
 $510
 $
 $1,099
 $
 $1,099
Mezzanine:  
  
  
  
  
  
  
  
Redeemable noncontrolling interests (Company)/Redeemable limited partners (Operating Partnership) $
 $50,887
 $61,383
 $112,270
 $
 $55,078
 $
 $55,078
The Company uses derivative financial instruments, specifically interest rate swaps and forward starting 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 and forward starting swaps to reduce exposure to variability in cash flows relating to interest payments on forecasted issuances of debt.  Through September 30, 2017, 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.

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 derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize 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 September 30, 2017 and December 31, 2016, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivative financial instruments.  As a result, the Company has determined each of its derivative valuations in its entirety is classified in Level 2 of the fair value hierarchy.
The OP Unit component of redeemable noncontrolling interests has a redemption feature and is marked to its redemption value.  The redemption value is based on the fair value of the Company’s common stock at the redemption date, and therefore, is calculated based on the fair value of the Company’s common stock at the balance sheet date.  Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets, these instruments are classified in Level 2 of the fair value hierarchy. 

As discussed in Note 2 and Note 9, the redeemable noncontrolling interests related to the joint venture partners in the Core Transaction are marked to their redemption value at each balance sheet date.  The redemption value is based on the fair value of the underlying properties held by the joint ventures.  This analysis incorporates information obtained from a number of sources, including the Company’s analysis of comparable properties in the Company’s portfolio, estimations of net operating results of the properties, capitalization rates, discount rates, and other market data. The Company has determined these estimates are primarily based upon unobservable inputs and therefore are considered to be Level 3 inputs within the fair value hierarchy. 


25

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Financial Instruments Not Carried at Fair Value
Cash and Cash Equivalents, Restricted Cash, Student Contracts Receivable, Other Assets, Accounts Payable and Accrued Expenses and Other Liabilities:  The Company estimates that the carrying amount approximates fair value, due to the short maturity of these instruments.
Loans Receivable:  The fair value of loans receivable is based on a discounted cash flow analysis consisting of scheduled cash flows and discount rate estimates to approximate those that a willing buyer and seller might use.  These financial instruments utilize Level 3 inputs.
Mortgage Loans Payable: The fair value of mortgage loans payable is based on the present value of the cash flows at current market interest rates through maturity.  The Company has concluded the fair value of these financial instruments utilize Level 2 inputs as the majority of the inputs used to value these instruments fall within Level 2 of the fair value hierarchy.

Bonds Payable: The fair value of bonds payable is based on quoted prices in markets that are not active due to the unique characteristics of these financial instruments; as such, the Company has concluded the inputs used to measure fair value fall within Level 2 of the fair value hierarchy.

Unsecured Notes: In calculating the fair value of unsecured notes, interest rate and spread assumptions reflect current creditworthiness and market conditions available for the issuance of unsecured notes with similar terms and remaining maturities.  These financial instruments utilize Level 2 inputs.

Construction Loans Payable, Unsecured Revolving Credit Facility, and Unsecured Term Loans: The fair value of these instruments approximates their carrying values due to the variable interest rate feature of these instruments.
The table below contains the estimated fair value and related carrying amounts for the Company’s other financial instruments as of SeptemberJune 30, 20172019 and December 31, 20162018. There were no Level 1 measurements for the periods presented.

  June 30, 2019 December 31, 2018 
    Estimated Fair Value   Estimated Fair Value 
    Level 2 Level 3   Level 2 Level 3 
  Carrying Amount Significant Other Observable Inputs Significant
Unobservable
Inputs
 Carrying
Amount
 Significant Other Observable Inputs Significant
Unobservable
Inputs
 
Assets:             
Loans receivable $56,156
 $
 $50,993
(1) 
$54,611
 $
 $50,993
(1) 
Liabilities(2):
  
      
  
  
 
Unsecured notes $1,983,895
 $2,035,338
(3) 
$
 $1,588,446
 $1,566,900
(3) 
$
 
Mortgage loans payable (fixed rate) $757,185
(4) 
$752,160
(5) 
$
 $693,384
(6) 
$668,911
(5) 
$
 
Bonds payable $26,778
 $29,105
(7) 
$
 $26,741
 $28,805
(7) 
$
 

  September 30, 2017  December 31, 2016 
  
Estimated
Fair Value
 
Carrying
Amount
  
Estimated
Fair Value
 
Carrying
Amount
 
Assets:          
Loans receivable $54,396
 $61,052
  $54,396
 $58,539
 
Liabilities:    
   
  
 
Unsecured notes $1,232,338
 $1,190,296
(1) 
 $1,211,344
 $1,188,737
(1) 
Mortgage loans payable 603,789
 611,657
(2) 
 644,617
 654,794
(2) 
Bonds payable 32,983
 30,177
  37,066
 33,401
 

(1)
IncludesValued using a discounted cash flow analysis with inputs of scheduled cash flows and discount rates that a willing buyer and seller might use.
(2)
Carrying amounts disclosed include any applicable net unamortized OID, and net unamortized deferred financing costs, and net unamortized debt premiums and discounts (see Note 7)6).
(2)(3)
Includes net unamortized debt premiumsValued using interest rate and discountsspread assumptions that reflect current creditworthiness and net unamortized deferred financing costs (see Note 7).market conditions available for the issuance of unsecured notes with similar terms and remaining maturities.
(4)
Does not include one variable rate mortgage loan with a principal balance of $41.0 million as of June 30, 2019.
(5)
Valued using the present value of the cash flows at current market interest rates through maturity that primarily fall within the Level 2 category.
(6)
Does not include two variable rate mortgage loans with a combined principal balance of $111.4 million as of December 31, 2018.
(7)
Valued using quoted prices in markets that are not active due to the unique characteristics of these financial instruments.


12. Leases

Refer to Note 2 for information on the impact of the adoption of the New Leases Standard.

As Lessee

The Company, as lessee, has entered into 50 ground/facility and office space lease agreements, which qualify as operating leases under the New Leases Standard. These leases include leases entered into under the ACE program with university systems and Walt Disney World® Resort, leases with local and regional land owners for owned off-campus properties, leases for corporate office space, and leases under the on-campus participating properties (“OCPPs”) structure. Under such leases, the lessors receive annual minimum (base) rent, variable rent based upon the operating performance of the property, or a combination thereof.  The leases have original terms (excluding extension options) ranging from seven years to 102 years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company records base rent expense under the straight-line method over the term of the lease, and variable rent expense is recorded when the achievement of the target is considered probable. Straight-line rent is capitalized during the construction period and expensed upon the commencement of operations. In the accompanying consolidated statements of comprehensive income, rent expense for ACE properties and OCPPs is included in ground/facility lease expense, and rent expense for owned off-campus properties is included in owned properties operating expenses. Total straight-line rent expense, variable rent expense, and capitalized rent costs for the three months ended June 30, 2019 was $2.4 million, $1.3 million, and $2.6 million, respectively, and $4.9 million, $3.9 million, and $5.1 million for the six months ended June 30, 2019, respectively.

As of June 30, 2019, ROU Assets, which are included in other assets on the accompanying consolidated balance sheet, were approximately $279.3 million. For purposes of calculating the ROU Asset and lease liability for such leases, extension options are not included in the lease term unless it is reasonably certain that the Company will exercise the option, or the lessor has the sole ability to exercise the option. As most of the Company’s leases do not contain an implicit rate, the Company uses its incremental borrowing rate to determine the present value of the lease payments. This involves determining a secured interest rate for each lease based on the term of the respective lease. The weighted average incremental borrowing rate was 6.04% as of June 30, 2019. The weighted average remaining lease term of leases with a lease liability as of June 30, 2019 is 58.1 years (excluding extension options).

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


There were no finance lease obligations outstanding as of June 30, 2019. Future minimum commitments over the life of all operating leases, which exclude variable rent payments, are as follows:
  June 30, 2019 December 31, 2018
2019 $6,752
(1) 
$9,463
2020 11,814
 12,092
2021 16,280
 16,653
2022 18,988
 18,999
2023 19,067
 18,903
Thereafter 1,049,874
 1,042,842
Total minimum lease payments 1,122,775
 $1,118,952
Less imputed interest (837,551)  
Total lease liabilities $285,224
  
(1) Excluding the six months ended June 30, 2019.

As Lessor

The Company’s primary business involves leasing properties to students under agreements that are classified as operating leases, and which have terms of 12 months or less. These student leases do not provide for variable rent payments. The Company is also a lessor under commercial leases at certain owned properties, some of which provide for variable lease payments based upon tenant performance such as a percentage of sales. The Company recognizes the base lease payments provided for under the leases on a straight-line basis over the lease term, and variable payments are recognized in the period in which the changes in facts and circumstances on which the variable payments are based occur. Lease income under both student and commercial leases is included in owned property revenues in the accompanying consolidated statements of comprehensive income. Lease income under student leases totaled $194.3 million and $179.4 million for the three months ended June 30, 2019 and 2018, respectively; and $416.0 million and $381.1 million for the six months ended June 30, 2019 and 2018, respectively. Lease income under commercial leases totaled $3.2 million for both the three months ended June 30, 2019 and 2018, respectively; and $6.6 million and $6.5 million for the six months ended June 30, 2019 and 2018, respectively.
13. Commitments and Contingencies
 
Commitments
 
Construction Contracts: As of SeptemberJune 30, 2017,2019, excluding fourtwo properties under construction and subject to presale arrangements which are being funded by construction loans, the Company estimates additional costs to complete eight wholly-ownedsix owned development projects under construction to be approximately $383.6$346.0 million.


Joint Ventures: As discussed in Note 3, as part of the Core Transaction, the Company entered into two joint ventures during the third quarter of 2017. As part of this transaction, the Company is obligated to increase its investment in the joint ventures over a two year period, resulting in aperiod. As of June 30, 2019, the remaining funding commitment ofwas approximately $325.2 million, including the Company's $40.6 million initial investment related to Hub U District Seattle anticipated to close during the fourth quarter of 2017.$154.0 million.


Pre-sale Arrangements: In December 2016, thePresale Development Projects: The Company has entered into a pre-sale agreementtwo presale agreements to purchase The Edge - Stadium Centre, a propertyproperties which will be completed in August 2018.Fall 2019. Total estimated development costs of approximately $42.6$107.3 million include

26

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


the purchase price and elected upgrades, and capitalized transaction costs.of which $85.4 million remains to be funded as of June 30, 2019. The Company is obligated to purchase the propertyproperties as long as the developer meets certain construction completion deadlines and other closing conditions are met.conditions. As a part of the presale agreements, the Company has the option to elect not to purchase the asset, which would result in the Company paying a significant penalty. The Company is responsible for leasing, management, and initial operations of the project while the third-party developer retains development risk during the construction period. See Note 8 for further discussion.


The Company expects to fund the commitments mentioned above through a combination of proceeds from cash flows generated from operations, anticipated property dispositions, joint venture activity, and a combination of debt and equity transactions, which may include net proceeds from the ATM Equity Program discussed in Note 8,7, borrowings under the Company’s existing unsecured credit facilities, and accessing the unsecured bond market.


AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Contingencies

Development-related Guarantees:  For certain of its third-party development projects, 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 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. These guarantees typically expire at the later of five days after completion of the project or once the Company has moved all students from the substitute living quarters into the project.

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 typicallyin certain cases 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. The Company’s estimated maximum exposure amount under the above guarantees is approximately $4.0$15.8 million as of SeptemberJune 30, 2017.2019.  As of SeptemberJune 30, 2017,2019, management did not anticipate any material deviations from schedule or budget related to third-party development projects currently in progress.


For one of its third-party development projects that is currently under construction, the Company’s obligation to pay alternate housing costs and excess project costs are unlimited in amount.  However, if the Company’s payment obligation arises from force majeure or is caused by the owner, the owner agrees to reimburse the Company from future cash flow of the project, with such reimbursement being subordinate to any financing on the property but paid prior to the University receiving any cash flow from the property.  If the Company’s obligation is a result of the general contractor and/or design professionals’ negligence, the owner agrees to assign its right to recover from such party to the Company. Additionally, for this project, the Company’s exposure to such costs resulting from owner-caused delays, as defined, is limited to $1.0 million.  As of June 30, 2019, management did not anticipate any material deviations from schedule or budget related to this project.

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.    


As a part of the development agreement with Walt Disney World® Resort, the Company has guaranteed the completion of construction of a $614.6 million project to be delivered in phases from 2020 to 2023. In addition, the Company is subject to a development guarantee in the event that the substantial completion of a project phase is delayed beyond its respective targeted delivery date, except in circumstances resulting in unavoidable delays. The agreement dictates that the Company shall pay damages of $20 per bed for each day of delay for any Disney College Internship Program participant who was either scheduled to live in the delayed phase as well as any participant who was not able to participate in the program due to the lack of available housing and would have otherwise been housed in the delayed phase. Under the agreement, the maximum exposure related to the Disney project assuming all beds are not delivered on their respective delivery date is approximately $0.2 million per day.

