American Campus Communities 10Q 2020 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2020.

☐ 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 LP)

AMERICAN CAMPUS COMMUNITIES, INC.

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP

(Exact name of registrant as specified in its charter)



(American Campus Communities, Inc.)	Maryland		76-0753089
(American Campus Communities Operating Partnership LP)	Maryland		56-2473181
	(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)

(512) 732-1000

Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



American Campus Communities, Inc.	Yes	☒	No	☐



American Campus Communities Operating Partnership LP	Yes	☒	No	☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).



American Campus Communities, Inc.	Yes	☒	No	☐



American Campus Communities Operating Partnership LP	Yes	☒	No	☐

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 filer	☒	Accelerated Filer ☐



Non-accelerated filer	☐	Smaller reporting company	☐



	Emerging growth company	☐

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. ☐

American Campus Communities Operating Partnership LP



Large accelerated filer	☐	Accelerated Filer	☐



Non-accelerated filer	☒ (Do not check if a smaller reporting company)	Smaller reporting company	☐



	Emerging growth company	☐

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.	Yes	☐	No	☒



American Campus Communities Operating Partnership LP	Yes	☐	No	☒

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $.01 per share	ACC	New York Stock Exchange

There were 137,632,091 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 July 24, 2020.

EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended June 30, 2020 of American Campus Communities, Inc. and American Campus Communities Operating Partnership 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 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:

The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC. As of June 30, 2020, 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 June 30, 2020, ACC owned an approximate 99.6% 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 June 30, 2020

TABLE OF CONTENTS



		PAGE NO.

PART I.

Item 1.	Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries:

	Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019	1

	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2020 and 2019 (all unaudited)	2

	Consolidated Statements of Changes in Equity for the three months ended March 31, 2020 and 2019 and June 30, 2020 and 2019 (all unaudited)	3

	Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (all unaudited)	5

	Consolidated Financial Statements of American Campus Communities Operating Partnership LP and Subsidiaries:

	Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019	7

	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2020 and 2019 (all unaudited)	8

	Consolidated Statements of Changes in Capital for the three months ended March 31, 2020 and 2019 and June 30, 2020 and 2019 (all unaudited)	9

	Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (all unaudited)	11

	Notes to Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries and American Campus Communities Operating Partnership LP and Subsidiaries (unaudited)	13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	46

Item 4.	Controls and Procedures	46

PART II.

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 3.	Defaults Upon Senior Securities	48

Item 4.	Mine Safety Disclosures	48

Item 5.	Other Information	48

Item 6.	Exhibits	49

SIGNATURES		50

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



	June 30, 2020			December 31, 2019
	(Unaudited)
Assets

Investments in real estate:
Owned properties, net	$	6,659,939		$	6,694,715
On-campus participating properties, net	72,273			75,188
Investments in real estate, net	6,732,212			6,769,903

Cash and cash equivalents	31,011			54,650
Restricted cash	29,959			26,698
Student contracts receivable, net	9,194			13,470
Operating lease right of use assets	459,110			460,857
Other assets	253,024			234,176

Total assets	$	7,514,510		$	7,559,754

Liabilities and equity

Liabilities:
Secured mortgage, construction and bond debt, net	$	747,086		$	787,426
Unsecured notes, net	2,373,767			1,985,603
Unsecured term loans, net	199,297			199,121
Unsecured revolving credit facility	186,500			425,700
Accounts payable and accrued expenses	72,335			88,411
Operating lease liabilities	482,492			473,070
Other liabilities	161,091			157,368
Total liabilities	4,222,568			4,116,699

Commitments and contingencies (Note 12)

Redeemable noncontrolling interests	20,912			104,381

Equity:
American Campus Communities, Inc. and Subsidiaries stockholders’ equity:
Common stock, $0.01 par value, 800,000,000 shares authorized, 137,540,345 and 137,326,824 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	1,375			1,373
Additional paid in capital	4,469,251			4,458,456
Common stock held in rabbi trust, 91,746 and 77,928 shares at June 30, 2020 and December 31, 2019, respectively	(3,951		)	(3,486		)
Accumulated earnings and dividends	(1,207,645		)	(1,144,721		)
Accumulated other comprehensive loss	(26,465		)	(16,946		)
Total American Campus Communities, Inc. and Subsidiaries stockholders’ equity	3,232,565			3,294,676
Noncontrolling interests – partially owned properties	38,465			43,998
Total equity	3,271,030			3,338,674

Total liabilities and equity	$	7,514,510		$	7,559,754




Consolidated variable interest entities’ assets and debt included in the above balances:

Investments in real estate, net	$	591,263	$	788,393
Cash, cash equivalents and restricted cash	$	36,988	$	59,908
Other assets	$	14,818	$	18,387
Secured mortgage and construction debt, net	$	417,248	$	418,241
Accounts payable, accrued expenses and other liabilities	$	40,071	$	56,976