Conveyance to University: In August 2013, the Company entered into an agreement to convey fee interest in a parcel of land, on which one of the Company’s student housing properties resides (University Crossings), to Drexel University (the “University”). Concurrent with the land conveyance, the Company as lessee entered into a ground lease agreement with the University as lessor for an initial term of 40 years, with three 10-year extensions, at the Company’s option. The Company also agreed to convey the building and improvements to the University at an undetermined date in the future and to pay real estate transfer taxes not to exceed $2.4 million. The Company paid approximately $0.6 million in real estate transfer taxes upon the conveyance of land to the University, leaving approximately $1.8 million to be paid by the Company upon the transfer of the building and improvements.


ContingenciesPre-development expenditures: The Company incurs pre-development expenditures such as architectural fees, permits, and deposits associated with the pursuit of third-party and owned development projects.  The Company bears the risk of loss of these pre-development expenditures if financing cannot be arranged or the Company is unable to obtain the required permits and authorizations for the project.  As such, management periodically evaluates the status of third-party and owned projects that have not yet commenced construction 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. As of June 30, 2019, the Company has deferred approximately $8.2 million in pre-development costs related to third-party and owned development
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


projects that have not yet commenced construction.  Such costs are included in other assets on the accompanying consolidated balance sheets.

Other Guarantees: As part of the purchase of an undeveloped land parcel, the Company entered into an agreement to construct a commercial retail space within a project under development that will be conveyed back to the seller upon construction completion.  If the construction of the retail space is not completed in accordance with the agreement, the Company is required to pay liquidated damages of $2.1 million. As of June 30, 2019, the Company has delivered the retail space and was in the process of executing the acknowledgment of performance with the seller. In July 2019, the Company received the acknowledgment of performance from the seller indicating that the Company’s obligation has been fulfilled.

In June 2019, the Company entered into a purchase and sale agreement to buy a land parcel initially scheduled to close on or before June 30, 2021, with potential extensions at the Company’s option to June 1, 2022 or June 1, 2023.  In connection with the execution of the agreement, the Company made an earnest money deposit of $2.1 million which is included in restricted cash on the accompanying consolidated balance sheet. As a part of the agreement, within 60 days of certain conditions not being met, the seller of the property can either terminate the agreement or exercise an option to require the Company to purchase the undeveloped land, with the Company retaining all rights to fully own, develop, and utilize the land. If the option is exercised, the Company must pay the agreed upon purchase price of $28.7 million and a commission calculated as a percentage of the sales price, and also reimburse the seller for demolition costs.

Litigation:  The Company is subject to various claims, lawsuits and legal proceedings, as well as other matters that have not been fully resolved and that have arisen in the ordinary course of business.  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.  However, the outcome of claims, lawsuits and legal proceedings brought against the Company is subject to significant uncertainty.  Therefore, although management considers the likelihood of such an outcome to be remote, the ultimate results of these matters cannot be predicted with certainty.
 
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 (except with regard to exclusivity and confidentiality), 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 acquirer will have the ability to terminate the contracts without penalty or forfeiture of any material 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.  Once the due diligence period expires, the Company is then at risk under a real property acquisition contract, but only to

27

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


the extent of any non-refundable earnest money deposits associated with the contract and subject to normal closing conditions being met.
 
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. 




28

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




14. Segments
 
The Company defines business segments by their distinct customer base and service provided.  The Company has identified four reportable segments: Wholly-OwnedOwned Properties, On-Campus Participating Properties, Development Services, and Property Management Services.  Management evaluates each segment’s performance based on operating income before depreciation, amortization and minority interests and allocation of corporate overhead.  Intercompany fees are reflected at the contractually stipulated amounts.interests. 

  Three Months Ended
June 30,
 Six Months Ended
June 30,
  2019 2018 2019 2018
Owned Properties        
Rental revenues and other income $203,903
 $190,223
 $429,104
 $396,612
Interest income 119
 383
 238
 764
Total revenues from external customers 204,022
 190,606
 429,342
 397,376
Operating expenses before depreciation, amortization, and ground/facility lease expense (90,763) (86,136) (182,932) (174,196)
Ground/facility lease expense (2,408) (1,940) (5,075) (3,987)
Interest expense, net (1)
 (4,014) (1,760) (8,777) (3,389)
Operating income before depreciation and amortization $106,837
 $100,770
 $232,558
 $215,804
Depreciation and amortization $65,764
 $60,454
 $131,396
 $122,262
Capital expenditures $129,833
 $148,905
 $245,352
 $283,155
         
On-Campus Participating Properties  
  
  
  
Rental revenues and other income $6,396
 $6,182
 $17,844
 $16,625
Interest income 70
 41
 111
 62
Total revenues from external customers 6,466
 6,223
 17,955
 16,687
Operating expenses before depreciation, amortization, and ground/facility lease expense (3,806) (3,730) (7,763) (7,155)
Ground/facility lease expense (828) (793) (1,710) (1,588)
Interest expense, net (1)
 (1,311) (1,269) (2,614) (2,522)
Operating income before depreciation and amortization $521
 $431
 $5,868
 $5,422
Depreciation and amortization $2,043
 $1,952
 $4,099
 $3,894
Capital expenditures $537
 $378
 $767
 $1,524
         
Development Services  
  
  
  
Development and construction management fees $3,607
 $2,202
 $6,778
 $3,048
Operating expenses (2,528) (1,715) (4,414) (3,920)
Operating income (loss) before depreciation and amortization $1,079
 $487
 $2,364
 $(872)
         
Property Management Services  
  
  
  
Property management fees from external customers $3,465
 $2,452
 $5,776
 $5,183
Operating expenses (1,985) (1,829) (4,285) (3,822)
Operating income before depreciation and amortization $1,480
 $623
 $1,491
 $1,361
         
  Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
  2017 2016 2017 2016
Wholly-Owned Properties        
Rental revenues and other income $184,282
 $186,504
 $533,866
 $548,403
Interest income 385
 345
 1,161
 878
Total revenues from external customers 184,667
 186,849
 535,027
 549,281
Operating expenses before depreciation, amortization, ground/facility leases and allocation of corporate overhead (97,545) (99,820) (242,315) (254,523)
Ground/facility leases (1,877) (1,614) (5,163) (4,520)
Interest expense, net (1)
 (1,540) (4,078) (1,194) (16,215)
Operating income before depreciation, amortization, and allocation of corporate overhead $83,705
 $81,337
 $286,355
 $274,023
Depreciation and amortization $58,339
 $49,464
 $161,341
 $151,740
Capital expenditures $196,910
 $119,589
 $473,638
 $329,932
Total segment assets at September 30, $6,488,259
 $6,062,852
 $6,488,259
 $6,062,852
         
On-Campus Participating Properties  
  
  
  
Total revenues and other income $6,799
 $6,758
 $23,128
 $23,018
Interest income 24
 2
 47
 4
Total revenues from external customers 6,823
 6,760
 23,175
 23,022
Operating expenses before depreciation, amortization, ground/facility leases and allocation of corporate overhead (3,611) (3,507) (10,109) (9,278)
Ground/facility leases (452) (351) (1,988) (2,216)
Interest expense (1,312) (1,394) (3,987) (4,231)
Operating income before depreciation, amortization and allocation of corporate overhead $1,448
 $1,508
 $7,091
 $7,297
Depreciation and amortization $1,892
 $1,839
 $5,621
 $5,493
Capital expenditures $2,039
 $1,446
 $2,909
 $2,510
Total segment assets at September 30, $101,027
 $105,774
 $101,027
 $105,774
         
Development Services  
  
  
  
Development and construction management fees $3,566
 $773
 $4,697
 $3,929
Operating expenses (4,185) (3,434) (11,396) (10,414)
Operating loss before depreciation, amortization and allocation of corporate overhead $(619) $(2,661) $(6,699) $(6,485)
Total segment assets at September 30, $4,918
 $2,279
 $4,918
 $2,279
         
Property Management Services  
  
  
  
Property management fees from external customers $2,291
 $2,376
 $7,193
 $7,039
Intersegment revenues 5,128
 5,830
 14,835
 17,410
Total revenues 7,419
 8,206
 22,028
 24,449
Operating expenses (3,034) (2,742) (9,719) (8,542)
Operating income before depreciation, amortization and allocation of corporate overhead $4,385
 $5,464
 $12,309
 $15,907
Total segment assets at September 30, $11,067
 $10,692
 $11,067
 $10,692
         

29

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


  Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
  2017 2016 2017 2016
         
Reconciliations  
  
  
  
Total segment revenues and other income $202,475
 $202,588
 $584,927
 $600,681
Unallocated interest income earned on investments and corporate cash 850
 925
 2,515
 3,144
Elimination of intersegment revenues (5,128) (5,830) (14,835) (17,410)
Total consolidated revenues, including interest income $198,197
 $197,683
 $572,607
 $586,415
         
Segment operating income before depreciation, amortization and allocation of corporate overhead $88,919
 $85,648
 $299,056
 $290,742
Depreciation and amortization (62,271) (53,411) (172,588) (164,724)
Net unallocated expenses relating to corporate interest and overhead (27,614) (22,047) (79,165) (67,573)
(Loss) gain from disposition of real estate 
 
 (632) 17,409
Provision for real estate impairment 
 
 (15,317) 
Income tax provision (267) (345) (791) (1,035)
Net income $(1,233) $9,845
 $30,563
 $74,819
         
Total segment assets $6,605,271
 $6,181,597
 $6,605,271
 $6,181,597
Unallocated corporate assets 81,620
 97,778
 81,620
 97,778
Total assets at September 30, $6,686,891
 $6,279,375
 $6,686,891
 $6,279,375
         
(1)
Net of capitalized interest and amortization of debt premiums.

30


AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP L.P.LP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)




  Three Months Ended
June 30,
 Six Months Ended
June 30,
  2019 2018 2019 2018
Reconciliations  
  
  
  
Total segment revenues and other income $217,560
 $201,483
 $459,851
 $422,294
Unallocated interest income earned on investments and corporate cash 780
 819
 1,546
 1,640
Total consolidated revenues, including interest income $218,340
 $202,302
 $461,397
 $423,934
         
Segment operating income before depreciation and amortization $109,917
 $102,311
 $242,281
 $221,715
Depreciation and amortization (70,033) (65,751) (139,920) (131,944)
Net unallocated expenses relating to corporate interest and overhead (29,078) (32,663) (56,622) (59,343)
(Loss) gain from disposition of real estate (282) 42,314
 (282) 42,314
Other operating income 
 2,648
 
 2,648
Loss from early extinguishment of debt 
 (784) 
 (784)
Provision for real estate impairment 
 
 (3,201) 
Income tax provision (314) (2,085) (678) (2,366)
Net income $10,210
 $45,990
 $41,578
 $72,240
         
         

(1)
Net of capitalized interest and amortization of debt premiums.

15. Subsequent Events

Distributions:  On November 1, 2017,July 31, 2019, the Board of Directors of the Company declared a distribution per share of $0.44,$0.47, which will be paid on November 27, 2017August 23, 2019 to all common stockholders of record as of November 13, 2017.August 12, 2019.  At the same time, the Operating Partnership will pay an equivalent amount per unit to holders of Common OP Units, as well as the quarterly cumulative preferential distribution to holders of Preferred OP Units (see Note 9)8).


October 2017 Bond Offering:  In October 2017,Property Disposition: On July 2, 2019, the Operating Partnership closedCompany completed a $400 million offeringtransfer to the lender of senior unsecured notes under its existing shelf registration.  These 10-year notes were issued at 99.912 percent of par value withBlanton Common, a coupon of 3.625 percent and a yield of 3.635 percent, and are fully and unconditionally guaranteed by the Company.  Interest on the notes is payable semi-annually on May 15 and November 15, with the first payment beginning on May 15, 2018.  The notes will mature on November 15, 2027.  Net proceeds from the saleproperty near Valdosta State University, in satisfaction of the senior unsecured notes totaled approximately $395property’s $27.4 million after expenses, and were used to repay the outstanding balance of the Company’s revolving credit facility, with the remaining proceeds available to fund the development pipeline, acquisition activity and for general business purposes.mortgage loan.


Property Acquisitions:  In October 2017,Acquisition: On August 1, 2019, the Company acquired Bridges @ 11th,The Flex at Stadium Centre, a 258-bed wholly-owned340-bed off-campus development property located on university-owned land nearsubject to a presale agreement for $36.7 million, including $8.5 million related to the University of Washington campus.

Additionally, in October 2017, as partpurchase of the Core Transaction,land on which the property is built. As the property was consolidated by the Company exercised an option to causefrom the joint venture partner in Core JV I to contribute Hub U District Seattle, a 248-bed property located neartime of execution of the University of Washington campus, topresale agreement with the joint venture. The Company anticipatesdeveloper, the closing of the contribution of the property to Core JV I to occur in the fourth quarter 2017 and the Company's initial investment in the propertytransaction will be approximately $40.6 million.accounted for as an increase in ownership of a consolidated subsidiary.






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,“project,” “should,” “will,” “result” and similar expressions, do not relate solely to historical matters and 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 forward-looking statements are not guarantees of future performance and will be 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; 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; risks associated with downturns in the national and local economies, volatility in capital and credit markets, 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 Company’s 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 the other factors discussed in the “Risk Factors” contained in Item 1A of our Form 10-K for the year ended December 31, 2016.2018.
 
Our Company and Our Business
 
Overview
 
American Campus Communities, Inc. (“ACC”) is a real estate investment trust (“REIT”) that commenced operations effective with the completion of an initial public offering (“IPO”) on August 17, 2004. Through ACC’s controlling interest in American Campus Communities Operating Partnership L.P.LP (“ACCOP”), ACC 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. ACC 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. ACC’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “ACC.”   References to the “Company,” “we,” “us” or “our” mean collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP.  References to the “Operating Partnership” mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP.  Unless otherwise indicated, the accompanying discussion applies to both the Company and the Operating Partnership.
 
Property Portfolio
 
As of SeptemberJune 30, 2017,2019, our total owned property portfolio contained 166169 properties, consisting of owned off-campus student housing properties that are in close proximity to colleges and universities, American Campus Equity (“ACE®”) properties operated under ground/facility leases with university systems, and on-campus participating properties operated under ground/facility leases with the related university systems.  Of the 166169 properties, 12eight were under development as of SeptemberJune 30, 2017.2019.  Our communities contain modern housing units and are supported by a resident assistant system and other student-oriented programming, with many offering resort-style amenities.


As of SeptemberJune 30, 2017,2019, through ACC’s taxable REIT subsidiary (“TRS”) entities, we provided third-party management and leasing services for 3834 properties, bringing our total owned and third-party managed portfolio to 204203 properties.  Third-party management and leasing services are typically provided pursuant to management contracts that have initial terms that range from one to five years.


Leasing Results

During the third quarter, we finalized our annual leasing process for the 2017/2018 academic year.  As of September 30, 2017, occupancy at our 2018 same store properties was 96.6% at a rental rate increase of 2.9% compared to the prior academic year.  Our 2018 same store property portfolio consists of properties owned and operating for both of the entire years ended December 31, 2017 and 2018, which are not conducting or planning to conduct substantial development, redevelopment, or repositioning activities, and are not classified as held for sale.  Including our 2017 acquisitions and development deliveries, our total wholly-owned portfolio was 95.5% occupied as of September 30, 2017.

Below is a summary of our property portfolio as of SeptemberJune 30, 2017:2019:
Property portfolio: Properties Beds Properties Beds
Wholly-owned operating properties:    
Owned operating properties:    
Off-campus properties 124
 70,248
 126
 71,312
On-campus ACE (1)
 25
 18,847
On-campus ACE (1) (2)
 29
 23,250
Subtotal – operating properties 149
 89,095
 155
 94,562
        
Wholly-owned properties under development:  
  
Owned properties under development:  
  
Off-campus properties 6
 2,935
 3
 1,278
On-campus ACE (2)
 6
 5,371
 5
 7,733
Subtotal – properties under development 12
 8,306
 8
 9,011
        
Total wholly-owned properties 161
 97,401
Total owned properties 163
 103,573
        
On-campus participating properties 5
 5,086
 6
 5,230
        
Total owned property portfolio 166
 102,487
 169
 108,803
        
Managed properties 38
 28,770
 34
 24,343
Total property portfolio 204
 131,257
 203
 133,146
        
(1)  
Includes threetwo properties at Prairie View A&M University that we ultimately expect to be refinanced under the existing on-campus participating structure.
(2)
Includes 33 properties operated under ground/facility leases with 16 university systems and one property operated under a ground/facility lease with Walt Disney World® Resort.

Owned development activityLeasing Results


Recently completed projects: InOur financial results for the third quarteryear ended December 31, 2019 are significantly impacted by the results of 2017,our annual leasing process for the final stages2018/2019 and 2019/2020 academic years.  As of construction were completed on three on-campus ACE properties and seven owned off-campus properties. These properties are summarized in the following table:
 
 
Project
 Project Type 
 
 
Location
 
 
Primary University Served
 
 
Beds
 Total Project Cost Opened for Occupancy
             
Tooker House ACE Tempe, AZ Arizona State University 1,594
 $105,500
 August 2017
Sky View ACE Flagstaff, AZ Northern Arizona University 626
 58,200
 August 2017
University Square ACE Prairie View, TX Prairie View A&M University 466
 25,900
 August 2017
U Centre on Turner Off-campus Columbia, MO University of Missouri 718
 69,600
 August 2017
U Pointe on Speight Off-campus Waco, TX Baylor University 700
 51,800
 August 2017
21Hundred @ Overton Park Off-campus Lubbock, TX Texas Tech University 1,204
 82,700
 August 2017
Suites at 3rd Off-campus Champaign, IL University of Illinois 251
 25,200
 August 2017
U Club Binghamton Phase II Off-campus Binghamton, NY SUNY Binghamton University 562
 56,900
 August 2017
Callaway House Apartments Off-campus Norman, OK University of Oklahoma 915
 90,700
 August 2017
U Centre on College Off-campus Clemson, SC Clemson University 418
 42,700
 August 2017
TOTAL – 2017 DELIVERIES 7,454
 $609,200
  

Projects under construction: At September 30, 2017,2018, the beginning of the 2018/2019 academic year, occupancy at our 2019 same store properties was 97.0% with a rental rate increase of 2.0% compared to the prior academic year, and occupancy at our total owned property portfolio was also 97.0%.

Development

At June 30, 2019, we were in the process of constructing sixfive on-campus ACE properties and one owned off-campus properties and six on-campus ACE properties.property. These properties are summarized in the table below:

Owned Development Projects Under Construction:
 
 
Project
 Project Type 
 
 
Location
 
 
Primary University Served
 
 
Beds
 Estimated Project Cost Total Costs Incurred Scheduled Completion
               
Gladding Residence Center ACE Richmond, VA Virginia Commonwealth Univ. 1,524
 $95,700
 $60,215
 August 2018
Irvington House ACE Indianapolis, IN Butler University 648
 38,900
 16,656
 August 2018
Greek Leadership Village ACE Tempe, AZ Arizona State University 957
 69,600
 24,032
 August 2018
Bancroft Residence Hall ACE Berkeley, CA University of California, Berkeley 781
 98,700
 44,570
 August 2018
NAU Honors College ACE Flagstaff, AZ Northern Arizona University 636
 43,400
 15,037
 August 2018
U Club Townhomes Off-campus Oxford, MS University of Mississippi 528
 44,300
 16,960
 August 2018
The Edge - Stadium Centre (1)
 Off-campus Tallahassee, FL Florida State University 412
 42,600
 16,045
 August 2018
        5,486
 $433,200
 $193,515
  
Core Spaces / DRW Portfolio (2)
              
Hub Ann Arbor Off-campus Ann Arbor, MI University of Michigan       September 2018
Hub Flagstaff Off-campus Flagstaff, AZ Northern Arizona University       September 2018
Hub West Lafayette Off-campus West Lafayette, IN Purdue University       September 2018
        1,500
 $240,000
 $63,957
  
SUBTOTAL – 2018 DELIVERIES 6,986
 $673,200
 $257,472
  
               
Columbus Avenue Student Apts. ACE Boston, MA Northeastern University 825
 $153,400
 $30,753
 August 2019
191 College Off-campus Auburn, AL Auburn University 495
 59,300
 11,516
 July 2019
SUBTOTAL – 2019 DELIVERIES 1,320
 $212,700
 $42,269
  
               
TOTAL – ALL PROJECTS 8,306
 $885,900
 $299,741
  
               
 
 
Project
 
 
 
Location
 
 
Primary University Served
 Project Type 
 
Beds
 Estimated Project Cost Total Costs Incurred Scheduled Occupancy
               
191 College Auburn, AL Auburn University Off-campus 495 $59,300
 $56,062
 August 2019
LightView Boston, MA Northeastern University ACE 825 153,400
 141,811
 August 2019
University of Arizona Honors College Tucson, AZ University of Arizona ACE 1,056 84,700
 75,333
 August 2019
    SUBTOTAL - 2019 DELIVERIES 2,376 $297,400
 $273,206
  
               
Disney College Program Phases I-II (1)
 Orlando, FL 
Walt Disney World® Resort
 ACE 1,627 $108,500
 $49,158
 May & Aug 2020
Currie Hall Phase II Los Angeles, CA Univ. of Southern California ACE 272 42,000
 9,411
 August 2020
Holloway Residences San Francisco, CA San Francisco State Univ. ACE 584 129,200
 44,551
 August 2020
    SUBTOTAL - 2020 DELIVERIES 2,483 $279,700
 $103,120
  
               
Disney College Program Phases III-V (1)
 Orlando, FL 
Walt Disney World® Resort
 ACE 3,369 $190,400
 $45,217
 Jan, May & Aug 2021
    SUBTOTAL - 2021 DELIVERIES 3,369 $190,400
 $45,217
  
               
(1)
The Disney College Program project will be delivered in multiple phases over several years with initial deliveries expected to occur in 2020. Including project phases that are not yet under construction, full development completion is anticipated for 2023. All phases are counted as one property.

(1) In December 2016, we entered intoPresale Development Projects:

Under the terms of a pre-sale agreementpresale transaction, the Company is obligated to purchase the property as long as certain construction completion deadlines and other closing conditions are met. The Edge - Stadium Centre, a property whichCompany is scheduled to be completed in August 2018. The estimatedresponsible for leasing, management, and initial operations of the project cost includeswhile the purchase price, elected upgrades and transaction costs.
(2) The company funded an initial investment of $24.2 million through a joint venturethird-party developer retains development risk during the construction period. In accordance with Core Spaces/DRW Real Estate Investments in August 2017. Including the initial investment, the company expects to invest a total of $240 million over a two year period. Refer to Note 3 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1.accounting

Acquisitions and Joint Venture Investments

As discussedguidance, the Company includes presale properties in more detail in Notes 3 and 9 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1, during the third quarter of 2017 we executed an agreement to acquire a portfolio of seven student housing properties from affiliates of Core Spaces and DRW Real Estate Investments (the “Core Transaction”).  The transaction included the purchase of 100%its consolidated financial statements upon execution of the ownership interests inpresale agreement with the developer.

Presale Development Projects Under Construction:

The Company is currently party to presale agreements to purchase two operating properties, the purchase of partial ownership interests in two operating properties through a joint venture arrangement (with one property being subject to a purchase option that had not been exercised as of September 30, 2017), and the purchase of partial ownership interests in three in-process development properties through a joint venture arrangement.   In total, the Core Transaction properties contain 3,776 beds.  The initial investment made at closing was $265.4 million, and the Company expects to invest a total of $590.6 million over a two year period including the initial investment.

During the nine months ended September 30, 2017, the Company acquired two additional wholly-owned properties containing 982 beds for approximately $158.5 million.owned properties. Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements contained in Item 1 for a more detailed discussion of our recent acquisitionpresale development activity. As of June 30, 2019, our presale development pipeline consisted of the following properties:

 
 
Project
  
 
Location
  
Primary University Served
 Project Type  
Beds
 Purchase Price Amount Funded as of June 30, 2019 Scheduled Occupancy
               
The Flex at Stadium Centre Tallahassee, FL Florida State University Off-campus 340 $36,700
 $353
 August 2019
959 Franklin (1)
 Eugene, OR University of Oregon Off-campus 443 70,600
 21,523
 September 2019
SUBTOTAL – 2019 DELIVERIES 783 $107,300
 $21,876
  

(1)
As part of the presale agreement, the Company provided $15.6 million of mezzanine financing to the project.

Dispositions


During the ninethree months ended SeptemberJune 30, 2017,2019, the Company sold one wholly-ownedowned property for approximately $25.0$9.5 million. Refer to Note 4 in the accompanying Notes to Consolidated Financial Statements contained in Item 1 for a more detailed discussion of our recent disposition activity.


Third-Party Development Services


Through ACC’s TRS entities, we provide development and construction management services for student housing properties owned by colleges and universities, charitable foundations and others.  During the third quarter 2017three months ended June 30, 2019, we completed, deliveredclosed on bond financing and

commenced management of Momentum Village Phase II, a 560-bed third party developmentconstruction on our ninth project on the campus of Texasat Prairie View A&M University Corpus Christi,in Prairie View, Texas, which contributed approximately $1.5 million in revenue during the quarter. The project has an anticipated completion date of August 2020 and Esperanza Hall, a 382-bed third party development project on the campustotal fees of Texas A&M University San Antonio.$2.5 million. As of SeptemberJune 30, 2017,2019, we were under contract on oneseven third-party development projectprojects that isare currently under construction and whose fees total $5.9$25.2 million.  As of SeptemberJune 30, 2017,2019, fees of approximately $3.0$4.5 million remained to be earned by the Company with respect to this project,these projects, which has ahave scheduled completion datedates in August 2019. and 2020.