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands, except share and per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues:
Owned properties	$	177,186		$	203,156		$	409,277		$	427,575
On-campus participating properties	4,101			6,396			14,810			17,844
Third-party development services	1,290			3,607			3,345			6,778
Third-party management services	2,668			3,465			6,497			5,776
Resident services	302			747			1,022			1,529
Total revenues	185,547			217,371			434,951			459,502

Operating expenses (income):
Owned properties	85,749			90,763			178,223			182,932
On-campus participating properties	3,208			3,806			6,574			7,763
Third-party development and management services	4,977			4,513			11,184			8,699
General and administrative	9,767			8,115			19,925			15,430
Depreciation and amortization	66,441			68,815			132,610			137,570
Ground/facility leases	2,893			3,236			6,962			6,785
Loss (gain) from disposition of real estate	—			282			(48,525		)	282
Provision for impairment	—			—			—			3,201
Total operating expenses	173,035			179,530			306,953			362,662

Operating income	12,512			37,841			127,998			96,840

Nonoperating income (expenses):
Interest income	870			969			1,721			1,895
Interest expense	(27,168		)	(27,068		)	(54,951		)	(54,129		)
Amortization of deferred financing costs	(1,255		)	(1,218		)	(2,542		)	(2,350		)
Loss from early extinguishment of debt	—			—			(4,827		)	—
Total nonoperating expenses	(27,553		)	(27,317		)	(60,599		)	(54,584		)

(Loss) income before income taxes	(15,041		)	10,524			67,399			42,256
Income tax provision	(381		)	(314		)	(760		)	(678		)
Net (loss) income	(15,422		)	10,210			66,639			41,578
Net loss (income) attributable to noncontrolling interests	2,078			176			872			(1,552		)
Net (loss) income attributable to ACC, Inc. and Subsidiaries common stockholders	$	(13,344	)	$	10,386		$	67,511		$	40,026

Other comprehensive income (loss)
Change in fair value of interest rate swaps and other	282			(8,593		)	(9,519		)	(14,387		)
Comprehensive (loss) income	$	(13,062	)	$	1,793		$	57,992		$	25,639

Net (loss) income per share attributable to ACC, Inc. and Subsidiaries common shareholders
Basic and diluted	$	(0.10	)	$	0.07		$	0.48		$	0.28

Weighted-average common shares outstanding:
Basic	137,613,560			137,268,696			137,545,365			137,185,576
Diluted	137,613,560			138,243,388			138,652,106			138,198,134

See accompanying notes to consolidated financial statements.

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) Income			Noncontrolling Interests – Partially Owned Properties			Total
Equity, December 31, 2019	137,326,824		$	1,373	$	4,458,456		77,928	$	(3,486	)	$	(1,144,721	)	$	(16,946	)	$	43,998		$	3,338,674
Adjustments to reflect redeemable noncontrolling interests at fair value	—		—		9,490			—	—			—			—			—			9,490
Amortization of restricted stock awards	—		—		3,988			—	—			—			—			—			3,988
Vesting of restricted stock awards	199,695		2		(4,157		)	—	—			—			—			—			(4,155		)
Distributions to common and restricted stockholders and other ($0.47 per common share)	—		—		—			—	—			(65,242		)	—			—			(65,242		)
Distributions to noncontrolling interests - partially owned properties	—		—		—			—	—			—			—			(2,566		)	(2,566		)
Change in fair value of interest rate swaps and other	—		—		—			—	—			—			(9,801		)	—			(9,801		)
Deposits to deferred compensation plan, net of withdrawals	(3,488	)	—		129			3,488	(129		)	—			—			—			—
Net income	—		—		—			—	—			80,855			—			895			81,750
Equity, March 31, 2020	137,523,031		$	1,375	$	4,467,906		81,416	$	(3,615	)	$	(1,129,108	)	$	(26,747	)	$	42,327		$	3,352,138
Adjustments to reflect redeemable noncontrolling interests at fair value	—		—		(3,410		)	—	—			—			—			—			(3,410		)
Amortization of restricted stock awards and vesting of restricted stock units	27,644		—		4,439			—	—			—			—			—			4,439
Vesting of restricted stock awards	—		—		(20		)	—	—			—			—			—			(20		)
Distributions to common and restricted stockholders and other ($0.47 per common share)	—		—		—			—	—			(65,193		)	—			—			(65,193		)
Distributions to noncontrolling interests - partially owned properties	—		—		—			—	—			—			—			(1,816		)	(1,816		)
Change in fair value of interest rate swaps and other	—		—		—			—	—			—			282			—			282
Deposits to deferred compensation plan, net of withdrawals	(10,330	)	—		336			10,330	(336		)	—			—			—			—
Net loss	—		—		—			—	—			(13,344		)	—			(2,046		)	(15,390		)
Equity, June 30, 2020	137,540,345		$	1,375	$	4,469,251		91,746	$	(3,951	)	$	(1,207,645	)	$	(26,465	)	$	38,465		$	3,271,030

See accompanying notes to consolidated financial statements.