Critical Accounting Policies

With the exception of the adoption of ASC Topic 842, Leases (“ASC 842”), there have been no material changes to the Company’s critical accounting policies disclosed in the Company’s Form 10-K for the year ended December 31, 2018. Refer to Note 2 in the accompanying Notes to Consolidated Financial statements contained in Item 1 for information regarding recently adopted accounting standards, including ASC 842.




Results of Operations


Comparison of the Three Months Ended SeptemberJune 30, 20172019 and SeptemberJune 30, 20162018
 
The following table presents our results of operations for the three months ended SeptemberJune 30, 20172019 and 2016,2018, including the amount and percentage change in these results between the two periods.  
 Three Months Ended 
 September 30,
     Three Months Ended
June 30,
    
 2017 2016 Change ($) Change (%) 2019 2018 Change ($) Change (%)
Revenues        
Wholly-owned properties $183,569
 $185,694
 $(2,125) (1.1)%
Revenues:        
Owned properties $203,156
 $189,488
 $13,668
 7.2 %
On-campus participating properties 6,799
 6,758
 41
 0.6 % 6,396
 6,182
 214
 3.5 %
Third-party development services 3,566
 773
 2,793
 361.3 % 3,607
 2,202
 1,405
 63.8 %
Third-party management services 2,291
 2,376
 (85) (3.6)% 3,465
 2,452
 1,013
 41.3 %
Resident services 713
 810
 (97) (12.0)% 747
 735
 12
 1.6 %
Total revenues 196,938
 196,411
 527
 0.3 % 217,371
 201,059
 16,312
 8.1 %
                
Operating expenses  
  
  
  
Wholly-owned properties 99,423
 100,602
 (1,179) (1.2)%
Operating expenses:  
  
  
  
Owned properties 90,763
 86,136
 4,627
 5.4 %
On-campus participating properties 3,923
 3,784
 139
 3.7 % 3,806
 3,730
 76
 2.0 %
Third-party development and management services 3,879
 3,340
 539
 16.1 % 4,513
 3,544
 969
 27.3 %
General and administrative 8,684
 5,375
 3,309
 61.6 % 8,115
 13,173
 (5,058) (38.4)%
Depreciation and amortization 61,125
 52,067
 9,058
 17.4 % 68,815
 63,537
 5,278
 8.3 %
Ground/facility leases 2,329
 1,965
 364
 18.5 % 3,236
 2,733
 503
 18.4 %
Loss (gain) from disposition of real estate 282
 (42,314) 42,596
 (100.7)%
Other operating income 
 (2,648) 2,648
 (100.0)%
Total operating expenses 179,363
 167,133
 12,230
 7.3 % 179,530
 127,891
 51,639
 40.4 %
                
Operating income 17,575
 29,278
 (11,703) (40.0)% 37,841
 73,168
 (35,327) (48.3)%
                
Nonoperating income and (expenses)  
  
  
  
Nonoperating income (expenses):  
  
  
  
Interest income 1,259
 1,272
 (13) (1.0)% 969
 1,243
 (274) (22.0)%
Interest expense (18,654) (19,016) 362
 (1.9)% (27,068) (23,338) (3,730) 16.0 %
Amortization of deferred financing costs (1,146) (1,344) 198
 (14.7)% (1,218) (2,214) 996
 (45.0)%
Total nonoperating expense (18,541) (19,088) 547
 (2.9)%
Loss from early extinguishment of debt 
 (784) 784
 (100.0)%
Total nonoperating expenses (27,317) (25,093) (2,224) 8.9 %
                
(Loss) income before income taxes (966) 10,190
 (11,156) (109.5)%
Income before income taxes 10,524
 48,075
 (37,551) (78.1)%
Income tax provision (267) (345) 78
 (22.6)% (314) (2,085) 1,771
 (84.9)%
                
Net (loss) income (1,233) 9,845
 (11,078) (112.5)%
Net income 10,210
 45,990
 (35,780) (77.8)%
                
Net income attributable to noncontrolling interests (79) (201) 122
 (60.7)%
Net (loss) income attributable to ACC, Inc. and Subsidiaries common stockholders
 $(1,312) $9,644
 $(10,956) (113.6)%
Net loss attributable to noncontrolling interests 176
 19
 157
 826.3 %
Net income attributable to ACC, Inc. and Subsidiaries common stockholders $10,386
 $46,009
 $(35,623) (77.4)%


Same Store and New Property Operations
 
We define our same store property portfolio as wholly-ownedowned properties that were owned and operating for both of the full years ended December 31, 20172019 and December 31, 2016,2018, which are not conducting or planning to conduct substantial development, redevelopment, or repositioning activities, and are not classified as held for sale as of SeptemberJune 30, 2017.2019.


Same store revenues are defined as revenues generated from our same store portfolio and consist of rental revenue earned from student leases as well as other income items such as utility income, damages, parking income, summer conference rent, application

and administration fees, income from retail tenants, the provision for uncollectible accounts, and income earned by one of our TRS entities from ancillary activities such as the provision of food services.
 
Same store operating expenses are defined as operating expenses generated from our same store portfolio and include usual and customary expenses incurred to operate a property such as payroll, maintenance, utilities, marketing, general and administrative costs, insurance, and property taxes, and bad debt.taxes.  Same store operating expenses also include an allocation of payroll and other administrative costs related to corporate management and oversight.
 
A reconciliation of our same store, new property and sold/held for saleother property operations to our consolidated statements of comprehensive income is set forth below: 
 Same Store Properties New Properties 
Sold/Held for Sale Properties (1)
 Total - All Properties Same Store Properties New Properties 
Sold Properties/Other (1)
 Total - All Properties 
 Three Months Ended 
 September 30,
 Three Months Ended 
 September 30,
 Three Months Ended 
 September 30,
 Three Months Ended 
 September 30,
 Three Months Ended
June 30,
 Three Months Ended
June 30,
 Three Months Ended
June 30,
 Three Months Ended
June 30,
 
 2017 2016 2017 2016 
2017  (2)
 
2016 (3)
 2017 2016 2019 2018 2019 2018 2019 2018 2019 2018 
Number of properties (4)
 124
 124
 24
 8
 1
 22
 149
 154
 144
 144
 10
 
 3
(2) 
7
(3) 
157
 151
 
Number of beds (4)
 73,871
 73,871
 14,364
 3,737
 860
 13,600
 89,095
 91,208
 86,717
 86,717
 6,985
 
 1,404
 2,886
 95,106
 89,603
 
                                 
Revenues (5)(4)
 $162,776
 $160,636
 $20,637
 $4,187
 $869
 $21,681
 $184,282
 $186,504
 $190,207
 $184,281
 $12,759
 $136
 $937
 $3,992
 $203,903
 $188,409
(5) 
Operating expenses 87,902
 85,126
 11,232
 2,242
 289
 13,234
 99,423
 100,602
 84,175
 81,791
 5,781
 191
 807
 2,340
 90,763
 84,322
(5) 
(1) 
Includes recurring professional fees related to the formation and operation of the ACC / Allianz Joint Venture. Does not include the allocation of payroll and other administrative costs related to corporate management and oversight.
(2) 
Includes one property currently in receivership that is in the process of beingwas transferred to the lender in settlement of the property’s $27.4 million mortgage loan that matured in August 2017.July 2019, and one property consisting of two phases sold in May 2019.
(3) 
Includes the properties described above in note 2, as well as properties sold in 2016 and 2017,2018 and one property that is in the process of being transferredconverted to the lender as discussed above.
OCPP structure in January 2019.
(4) 
Does not include properties under construction or undergoing redevelopment.
(5)
Includes revenues which are reflected as resident services revenue on the accompanying consolidated statements of comprehensive income.
(5)
The Company adopted new lease accounting guidance on January 1, 2019 which required the reclassification of the provision for uncollectible accounts from operating expenses to revenue. For purposes of calculating same store and new property results of operations, the reclassification is reflected for all periods presented to ensure comparability between periods. The provision for uncollectible accounts for all owned properties was $1.7 million and $1.8 million for the three months ended June 30, 2019 and 2018, respectively.


Same Store Properties:  The increase in revenue from our same store properties was primarily due to an increase in average rental rates for the 2017/20182018/2019 academic year, partially offset by a decreaseas well as an increase in our weighted average occupancy from 92.2%88.4% during the three months ended SeptemberJune 30, 20162018 to 91.9%90.6% during the three months ended SeptemberJune 30, 2017.2019. Future revenues will be dependent on our ability to maintain our current leases in effect for the 2017/20182018/2019 academic year and our ability to obtainachieve appropriate rental rates and desired occupancy levels for the 2018/20192019/2020 academic year at our various properties.
 
The increase in operating expenses fromfor our same store properties was primarily due to: (i) an increaseto increases in payroll, marketing, repairs and maintenance and property taxes. This increase was partially offset by a decrease in utilities expense, of approximately $1.9 million related to cleanup and repairs for water intrusion, roofing, and landscaping at the Company’s communities located in Florida and Texas, as a result of hurricanes Harvey and Irma; (ii) an increase in property taxes and related consulting feeswhich was primarily due to increased property tax assessments in various markets;renegotiated cable and (iii) other general inflationary factors.internet agreements, lower electricity costs from favorable weather patterns, and decreased usage at properties that have recently undergone LED replacements. We anticipate that total operating expenses for our same store property portfolio for 20172019 will increase as compared to 2016 as a result of the reasons discussed above.2018 due to increases in property taxes, payroll, marketing and general inflation.

 

New Property Operations: Our new properties for the three and ninesix months ended SeptemberJune 30, 20172019 include development properties that completed construction and opened for operations in Fall 2018. These properties are summarized in the table below:
Property Location Primary University Served  Beds Acquisition/ Opening Date
Acquisitions:Gladding Residence Center (ACE) Richmond, VA Virginia Commonwealth University 
University CrossingsCharlotte, NCUniversity of North Carolina5461,524 August 20162018
U PointSyracuse, NYSyracuse University163October 2016
The ArlieArlington, TXUniversity of Texas at Arlington598April 2017
TWELVE at U DistrictSeattle, WAUniversity of Washington384June 2017
Hub EugeneEugene, ORUniversity of Oregon513August 2017
StateFort Collins, COColorado State University665August 2017
The James (1)
Madison, WIUniversity of Wisconsin850September 2017
SUBTOTAL - Acquisitions3,719
Owned Developments:
Currie HallLos Angeles, CAUniversity of Southern California456August 2016
FairviewIrvington House (ACE) Indianapolis, IN Butler University 633648 August 20162018
University PointeGreek Leadership Village (ACE) Louisville, KYTempe, AZArizona State University957August 2018
David Blackwell Hall (ACE)Berkeley, CA University of LouisvilleCalifornia, Berkeley 531780 August 20162018
NAU Honors College (ACE)Flagstaff, AZNorthern Arizona University636August 2018
U Club on 28thTownhomes at Oxford (ACE) Boulder, COOxford, MS University of ColoradoMississippi 398528 August 2016
U Club SunnysideMorgantown, WVWest Virginia University534August 20162018
The Court atEdge - Stadium Centre Tallahassee, FL Florida State University 260413 August 20162018
Merwick Stanworth Phase IIHub Ann Arbor Princeton, NJAnn Arbor, MI Princeton University of Michigan 379September 2016
Tooker HouseTempe, AZArizona State University1,594310 August 20172018
Sky ViewHub Flagstaff Flagstaff, AZ Northern Arizona University 626591 August 20172018
University SquareCampus Edge on Pierce Prairie View, TXWest Lafayette, IN Prairie View A&MPurdue University 466598 August 2017
U Centre on TurnerColumbia, MOUniversity of Missouri718August 2017
U Pointe on SpeightWaco, TXBaylor University700August 2017
21Hundred @ Overton ParkLubbock, TXTexas Tech University1,204August 2017
Suites at 3rdChampaign, ILUniversity of Illinois251August 2017
U Club Binghamton Phase IIBinghamton, NYSUNY Binghamton University562August 2017
Callaway House ApartmentsNorman, OKUniversity of Oklahoma915August 2017
U Centre on CollegeClemson, SCClemson University418August 20172018
    SUBTOTAL - Owned Developments 10,645
Total - New Properties14,3646,985  
(1)
The James is a property held by a joint venture formed as part of the Core Transaction. Refer to Note 3 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1.


Third-Party Development Services Revenue


Third-party development services revenue increased by approximately $2.8$1.4 million, from $0.8$2.2 million during the three months ended SeptemberJune 30, 20162018, to $3.6 million for the three months ended SeptemberJune 30, 2017.  This2019.  The increase wasis primarily due to an increase in the closingnumber of bond financing and commencement ofthird-party development projects under construction of a fourth phase at the University of California, Irvine during the third quarter 2017.  This project contributed approximately $2.9current year as compared to the prior year. During the three months ended June 30, 2019, we had seven projects under construction with an average contractual fee of $3.6 million, in revenueas compared to four projects under construction during the three months ended SeptemberJune 30, 2017.2018 with an average contractual fee of $4.0 million.


Development services revenues are dependent on our ability to successfully be awarded such projects, the amount of the contractual fee related to the project and the timing and completion of the development and construction of the project. In addition, to the extent projects are completed under budget, we may be entitled to a portion of such savings, which are recognized as revenue when performance has been agreed upon by all parties, or when performance has been verified by an independent third-party. It is possible that projects for which we have deferred pre-development costs will not close and that we will not be reimbursed for such costs. The pre-development costs associated therewith will ordinarily be charged against income for the then-current period. We anticipate that third-party development services revenue towill increase in 20172019 as compared to 2016 as a result2018 due to an increase in the volume and timing of third-party development projects anticipated to close and commence construction in 2019.

Third-Party Management Services Revenue

Third-party management services revenue increased by approximately $1.0 million, from $2.5 million during the three months ended June 30, 2018, to $3.5 million for the three months ended June 30, 2019. The increase is primarily due to reimbursed payroll costs from the Disney College Program management contract which began in April 2019. As the project'sfacilities manager, the Company is responsible for the operations and maintenance of the closing and commencementproject. Because of construction of additional anticipated third-party development projects. However, the commencement of such projects is highly dependentcompany’s role in funding payroll costs for on-site personnel at the properties, accounting guidance requires the management fee for this project to be recorded on final determination of feasibility, negotiation, procurement rules and other applicable law, fluctuationsa gross basis in the constructioncompany’s consolidated financial statements.  Accordingly, both management services revenue and financing markets, andthird-party management services expenses for the availabilitythree months ended June 30, 2019 include approximately $1.1 million in reimbursed payroll costs. We anticipate third-party management services revenue will increase in 2019 as compared to 2018 due to the recognition of project financing.reimbursed payroll costs for the Disney College Program management contract, as discussed above.



Third-Party Development and Management Services Expenses


Third-party development and management services expenses increased by approximately $0.6$1.0 million, from $3.3$3.5 million during the three months ended SeptemberJune 30, 20162018, to $3.9$4.5 million for the three months ended SeptemberJune 30, 2017. This2019. The increase wasis primarily due to an increase in$1.1 million of payroll and other administrative costs related to corporatefrom the Disney College Program management and oversight, an increase in the level of pursuits of potential on-campus development projects, and general inflation.contract described above. We anticipate third-party development and management services expensesthis expense item will increase in 20172019 as compared to 20162018 due to the recognition of reimbursed payroll costs for the reasons discussed above.Disney College Program management contract, as well as an overall increase in pursuit activity for third-party development projects during 2019.


General and Administrative


General and administrative expenses increased bydecreased approximately $3.3$5.1 million, from $5.4$13.2 million during the three months ended SeptemberJune 30, 20162018, to $8.7$8.1 million for the three months ended SeptemberJune 30, 2017. This increase was primarily due to the following: (i) $2.92019. Excluding $5.8 million of transaction costs incurred in connection with our initial investmentthe closing of the ACC / Allianz joint venture transaction in the Core Transaction in August 2017; (ii) increases in travelMay 2018, general and related pursuit costs of potential acquisition transactions; (iii)administrative expenses

increased $0.7 million, primarily due to additional expenses incurred in connection with enhancements to our operating systems platform;platform, additional payroll expenses, and (iv) other general inflationary factors. We anticipate general and administrative expenses will increasedecrease in 20172019 as compared to 2016 for2018 due to transaction costs incurred in 2018 related to the reasons discussed above.formation of the ACC / Allianz Joint Venture Transaction, offset by an increase in payroll costs and an increase in expenses incurred in connection with enhancements to our operating systems platform.
 
Depreciation and Amortization
 
Depreciation and amortization increased by approximately $9.0$5.3 million, from $52.1$63.5 million during the three months ended SeptemberJune 30, 20162018, to $61.1$68.8 million for the three months ended SeptemberJune 30, 2017.  This2019.  The increase was primarily due to the following: (i) a $4.8$5.6 million increase related to the completion of construction and opening of seven owned development properties in August and September of 2016 and ten owned development properties in August 2017; (ii) a $3.8 million increase due to property acquisition activity during 2016 and 2017; and (iii) a $2.4 million increase in depreciation expense at our same store properties due to capital improvement projects at various properties. These increases wereFall 2018, partially offset by a $2.0$0.7 million decrease in depreciation and amortization expense related to properties sold in 20162018 and 2017.2019. We anticipate depreciation and amortization expense towill increase in 20172019 as compared to 2016 for2018 due to the reasons discussed above.completion of owned development projects in Fall 2018 and Fall 2019, offset by property dispositions completed during 2018 and 2019.


Ground/Facility Leases


Ground/facility leases expense increased by approximately $0.3$0.5 million, from $2.0$2.7 million during the three months ended SeptemberJune 30, 20162018, to $2.3$3.2 million for the three months ended SeptemberJune 30, 2017. This2019. The increase was primarily due to ACE development projects that completed construction and opened for operations in Fall 2016 and 2017.2018. We anticipate ground/facility leases expense towill increase for the full year 2017in 2019 as compared to 2016 for2018, primarily as a result of the reasons discussed above.timing of new ACE projects being placed into service, and the conversion of one owned property to the OCPP structure in January 2019.


Loss (Gain) from Disposition of Real Estate

During the three months ended June 30, 2019, we sold one owned property containing 544 beds, resulting in a net loss from disposition of real estate of approximately $0.3 million. During the three months ended June 30, 2018, we sold a portfolio of three owned properties containing 1,338 beds, resulting in a net gain from disposition of real estate of approximately $42.3 million. Refer to Note 4 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1.

Other Operating Income

During the three months ended June 30, 2018, we recorded a $2.6 million gain related to cash proceeds received from a litigation settlement.

Interest Expense


Interest expense decreasedincreased by approximately $0.3$3.8 million, from $19.0$23.3 million during the three months ended SeptemberJune 30, 20162018, to $18.7$27.1 million for the three months ended SeptemberJune 30, 2017. Interest2019. The increase was primarily due to $2.9 million of additional interest expense decreased as a resultdue to the timing of borrowings under our unsecured revolving credit facility during the following: (i) a decrease of approximatelyrespective three month periods, $2.2 million in additional interest expense incurred in the current year related to the dispositionissuance of properties with outstanding$330 million in mortgage debt during 2016; (ii)as part of the ACC / Allianz Joint Venture Transaction which closed in May 2018, and a decrease of approximately $0.9$0.4 million due to the pay-off of $200 million of our $350 million term loan facility (“Term Loan I Facility”)increase in November 2016; (iii) a $0.5 million decreaseinterest expense related to the pay-off of mortgage loans during 2016; and (iv) a $0.2 million decrease related to lower outstanding balances on our mortgage debt due to continued scheduled principal payments. These decreases were partially offset by (i) a $1.7 million increase related to increased borrowings on our revolving credit facility; (ii) an increase of approximately $1.4 million related to the closings of our $300 million term loan facility (“Term Loan III Facility”) in September 2017 and our $200 million term loan (the “New Term Loan II Facility”) in June 2017; and (iii) an increase of $0.4 million in interest related to the property in receivership incurred while working with the lender to finalize the transfer of the property in settlement of the property’s $27.4 million mortgage loan.

We anticipate interest expense will decrease in 2017 as compared to 2016 due to the pay-off of mortgage debt in 2016 and 2017, the disposition of properties with outstanding mortgage debt during 2016, and the 2016 pay-off of $200 million of the Term Loan I Facility. These decreases will be offset by an increase in borrowings under the Company’s revolving credit facility to fund its development pipeline, an increase related to the closings of the New Term Loan II Facility in June 2017, the Term Loan III Facility in September 2017, and additional interest incurred from the $400 million offering of unsecured notes in October 2017.June 2019. These increases were offset by a $1.8 million decrease in term loan interest expense due to the pay-off of $450 million of term loans in 2018. We anticipate interest expense will increase in 2019 as compared to 2018 due to increased interest rates on a higher average outstanding balance under our revolving credit facility throughout 2019, additional interest incurred from $330 million in mortgage debt as part of the ACC / Allianz Joint Venture Transaction, and additional interest incurred from the issuance of unsecured notes issued in June 2019.

Amortization of Deferred Financing Costs

Amortization of deferred financing costs decreased by approximately $1.0 million, from $2.2 million during the three months ended June 30, 2018 to $1.2 million for the three months ended June 30, 2019. The decrease was primarily due to $0.9 million of accelerated amortization recorded in the prior year related to the pay-off of $450 million of term loan debt in May 2018. We anticipate amortization of deferred finance costs will decrease in 2019, as increases related to offerings of unsecured debt in 2019 will be more than offset by the 2018 accelerated amortization related to the pay-off of term loan debt.

Loss from Early Extinguishment of Debt

During the three months ended June 30, 2018, we incurred approximately $0.8 million of losses associated with the early pay-off of mortgage loans in connection with the sale of one owned property and one owned property included in the ACC / Allianz Joint Venture Transaction.

Income Tax Provision

Income tax provision decreased by approximately $1.8 million, from $2.1 million during the three months ended June 30, 2018 to $0.3 million for the three months ended June 30, 2019. The decrease was primarily due to estimated state income tax recorded in the prior year related to a taxable gain resulting from the ACC / Allianz Joint Venture Transaction.



Comparison of the NineSix Months Ended SeptemberJune 30, 20172019 and SeptemberJune 30, 20162018
 
The following table presents our results of operations for the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, including the amount and percentage change in these results between the two periods.


 Nine Months Ended 
 September 30,
   Six Months Ended
June 30,
  
 2017 2016 Change ($) Change (%) 2019 2018 Change ($) Change (%)
Revenues                
Wholly-owned properties $531,556
 $546,078
 $(14,522) (2.7)%
Owned properties $427,575
 $395,020
 $32,555
 8.2 %
On-campus participating properties 23,128
 23,018
 110
 0.5 % 17,844
 16,625
 1,219
 7.3 %
Third-party development services 4,697
 3,929
 768
 19.5 % 6,778
 3,048
 3,730
 122.4 %
Third-party management services 7,193
 7,039
 154
 2.2 % 5,776
 5,183
 593
 11.4 %
Resident services 2,310
 2,325
 (15) (0.6)% 1,529
 1,592
 (63) (4.0)%
Total revenues 568,884
 582,389
 (13,505) (2.3)% 459,502
 421,468
 38,034
 9.0 %
                
Operating expenses  
  
  
  
Wholly-owned properties 249,552
 257,175
 (7,623) (3.0)%
Operating expenses (income)  
  
  
  
Owned properties 182,932
 174,196
 8,736
 5.0 %
On-campus participating properties 11,080
 10,125
 955
 9.4 % 7,763
 7,155
 608
 8.5 %
Third-party development and management services 11,789
 10,638
 1,151
 10.8 % 8,699
 7,742
 957
 12.4 %
General and administrative 25,200
 16,810
 8,390
 49.9 % 15,430
 19,872
 (4,442) (22.4)%
Depreciation and amortization 169,391
 159,486
 9,905
 6.2 % 137,570
 128,316
 9,254
 7.2 %
Ground/facility leases 7,151
 6,736
 415
 6.2 % 6,785
 5,575
 1,210
 21.7 %
Loss (gain) from disposition of real estate 282
 (42,314) 42,596
 (100.7)%
Provision for real estate impairment 15,317
 
 15,317
 100.0 % 3,201
 
 3,201
 100.0 %
Other operating income 
 (2,648) 2,648
 (100.0)%
Total operating expenses 489,480
 460,970
 28,510
 6.2 % 362,662
 297,894
 64,768
 21.7 %
                
Operating income 79,404
 121,419
 (42,015) (34.6)% 96,840
 123,574
 (26,734) (21.6)%
                
Nonoperating income and (expenses)  
  
  
  
Nonoperating income (expenses)  
  
  
  
Interest income 3,723
 4,026
 (303) (7.5)% 1,895
 2,466
 (571) (23.2)%
Interest expense (47,944) (61,762) 13,818
 (22.4)% (54,129) (47,022) (7,107) 15.1 %
Amortization of deferred financing costs (3,197) (5,238) 2,041
 (39.0)% (2,350) (3,628) 1,278
 (35.2)%
(Loss) gain from disposition of real estate (632) 17,409
 (18,041) (103.6)%
Total nonoperating expense (48,050) (45,565) (2,485) 5.5 %
Loss from early extinguishment of debt 
 (784) 784
 (100.0)%
Total nonoperating expenses (54,584) (48,968) (5,616) 11.5 %
                
Income before income taxes 31,354
 75,854
 (44,500) (58.7)% 42,256
 74,606
 (32,350) (43.4)%
Income tax provision (791) (1,035) 244
 (23.6)% (678) (2,366) 1,688
 (71.3)%
Net income 30,563
 74,819
 (44,256) (59.2)% 41,578
 72,240
 (30,662) (42.4)%
                