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) Income			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.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



	Six Months Ended June 30,
	2020			2019
Operating activities
Net income	$	66,639		$	41,578
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss from disposition of real estate	(48,525		)	282
Loss from early extinguishment of debt	4,827			—
Provision for impairment	—			3,201
Depreciation and amortization	132,610			137,570
Amortization of deferred financing costs and debt premiums/discounts	379			53
Share-based compensation	8,427			7,509
Income tax provision	760			678
Amortization of interest rate swap terminations and other	855			268
Termination of interest rate swaps	—			(13,159		)
Changes in operating assets and liabilities:
Student contracts receivable, net	4,236			(970		)
Other assets	(3,988		)	(4,723		)
Accounts payable and accrued expenses	(17,304		)	(22,416		)
Other liabilities	(5,781		)	(1,492		)
Net cash provided by operating activities	143,135			148,379

Investing activities
Proceeds from disposition of properties and land parcels	146,144			8,854
Capital expenditures for owned properties	(25,075		)	(24,427		)
Investments in owned properties under development	(156,757		)	(220,925		)
Capital expenditures for on-campus participating properties	(1,166		)	(767		)
Other investing activities	(14,635		)	(2,342		)
Net cash used in investing activities	(51,489		)	(239,607		)

Financing activities
Proceeds from unsecured notes	795,808			398,816
Pay-off of mortgage and construction loans	(34,219		)	—
Costs paid related to early extinguishment of debt	(4,156		)	—
Pay-off of unsecured notes	(400,000		)	—
Proceeds from revolving credit facility	1,456,700			390,200
Paydowns of revolving credit facility	(1,695,900		)	(591,900		)
Proceeds from construction loans	—			26,051
Scheduled principal payments on debt	(3,983		)	(4,017		)
Debt issuance costs	(9,614		)	(6,562		)
Increase in ownership of consolidated subsidiary	(77,200		)	—
Contribution by noncontrolling interests	—			704
Taxes paid on net-share settlements	(4,175		)	(3,975		)
Distributions paid to common and restricted stockholders	(130,435		)	(128,589		)
Distributions paid to noncontrolling interests	(4,850		)	(7,291		)
Net cash (used in) provided by financing activities	(112,024		)	73,437

Net change in cash, cash equivalents, and restricted cash	(20,378		)	(17,791		)
Cash, cash equivalents, and restricted cash at beginning of period	81,348			106,517
Cash, cash equivalents, and restricted cash at end of period	$	60,970		$	88,726

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents	$	31,011		$	51,541
Restricted cash	29,959			37,185
Total cash, cash equivalents, and restricted cash at end of period	$	60,970		$	88,726

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



	Six Months Ended June 30,
	2020			2019
Supplemental disclosure of non-cash investing and financing activities
Conversion of common and preferred operating partnership units to common stock	$	—		$	251
Accrued development costs and capital expenditures	$	32,880		$	39,646
Change in fair value of derivative instruments, net	$	(10,374	)	$	(1,496	)
Change in fair value of redeemable noncontrolling interest	$	6,080		$	(1,887	)
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	$	56,362		$	54,186

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)



	June 30, 2020			December 31, 2019
	(Unaudited)
Assets

Investments in real estate:
Owned properties, net	$	6,659,939		$	6,694,715
On-campus participating properties, net	72,273			75,188
Investments in real estate, net	6,732,212			6,769,903

Cash and cash equivalents	31,011			54,650
Restricted cash	29,959			26,698
Student contracts receivable, net	9,194			13,470
Operating lease right of use assets	459,110			460,857
Other assets	253,024			234,176

Total assets	$	7,514,510		$	7,559,754

Liabilities and capital

Liabilities:
Secured mortgage, construction and bond debt, net	$	747,086		$	787,426
Unsecured notes, net	2,373,767			1,985,603
Unsecured term loans, net	199,297			199,121
Unsecured revolving credit facility	186,500			425,700
Accounts payable and accrued expenses	72,335			88,411
Operating lease liabilities	482,492			473,070
Other liabilities	161,091			157,368
Total liabilities	4,222,568			4,116,699

Commitments and contingencies (Note 12)

Redeemable limited partners	20,912			104,381

Capital:
Partners’ capital:
General partner - 12,222 OP units outstanding at both June 30, 2020 and December 31, 2019	35			40
Limited partner - 137,619,869 and 137,392,530 OP units outstanding at June 30, 2020 and December 31, 2019, respectively	3,258,995			3,311,582
Accumulated other comprehensive loss	(26,465		)	(16,946		)
Total partners’ capital	3,232,565			3,294,676
Noncontrolling interests - partially owned properties	38,465			43,998
Total capital	3,271,030			3,338,674