Net income attributable to noncontrolling interests (587) (1,150) 563
 (49.0)% (1,552) (304) (1,248) 410.5 %
Net income attributable to ACC, Inc. and
Subsidiaries common stockholders
 $29,976
 $73,669
 $(43,693) (59.3)% $40,026
 $71,936
 $(31,910) (44.4)%



Same Store and New Property Operations


A reconciliation of our same store, new property and sold/held for saleother property operations to our consolidated statements of comprehensive income is set forth below:
 Same Store Properties New Properties 
Sold/Held for Sale Properties (1)
 Total - All Properties Same Store Properties New Properties 
Sold Properties/Other (1)
 Total - All Properties 
 Nine Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 Six Months Ended
June 30,
 Six Months Ended
June 30,
 Six Months Ended
June 30,
 Six Months Ended
June 30,
 
 2017 2016 2017 2016 
2017  (2)
 
2016 (3)
 2017 2016 2019 2018 2019 2018 2019 2018 2019 2018 
Number of properties (4)
 124
 124
 24
 8
 2
 24
 150
(5) 
156
 144
 144
 10
 
 3
(2) 
7
(3) 
157
 151
 
Number of beds (4)
 73,871
 73,871
 14,364
 3,737
 1,517
 14,924
 89,752
 92,532
 86,717
 86,717
 6,985
 
 1,404
 2,886
 95,106
 89,603
 
                                 
Revenues (6)(4)
 $490,177
 $478,327
 $39,774
 $4,291
 $3,915
 $65,785
 $533,866
 $548,403
 $395,576
 $383,396
 $31,317
 $257
 $2,211
 $10,227
 $429,104
 $393,880
(5) 
Operating expenses 227,993
 220,724
 19,152
 2,400
 2,407
 34,051
 249,552
 257,175
 169,012
 166,173
 11,896
 315
 2,024
 4,976
 182,932
 171,464
(5) 
(1) 
Includes recurring professional fees related to the formation and operation of the ACC / Allianz Joint Venture. Does not include the allocation of payroll and other administrative costs related to corporate management and oversight.
(2) 
Includes one property that was sold in April 2017 and one property currently in receivership that is in the process of being transferred to the lender in settlement of the property’s $27.4 million mortgage loan that matured in August 2017.July 2019, and one property consisting of two phases sold in May 2019.
(3) 
Includes the properties described above in note 2, as well as properties sold in 2016 and 2017,2018 and one property that is in the process of being transferredconverted to the lender as discussed above.OCPP structure in January 2019.
(4) 
Does not include properties under construction or undergoing redevelopment.
(5)
Difference from total operating property portfolio represents one property that was sold during the second quarter 2017.
(6)
Includes revenues which are reflected as resident services revenue on the accompanying consolidated statements of comprehensive income.
(5)
The Company adopted new lease accounting guidance on January 1, 2019 which required the reclassification of the provision for uncollectible accounts from operating expenses to revenue. For purposes of calculating same store and new property results of operations, the reclassification is reflected for all periods presented to ensure comparability between periods. The provision for uncollectible accounts for all owned properties was $2.8 million and $2.7 million for the six months ended June 30, 2019 and 2018, respectively.


Same Store Properties:  The increase in revenue from our same store properties was primarily due to an increase in average rental rates for the 2016/2017 and 2017/20182018/2019 academic years partially offset by a slight decreaseas well as an increase in our weighted average occupancy from 93.8%91.1%during the ninesix months ended SeptemberJune 30, 20162018, to 93.6%93.8% for the ninesix months ended SeptemberJune 30, 2017.2019.


The increase in operating expenses from our same store properties was primarily due to the same factors that contributed to the increase in operating expenses for the three months ended SeptemberJune 30, 2017, as discussed above, as well the following: (i) an increase in utilities expense as a result of overall rate increases in water2019, and sewage in various markets, which was partially offset by increased utility reimbursements from tenants which are included in same store properties revenues; (ii) increases related to 2015 development deliveries caused primarily by the stabilization of property tax assessments in the second year of operations; and (iii) additional marketing expenses incurred due to our efforts to achieve our leasing targets.general inflation.


New Property Operations: Our new properties for the ninesix months ended SeptemberJune 30, 20172019 are summarized in the table of new properties contained in the discussion of our results of operations for the three months ended SeptemberJune 30, 20172019 and 2016.2018.


On-Campus Participating Properties (“OCPP”) Operations
 
Same StoreAs of June 30, 2019, we had six OCPPs containing 5,230 beds. In January 2019, one owned property located at Prairie View A&M University was converted to the OCPP Properties: We had five participating properties containing 5,086 beds which were operating duringstructure and is now included in our OCPP portfolio, contributing to the nineincrease in both revenues and expenses for the six months ended SeptemberJune 30, 20172019 as compared to the six months ended June 30, 2018. In addition, the Company adopted new lease accounting guidance on January 1, 2019 which required the reclassification of the provision for uncollectible accounts from operating expenses to revenue. The reclassification is reflected on a prospective basis in the Consolidated Statements of Comprehensive Income contained in Item 1 herein starting in the first quarter 2019. The amount reclassified from operating expenses to revenue was a $0.7 million benefit and 2016. Revenuesa $0.2 million expense for the six months ended June 30, 2019 and 2018, respectively. We anticipate that revenues from these properties increased by $0.1 million, from $23.0 million for the nine months ended September 30, 2016 to $23.1 million for the nine months ended September 30, 2017 as a result of an2019 will increase in average rental rates for the 2016/2017 and 2017/2018 academic years, offset by a decrease in average occupancy from 69.5% for the nine months ended September 30, 2016 to 67.6% for the nine months ended September 30, 2017. Operating expenses at these properties increased by $1.0 million, from $10.1 million for the nine months ended September 30, 2016 as compared to $11.1 million for the nine months ended September 30, 2017, primarily due to (i) an increase in payroll costs related to recently filled staff positions; (ii) increased maintenance costs related to the annual turn process; (iii) an increase in utilities expense; and (iv) increases in general and administrative costs. Futurefactors described above. In addition, future revenues will be dependent on our ability to maintain our current leases in effect for the 2017/20182018/2019 academic year and our ability to obtain appropriate rental rates and desired occupancy for the 2018/20192019/2020 academic year. We anticipate that operating expenses for our OCPPthese properties for 20172019 will increase as compared to 2016 for2018 due to the reasons discussed above.conversion of one property to the OCPP structure in January 2019 and general inflation.



Third-Party Development Services Revenue


Third-party development services revenue increased by approximately $0.8$3.8 million, from $3.9$3.0 million during the ninesix months ended SeptemberJune 30, 20162018, to $4.7$6.8 million for the ninesix months ended SeptemberJune 30, 2017.  This2019.  The increase was primarily due to the closing of bond financing and commencement of construction of a fourththe Calhoun Hall project at Drexel University and the ninth phase at thePrairie View A&M University of California, Irvinein March and April 2019, respectively, which contributed approximately $2.9$3.0 million in revenue forduring the ninesix months ended SeptemberJune 30, 2017. These increases were partially offset by2019, as compared to the closing of bond financing and commencement of construction of two development projects with the Texas A&MDelaware State University System at their Corpus Christi and San Antonio campuses,project in May 2018, which contributed approximately $2.0$1.5 million ofin revenue as well as a $0.5 million fee earned for the performance of various predevelopment activities for the University of Kansas during the ninesix months ended SeptemberJune 30, 2016. During2018. In addition, during the ninesix months ended SeptemberJune 30, 20172019, we had threealso continued development services for five projects that commenced construction in progress with an average contractual fee2018, for which we earned fees of approximately $3.1$3.7 million, as compared to three projects that commenced construction in 2017, for which we earned fees of approximately $1.4 million during the ninesix months ended SeptemberJune 30, 20162018.

Third-Party Management Services Revenue

Third-party management services revenue increased by approximately $0.6 million, from $5.2 million during the six months ended June 30, 2018, to $5.8 million for the six months ended June 30, 2019. The increase was due to the same factors that contributed to the increase in which we had four projectsthird-party management services revenue for the three months ended June 30, 2019, as discussed above. The increase was partially offset by discontinued third-party management contracts in progress with an average contractual fee of approximately $1.8 million. 2018 and 2019.

Third-Party Development and Management Services Expenses


Third-party development and management services expenses increased by approximately $1.2$1.0 million, from $10.6$7.7 million during the ninesix months ended SeptemberJune 30, 20162018, to $11.8$8.7 million for the ninesix months ended SeptemberJune 30, 2017. This2019. The increase was due to the same factors that contributed to the increase in third-party development and management services expenses for the three months ended SeptemberJune 30, 2017,2019, as discussed above. The increase was partially offset by discontinued third-party management contracts in 2018 and 2019.


General and Administrative


General and administrative expenses increaseddecreased by approximately $8.4$4.5 million from $16.8$19.9 million during the ninesix months ended SeptemberJune 30, 20162018, to $25.2$15.4 million for the ninesix months ended SeptemberJune 30, 2017.2019. Excluding $5.8 million in transaction costs incurred in connection with the closing of the ACC / Allianz Joint Venture Transaction in May 2018, general and administrative expense increased by $1.3 million. This increase was primarily due to the same factors that contributed to the increase in general and administrative expenses for the three months ended SeptemberJune 30, 2017,2019, as discussed above, as well as $4.5 million in contractual executive separation and retirement charges incurred in the first and second quarter 2017 as a result of the retirement of the former Company’s Chief Financial Officer.above.
 
Depreciation and Amortization
 
Depreciation and amortization increased by approximately $9.9$9.3 million, from $159.5$128.3 million during the ninesix months ended SeptemberJune 30, 20162018, to $169.4$137.6 million for the ninesix months ended SeptemberJune 30, 2017.  This2019.  The increase was primarily due to the following: (i) a $10.7an $11.3 million increase related to the completion of construction and opening of seven ownedten development properties in August and September of 2016 and ten owned development properties in August 2017; (ii) a $7.0 million2018. This increase due to property acquisition activity during 2016 and 2017; (iii) a $4.9 million increase in depreciation expense at our same store properties due to capital improvement projects at various properties; and (iv) a $0.2 million increase in depreciation of corporate assets. These increases werewas partially offset by a $13.0$2.4 million decrease in depreciation and amortization expense related to properties sold in 20162018 and 2017.2019.


Ground/Facility Leases


Ground/facility leases expense increased by approximately $0.5$1.2 million, from $6.7$5.6 million during the ninesix months ended SeptemberJune 30, 20162018, to $7.2$6.8 million for the ninesix months ended SeptemberJune 30, 2017. This2019. The increase was due to the same factors that contributed to the increase in ground/facility lease expenses for the three months ended SeptemberJune 30, 2017,2019, as discussed above.


Provision for Real Estate Impairment

During the nine months ended September 30, 2017, we recorded an impairment charge of approximately $15.3 million for one wholly-owned property currently in receivership that is in the process of being transferred to the lender in settlement of the property’s $27.4 million mortgage loan that matured in August 2017. Refer to Note 7 in the accompanying Notes to Consolidated Financial Statements in Item 1 for a detailed discussion of this transaction.


Interest Expense

Interest expense decreased by approximately $13.9 million, from $61.8 million during the nine months ended September 30, 2016 to $47.9 million for the nine months ended September 30, 2017. Interest expense decreased as a result of the following: (i) a decrease of approximately $7.4 million related to the disposition of properties with outstanding mortgage debt during 2016; (ii) a $4.6 million increase in capitalized interest due to the timing and volume of construction activities on our owned development projects during the comparable nine month periods; (iii) a $3.5 million decrease related to the pay-off of mortgage loans during 2016; and (iv) a decrease of approximately $3.6 million due to the pay-off of our $250 million term loan facility (“Term Loan II Facility”) in February 2016 and the pay-off of a portion of the Term Loan I Facility in November 2016. These decreases were partially offset by (i) a $3.6 million increase in interest expense related to increased borrowings on our revolving credit facility; and (ii) a $1.4 million increase in interest related to closings of our Term Loan III Facility in September 2017 and our New Term Loan II Facility in June 2017.

Amortization of Deferred Financing Costs

Amortization of deferred financing costs decreased by approximately $2.0 million, from $5.2 million during the nine months ended September 30, 2016 to $3.2 million for the nine months ended September 30, 2017. This decrease was primarily due to $1.1 million of accelerated amortization related to the pay-off of our Term Loan II Facility in February 2016, $0.6 million related to the pay-off of a portion of the Term Loan I Facility in November 2016, and $0.3 million related to properties with mortgage debt sold in 2016. We anticipate amortization of deferred finance costs will decrease in 2017 for the reasons discussed above, offset by increases related to the New Term Loan II and Term Loan III facilities, and the offering of unsecured notes in October 2017.

(Loss) GainLoss (Gain) from Disposition of Real Estate


During the ninesix months ended SeptemberJune 30, 2017,2019, we sold one wholly-ownedowned property containing 657544 beds, resulting in a net loss from disposition of real estate of approximately $0.6$0.3 million. During the ninesix months ended SeptemberJune 30, 2016,2018, we sold two wholly-owneda portfolio of three owned properties containing 1,3241,338 beds, resulting in a net gain from disposition of real estate of approximately $17.4$42.3 million. Refer to Note 4 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1.

Provision for Real Estate Impairment

During the six months ended June 30, 2019, we recorded an impairment charge of $3.2 million for one owned property serving students attending Florida A&M University, which was classified as held for sale as of March 31, 2019 and sold in May 2019.

Other Operating Income

During the six months ended June 30, 2018, we recorded a $2.6 million gain related to cash proceeds received from a litigation settlement.

Interest Income

Interest income decreased by approximately $0.6 million, from $2.5 million during the six months ended June 30, 2018, to $1.9 million for the six months ended June 30, 2019. The decrease was primarily due to the planned forgiveness of loans receivable resulting from the unwinding of a New Market Tax Credit ("NMTC") structure at one of the Company's owned properties.

Interest Expense

Interest expense increased by approximately $7.1 million, from $47.0 million during the six months ended June 30, 2018, to $54.1 million for the six months ended June 30, 2019. The increase was primarily due to $5.7 million of additional interest expense due to the timing of borrowings under our unsecured revolving credit facility during the respective six month periods, $5.5 million in additional interest expense incurred in the current year related to the issuance of $330 million in mortgage debt as part of the ACC / Allianz Joint Venture Transaction which closed in May 2018, a $0.6 million decrease in capitalized interest, and a $0.4 million increase in interest expense related to our $400 million offering of unsecured notes in June 2019. These increases were offset by a $4.4 million decrease in term loan interest expense due to the pay-off of $450 million of term loans in 2018 and a $0.7 million decrease due to the unwinding of an NMTC structure at one of the Company’s owned properties.

Amortization of Deferred Financing Costs

Amortization of deferred financing costs decreased by approximately $1.2 million, from $3.6 million during the six months ended June 30, 2018 to $2.4 million for the six months ended June 30, 2019. The decrease was due to the same factors that contributed to the decrease for the three months ended June 30, 2019, as discussed above.

Loss from Early Extinguishment of Debt

During the six months ended June 30, 2018, we incurred approximately $0.8 million of losses associated with the early pay-off of mortgage loans in connection with the sale of one owned property and one owned property included in the ACC / Allianz Joint Venture Transaction.

Income Tax Provision

Income tax provision decreased by approximately $1.7 million from $2.4 million during the six months ended June 30, 2018, to $0.7 million for the six months ended June 30, 2019. The decrease was primarily due to estimated state income tax recorded in the prior year related to a taxable gain resulting from the ACC / Allianz Joint Venture Transaction.

Net Income Attributable to Noncontrolling Interests


NoncontrollingNet income attributable to noncontrolling interests represent holdersrepresents consolidated joint venture partners’ share of common and preferred units in our Operating Partnership not held by ACC or ACC Holdingsnet income, as well as certain third-party partnersnet income allocable to holders of Operating Partnership units. The increase in joint ventures consolidated by us for financial reporting purposes. Accordingly, these external partners are allocated their sharethis item as compared to the prior year is primarily due to the closing of income/loss during the respective reporting periods. Refer to Note 9ACC / Allianz Joint Venture Transaction in the accompanying Notes to Consolidated Financial Statements in Item 1 for a detailed discussion of noncontrolling interests.May 2018.



Liquidity and Capital Resources
 
Cash Balances and Cash Flows
 
As of SeptemberJune 30, 2017, excluding our on-campus participating properties,2019, we had $29.7$88.7 million in cash and cash equivalents and restricted cash as compared to $32.3$106.5 million in cash and cash equivalents and restricted cash as of December 31, 2016.2018.  Restricted cash primarily consists of escrow accounts held by lenders, and resident security deposits as required by law in certain states, and funds held in escrow in connection with potential acquisition and development opportunities.  The following discussion relates to changes in cash due to operating, investing and financing activities, which are presented in our consolidated statements of cash flows included in Item 1.
 

Operating Activities: For the ninesix months ended SeptemberJune 30, 2017,2019, net cash provided by operating activities was approximately $245.1$148.4 million, as compared to approximately $242.8$169.5 million for the ninesix months ended SeptemberJune 30, 2016, an increase2018, a decrease of $2.3$21.1 million.  This increasedecrease in cash flows was primarily due to the timing of property tax payments for owned properties, the sale of three properties in 2018, and a $13.2 million interest rate swap termination payment made in June 2019. This decrease was partially offset by operating cash flows provided byfrom the completion of construction and opening of tensix owned development properties and four presale developments in third quarter of 2017,August 2018, and the completion of seven owned development projects in the third quarter of 2016, as well as property acquisitions in 2016 and 2017. Thean increase was partially offset by the timing of collections of our student accounts receivable as well as a decrease in operating cash flows related to property dispositions during 2016 and 2017.results for same store properties.

Investing Activities:  Investing activities utilized approximately $770.4$239.6 million and $365.7$44.4 million for the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, respectively.  The $404.7$195.2 million increase in cash utilized in investing activities was primarily a result of the following: (i) a $205.7$233.4 million increasedecrease in cash paid forproceeds from disposition of a three property acquisitions during the nine months ended September 30, 2017, (ii)portfolio in 2018 as compared to one property in 2019. This decrease was partially offset by a $124.4$32.4 million increasedecrease in cash used to fund the construction of our wholly-ownedowned development properties, related

to the timing of construction commencement and completion of our owned development pipeline; (iii)pipeline, and a $48.2$6.2 million decrease in proceeds from the disposition of wholly-owned properties, as we sold two properties during the nine months ended September 30, 2016 as compared to the sale of one property during the nine months ended September 30, 2017; (iv) a $19.3 million increase in cash used to fund capital expenditures at our wholly-owned properties;owned and (v) an $8.0 million increase in cash paid to acquire undeveloped land parcels in 2017.on-campus participating properties.


Financing Activities: Cash For the six months ended June 30, 2019, net cash provided by financing activities totaled approximately $519.4$73.4 million and $138.6as compared to net cash utilized by financing activities of $102.6 million for the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively.2018. The $380.8$176.0 million increase in cash provided by financing activities was primarily a result of the following: (i) a $750.0$398.8 million net increase in proceeds from unsecured notes; (ii) a $450.0 million decrease in the pay-off of unsecured term loans; (ii) a $216.0 million increase in net proceeds on our revolving credit facility; (iii) a $53.4$144.9 million decrease in distributions to noncontrolling interests as a result of the closing of the mortgage loans associated with the Allianz Joint Venture in May 2018; and (iv) a $58.6 million decrease in cash used to pay off mortgage and construction debt during the comparable nine month periods; (iv) $11.5 million in contributions from noncontrolling interests during the nine months ended September 30, 2017; and (v) $10.8 million in proceeds from construction loans.including defeasance costs. These increases were partially offset by the following:by: (i) a $581.7$373.7 million decrease in proceeds from noncontrolling interests as a result of the Allianz Joint Venture in May 2018; (ii) a $330.0 million decrease in proceeds from mortgage loans; (iii) a $125.4 million decrease in net proceeds on our revolving credit facility; (iv) a $35.5 million decrease in proceeds from the sale of common stock, related to our equity offering in February 2016 as compared to the issuance of common stock under our ATM Equity Program in 2017; (ii)construction loans; (v) a $72.5$4.8 million increase in distributions to common and restricted stockholdersstockholders; and noncontrolling partners due to the distribution of $59.6 million of the Company's initial investment to its joint venture partners; and (iii)(vi) a $6.6$5.9 million increase in payments of debt issuance costs due to the amendment of our credit agreement in January 2017 and our New Term Loan II and Term Loan III facilities in June and September 2017.costs.


Liquidity Needs, Sources and Uses of Capital
 
As of SeptemberJune 30, 2017,2019, our short-term liquidity needs included, but were not limited to, the following: (i) the pay-off of $300 million related to our Term Loan III Facility due to mature in September 2018; (ii) anticipated distribution payments to our common and restricted stockholders totaling approximately $241.5$259.9 million based on an assumed annual cash distribution of $1.76$1.88 per share and based on the number of our shares outstanding as of SeptemberJune 30, 2017; (iii)2019; (ii) anticipated distribution payments to our Operating Partnership unitholders totaling approximately $1.9$1.2 million based on an assumed annual distribution of $1.76$1.88 per common unit and a cumulative preferential per annum cash distribution rate of 5.99% on our Preferred OP Units based on the number of units outstanding as of SeptemberJune 30, 2017; (iv) the pay-off of approximately $35.5 million of outstanding fixed rate mortgage debt scheduled to mature during the next 12 months; (v)2019; (iii) estimated development costs over the next 12 months totaling approximately $319.8$274.4 million for our wholly-ownedowned properties currently under construction; (vi) a $42.6(iv) an $85.4 million obligation to purchase a propertytwo properties subject to a presale arrangementarrangements (see Note 13 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1); (vii)(v) an obligation to increase our investment in two joint ventures, resulting in a funding commitment of approximately $171.2$154.0 million (see Note 3 and Note 13 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1); (viii)(vi) the pay-off of approximately $34.8 million of outstanding fixed rate mortgage debt scheduled to mature during the next 12 months;
(vii) funds for other development projects scheduled to commence construction during the next 12 months; and (ix)(viii) potential future property or land acquisitions, including mezzanine financed developments.
 
We expect to meet our short-term liquidity requirements byby: (i) borrowing under our existing unsecuredrevolving credit facility; (ii) accessing the unsecured bond market; (iii) exercising debt extension options to the extent they are available; (iv) issuing securities, including common stock, under our ATM Equity Program discussed more fully in Note 87 in the accompanying Notes to Consolidated Financial Statements contained in Item 1, or otherwise; (v) potentially disposing of properties and/or entering into joint venture arrangements, depending on market conditions; and (vi) utilizing current cash on hand and net cash provided by operations. Our ability to obtain additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to the real estate industry, our credit ratings and credit capacity, as well as the perception of lenders regarding our long or short-term financial prospects.

In January 2017, the Company amended and expanded its senior unsecured revolving credit facility, increasing the facility size to $700 million and extending the maturity date to March 2022. The amended facility has an accordion feature that allows the Company to expand the facility by up to an additional $500 million, subject to the satisfaction of certain conditions. Borrowing rates under the credit facility float at a margin over LIBOR plus an annual facility fee with spreads reflecting current market terms which are more favorable than those contained in the prior facility. Both the margin and the facility fee are priced on a grid that is tied to the Company’s credit rating. Based on the Company’s current Baa2/BBB rating, the annual facility fee is 20 basis points and the LIBOR margin is 100 basis points, a reduction of 10 basis points from the prior facility.

In June 2017, the Company entered into a New Term Loan II Facility totaling $200 million which will mature in June 2022. The agreement has an accordion feature that allows the Company to expand the amount by up to an additional $100 million, subject to the satisfaction of certain conditions. Borrowing rates under this agreement float at a margin over LIBOR and the margin is priced on a grid that is tied to the Company’s credit rating. Based on the Company’s current Baa2/BBB rating, the LIBOR margin is 110 basis points.

In September 2017, the Company entered into a Term Loan III Facility totaling $300 million which will mature in September 2018, and can be extended for two one-year periods at our option, subject to the satisfaction of certain conditions. The agreement has an accordion feature that allows the Company to expand the amount by up to an additional $100 million, subject to the satisfaction of certain conditions. Borrowing rates under this agreement float at a margin over LIBOR and the margin is priced on a grid that is tied to the Company’s credit rating. Based on the Company’s current Baa2/BBB rating, the LIBOR margin is 110 basis points.
As discussed in Note 7 in the accompanying Notes to Consolidated Financial Statements contained in Item 1, in May 2017, the lender of the non-recourse mortgage loan secured by Blanton Common, a wholly-owned property located near Valdosta State University which was acquired as part of the GMH student housing transaction in 2008, sent a formal notice of default and initiated foreclosure proceedings. The property generated insufficient cash flow to cover the debt service on the $27.4 million mortgage loan that matured in August 2017. As of September 30, 2017, the underlying property was in receivership and the Company was cooperating with the lender to allow for a consensual foreclosure process upon which the property will be surrendered to the lender in satisfaction of the mortgage loan.

As discussed in Note 15 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1, in October 2017, we raised $395 million in net proceeds from an unsecured $400 million bond offering. Proceeds from the offering were used to repay the outstanding balance on our revolving credit facility. We intend to use the remaining proceeds for potential repayment of other outstanding debt, to fund our development pipeline, for potential acquisitions of student housing properties and for general corporate purposes.


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 incurrence of additional secured debt and the sale of additional debt or equity securities. 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 unsecured credit facility and unsecured notes. These financings could increase our level of indebtedness or result in dilution to our equity holders.


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.  Distributions to common stockholders are at the discretion of the Board of Directors. We may use borrowings under our unsecured revolving credit facility to fund distributions.  The Board of Directors considers a number of factors when determining distribution levels, including market factors and our Company’s performance in addition to REIT requirements.
 
On November 1, 2017, weJuly 31, 2019, our Board of Directors declared a distribution per share of $0.44,$0.47, which will be paid on November 27, 2017August 23, 2019 to all common stockholders of record as of November 13, 2017.August 12, 2019.  At the same time, the Operating Partnership will pay an equivalent amount per unit to holders of Common OP Units, as well as the quarterly cumulative preferential distribution to holders of Preferred OP Units.

Pre-Development Expenditures

Our third-party and owned development activities have historically required us to fund pre-development expenditures such as architectural fees, permits and deposits.  The closing and/or commencement of construction of these development projects is subject to a number of risks such as our inability to obtain financing on favorable terms and delays or refusals in obtaining necessary zoning, land use, building, and other required governmental permits and authorizations  As such, we cannot always predict accurately the liquidity needs of these activities.  We frequently incur these pre-development expenditures before a financing commitment and/or required permits and authorizations have been obtained.  Accordingly, we bear the risk of the loss of these pre-development expenditures if financing cannot ultimately be arranged on acceptable terms or we are unable to successfully obtain the required permits and authorizations.  Historically, our third-party and owned development projects have been successfully structured and financed; however, these developments have at times been delayed beyond the period initially scheduled, causing revenue to be recognized in later periods.  As of September 30, 2017, we have deferred approximately $5.6 million in pre-development costs related to third-party and owned development projects that have not yet commenced construction.

Indebtedness
 
The amounts below exclude net unamortized debt premiums and discounts related to mortgage loans assumed in connection with property acquisitions, original issue discounts (“OID”s), and deferred financing costs (see Note 76 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1). A summary of our consolidated indebtedness as of SeptemberJune 30, 20172019 is as follows:
 Amount % of Total 
Weighted Average Rates (1)
 Weighted Average Maturities Amount % of Total 
Weighted Average Rates (1)
 Weighted Average Maturities
Secured $646,582
 23.4% 4.8% 5.3 Years $866,303
 26.6% 4.7% 6.1 Years
Unsecured 2,116,440
 76.6% 3.1% 4.3 Years 2,385,600
 73.4% 3.6% 4.7 Years
Total consolidated debt $2,763,022
 100.0% 3.5% 4.5 Years $3,251,903
 100.0% 3.9% 5.1 Years
              
Fixed rate debt              
Secured              
Project-based taxable bonds $30,575
 1.1% 7.6% 7.0 Years $27,030
 0.8% 7.6% 5.3 Years
Mortgage 593,585
 21.4% 4.7% 5.4 Years 749,979
 23.1% 4.6% 5.5 Years
Unsecured              
April 2013 Notes 400,000
 14.5% 3.8% 5.5 Years 400,000
 12.3% 3.8% 3.8 Years
June 2014 Notes 400,000
 14.5% 4.1% 6.8 Years 400,000
 12.3% 4.1% 5.0 Years
September 2015 Notes 400,000
 14.5% 3.4% 3.0 Years 400,000
 12.3% 3.4% 1.3 Years
October 2017 Notes 400,000
 12.3% 3.6% 8.4 Years
June 2019 Notes 400,000
 12.3% 3.3% 7.0 Years
Total - fixed rate debt 1,824,160
 66.0% 4.1% 5.2 Years 2,777,009
 85.4% 3.9% 5.2 Years
              
Variable rate debt:              
Secured              
Construction 22,422
 0.8% 4.2% 2.3 Years
Mortgage and construction 89,294
 2.7% 5.1% 12.1 Years
Unsecured              
Term loans 650,000
 23.5% 2.3% 2.7 Years 200,000
 6.2% 3.5% 3.0 Years
Unsecured revolving credit facility 266,440
 9.7% 2.4% 4.5 Years 185,600
 5.7% 3.6% 2.7 Years
Total - variable rate debt 938,862
 34.0% 2.4% 4.4 Years 474,894
 14.6% 3.9% 4.6 Years
Total consolidated debt $2,763,022
 100.0% 3.5% 4.5 Years $3,251,903
 100.0% 3.9% 5.1 Years
              
(1) 
Represents stated interest rate and does not include the effect of the amortization of deferred financing costs, debt premiums and discounts, OIDs, and interest rate swap terminations.
     

Funds From Operations (“FFO”)


The National Association of Real Estate Investment Trusts (“NAREIT”) currently defines FFO as net income or loss attributable to common shares computed in accordance with generally accepted accounting principles (“GAAP”), excluding gains or losses from depreciable operating property sales, impairment charges and real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  We present FFO because we consider it an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results.  FFO excludes 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.  We therefore believe that FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, and interest costs, among other items, 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 1995December 2018 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.
 
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 the elimination of property acquisitiontransaction costs, contractual executive separation and retirement charges and other non-cash items, as we determine in good faith. 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.  Therefore, unlike the ownership of our wholly-ownedowned 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, we believe it is meaningful to modify FFO to exclude the operations of our on-campus participating properties and to consider their impact on our 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 performance of the properties.  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 third-party 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 contractual calculation of net cash flow from our on-campus participating properties, which is unique to us and is different from that of our owned off-campus properties.  Companies that are considered to be in our industry may not have similar ownership structures; and therefore those companies may not calculate 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 FFOM only supplementally.  Further, FFO and FFOM do 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 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 following table presents a reconciliation of our net income attributable to common stockholders to FFO and FFOM:
 Three Months Ended 
 September 30,
 Nine Months Ended 
 September 30,
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 2017 2016 2017 2016 2019 2018 2019 2018
Net (loss) income attributable to ACC, Inc. and
Subsidiaries common stockholders
 $(1,312) $9,644
 $29,976
 $73,669
Net income attributable to ACC, Inc. and
Subsidiaries common stockholders
 $10,386
 $46,009
 $40,026
 $71,936
Noncontrolling interests(1) 85
 201
 593
 1,150
 54
 453
 214
 775
Loss (gain) from disposition of real estate 
 
 632
 (17,409) 282
 (42,314) 282
 (42,314)
Elimination of provision for real estate impairment (1)
 
 
 15,317
 
 
 
 3,201
 
Real estate related depreciation and amortization(2) 60,202
 51,301
 166,931
 157,232
 65,458
 61,571
 130,834
 125,149
Funds from operations (“FFO”) attributable to
common stockholders and OP unitholders
 58,975
 61,146
 213,449
 214,642
 76,180
 65,719
 174,557
 155,546
                
Elimination of operations of on-campus participating properties:  
  
  
  
  
  
  
  
Net loss (income) from on-campus participating properties 479
 365
 (1,373) (1,702) 1,130
 1,218
 (2,562) (2,151)
Amortization of investment in on-campus participating properties (1,892) (1,839) (5,621) (5,493) (2,016) (1,952) (4,045) (3,894)
 57,562
 59,672
 206,455
 207,447
 75,294
 64,985
 167,950
 149,501
Modifications to reflect operational performance of on-campus participating properties:  
  
  
  
  
  
  
  
Our share of net cash flow (2)(3)
 452
 351
 1,987
 2,216
 828
 793
 1,710
 1,588
Management fees 306
 304
 1,046
 1,027
Management fees and other 408
 279
 1,228
 756
Contribution from on-campus participating properties 758
 655
 3,033
 3,243
 1,236
 1,072
 2,938
 2,344
Property acquisition costs (3)
 2,855
 114
 2,855
 114
Contractual executive separation and retirement charges (4)
 
 
 4,515
 
        
Transaction costs (4)
 
 7,818
 
 7,818
Elimination of loss from early extinguishment of debt (5)
 
 784
 
 784
Elimination of gain from litigation settlement (6)
 
 (2,648) 
 (2,648)
Elimination of FFO from property in receivership (7)
 839
 606
 1,808
 1,195
Funds from operations – modified (“FFOM”) attributable to
common stockholders and OP unitholders
 $61,175
 $60,441
 $216,858
 $210,804
 $77,369
 $72,617
 $172,696
 $158,994
                
FFO per share – diluted $0.43
 $0.46
 $1.56
 $1.65
 $0.55
 $0.47
 $1.26
 $1.12
FFOM per share – diluted $0.44
 $0.45
 $1.59
 $1.62
 $0.56
 $0.52
 $1.24
 $1.15
Weighted-average common shares outstanding – diluted 138,328,932
 132,877,380
 136,686,611
 130,407,761
 138,873,418
 138,592,562
 138,842,644
 138,561,640

(1)
Represents an impairment charge recorded for a wholly-owned property currently in receivership that isThe difference from the amount presented in the processcompany’s consolidated statements of being transferred to the lender in settlementcomprehensive income represents consolidated joint venture partners’ share of the property’s $27.4 million mortgage loan that matured in August 2017.net income.
(2)
The difference from the amount presented in the company’s consolidated statements of comprehensive income represents corporate depreciation and consolidated joint venture partners’ share of depreciation. Corporate depreciation and the joint venture partners' share of depreciation for the three months ended June 30, 2019 was $1.2 million and $2.2 million, respectively. Corporate depreciation and the joint venture partners' share of depreciation for the six months ended June 30, 2019 was $2.4 million and $4.3 million, respectively.
(3)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,expenditures which is included in ground/facility leases expense in the consolidated statements of comprehensive income.income (refer to page S-3).
(3)
(4)
The three and nine months ended September 30, 2017 amounts representRepresents transaction costs relatedincurred in connection with the closing of a real estate joint venture transaction in May 2018, whereby a 45% noncontrolling interest in seven properties was sold to our initial investment in twoa joint ventures. Refer to Notes 3 and 9 in the accompanying Notes to Consolidated Financial Statements contained in Item 1 for a more detailed discussion.venture partner.
(4)
(5)
Represents contractual executive separation and retirement charges incurredlosses associated with the early extinguishment of mortgage loans due to real estate disposition transactions, including the sale of partial ownership interests in the first and second quarter 2017properties. Such costs are excluded from gains from disposition of real estate reported in accordance with regardGAAP.
(6)Represents a gain related to cash proceeds received from a litigation settlement.
(7)Represents FFO for an owned property that was transferred to the retirementlender in July 2019 in settlement of the Company’s former Chief Financial Officer.property's $27.4 million mortgage loan.


Inflation

Our student 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 facilities 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, 2016.2018.
 
Item 4.  Controls and Procedures
 
American Campus Communities, Inc.
 
(a)Evaluation of Disclosure Controls and Procedures


As required by SEC Rule 13a-15(b), we have carried out an evaluation, under the supervision of 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 period 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.
 
(b)
Changes in Internal Control Over Financial Reporting


There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
American Campus Communities Operating Partnership L.P.LP
 
(a)Evaluation of Disclosure Controls and Procedures


As required by SEC Rule 13a-15(b), we have carried out an evaluation, under the supervision of 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 period 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.
 
(b)Changes in Internal Control Over Financial Reporting


There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II OTHER INFORMATION
 
Item 1.              Legal Proceedings
 
We are subject to various claims, lawsuits and legal proceedings that arise in the ordinary course of business.  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 our consolidated financial position or our results of operations.
 
Item 1A.           Risk Factors
 
There have been no material changes to the risk factors that were discussed in Part 1, Item 1A of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016.2018.
 
Item 2.              Unregistered Sales of Equity Securities and Use of Proceeds
 
None.
 
Item 3.              Defaults Upon Senior Securities
 
None.
 
Item 4.              Mine Safety Disclosures
 
Not applicable.
 
Item 5.              Other Information
 
None.




Item 6.              Exhibits
 
Exhibit Number Description of Document
Amendment to Bylaws of American Campus Communities, Inc. Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) and American Campus Communities Operating Partnership LP (File No. 333-181102-01) filed on April 21, 2017
   
 American Campus Communities, Inc. - Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
 American Campus Communities, Inc. - Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
 American Campus Communities Operating Partnership L.P.LP - Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
 American Campus Communities Operating Partnership L.P.LP - Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
 American Campus Communities, Inc. - 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.
   
 American Campus Communities, Inc. - 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.
   
 American Campus Communities Operating Partnership L.P.LP - 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.
   
 American Campus Communities Operating Partnership L.P.LP - 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.
   
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document


 





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.
 
Dated:November 3, 2017August 2, 2019
AMERICAN CAMPUS COMMUNITIES, INC.
  
By:/s/ Daniel B. Perry
  
 
Daniel B. Perry

Executive Vice President,

Chief Financial Officer,
Treasurer and Secretary
  
By:/s/ Kim K. Voss
  
 Kim K. Voss

Executive Vice President,

Chief Accounting Officer,

and Assistant Secretary
 
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.
 
Dated:November 3, 2017August 2, 2019
AMERICAN CAMPUS COMMUNITIES
OPERATING PARTNERSHIP L.P.LP
By:
American Campus Communities Holdings,
   LLC, its general partner
 By:American Campus Communities, Inc.,

its sole member
   
 By:/s/ Daniel B. Perry
   
  Daniel B. Perry

Executive Vice President,

Chief Financial Officer,

Treasurer and Secretary
   
 By:/s/ Kim K. Voss
   
  
Kim K. Voss

Executive Vice President,

Chief Accounting Officer,
and Assistant Secretary
 




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