Total liabilities and capital	$	7,514,510		$	7,559,754




Consolidated variable interest entities’ assets and debt included in the above balances:

Investments in real estate, net	$	591,263	$	788,393
Cash, cash equivalents and restricted cash	$	36,988	$	59,908
Other assets	$	14,818	$	18,387
Secured mortgage and construction debt, net	$	417,248	$	418,241
Accounts payable, accrued expenses and other liabilities	$	40,071	$	56,976

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands, except unit and per unit data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues:
Owned properties	$	177,186		$	203,156		$	409,277		$	427,575
On-campus participating properties	4,101			6,396			14,810			17,844
Third-party development services	1,290			3,607			3,345			6,778
Third-party management services	2,668			3,465			6,497			5,776
Resident services	302			747			1,022			1,529
Total revenues	185,547			217,371			434,951			459,502

Operating expenses (income):
Owned properties	85,749			90,763			178,223			182,932
On-campus participating properties	3,208			3,806			6,574			7,763
Third-party development and management services	4,977			4,513			11,184			8,699
General and administrative	9,767			8,115			19,925			15,430
Depreciation and amortization	66,441			68,815			132,610			137,570
Ground/facility leases	2,893			3,236			6,962			6,785
Loss (gain) from disposition of real estate	—			282			(48,525		)	282
Provision for impairment	—			—			—			3,201
Total operating expenses	173,035			179,530			306,953			362,662

Operating income	12,512			37,841			127,998			96,840

Nonoperating income (expenses):
Interest income	870			969			1,721			1,895
Interest expense	(27,168		)	(27,068		)	(54,951		)	(54,129		)
Amortization of deferred financing costs	(1,255		)	(1,218		)	(2,542		)	(2,350		)
Loss from early extinguishment of debt	—			—			(4,827		)	—
Total nonoperating expenses	(27,553		)	(27,317		)	(60,599		)	(54,584		)
(Loss) income before income taxes	(15,041		)	10,524			67,399			42,256
Income tax provision	(381		)	(314		)	(760		)	(678		)
Net (loss) income	(15,422		)	10,210			66,639			41,578
Net loss (income) attributable to noncontrolling interests – partially owned properties	2,046			230			1,130			(1,338		)
Net (loss) income attributable to American Campus Communities Operating Partnership LP	(13,376		)	10,440			67,769			40,240
Series A preferred units distributions	(14		)	(9		)	(28		)	(40		)
Net (loss) income attributable to common unitholders	$	(13,390	)	$	10,431		$	67,741		$	40,200

Other comprehensive income (loss)
Change in fair value of interest rate swaps and other	282			(8,593		)	(9,519		)	(14,387		)
Comprehensive (loss) income	$	(13,108	)	$	1,838		$	58,222		$	25,813

Net (loss) income per unit attributable to common unitholders
Basic and diluted	$	(0.10	)	$	0.07		$	0.48		$	0.28

Weighted-average common units outstanding
Basic	138,082,035			137,863,484			138,013,840			137,780,364
Diluted	138,082,035			138,838,176			139,120,581			138,792,922

See accompanying notes to consolidated financial statements.

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) Income			Properties			Total
Capital, December 31, 2019	12,222	$	40		137,392,530	$	3,311,582		$	(16,946	)	$	43,998		$	3,338,674
Adjustments to reflect redeemable limited partners’ interest at fair value	—	—			—	9,490			—			—			9,490
Amortization of restricted stock awards	—	—			—	3,988			—			—			3,988
Vesting of restricted stock awards	—	—			199,695	(4,155		)	—			—			(4,155		)
Distributions to common and restricted unit holders and other ($0.47 per common unit)	—	(6		)	—	(65,236		)	—			—			(65,242		)
Distributions to noncontrolling joint venture partners	—	—			—	—			—			(2,566		)	(2,566		)
Change in fair value of interest rate swaps and other	—	—			—	—			(9,801		)	—			(9,801		)
Net income	—	7			—	80,848			—			895			81,750
Capital, March 31, 2020	12,222	$	41		137,592,225	$	3,336,517		$	(26,747	)	$	42,327		$	3,352,138
Adjustments to reflect redeemable limited partners’ interest at fair value	—	—			—	(3,410		)	—			—			(3,410		)
Amortization of restricted stock awards and vesting of restricted stock units	—	—			27,644	4,439			—			—			4,439
Vesting of restricted stock awards	—	—			—	(20		)	—			—			(20		)
Distributions to common and restricted unit holders and other ($0.47 per common unit)	—	(5		)	—	(65,188		)	—			—			(65,193		)
Distributions to noncontrolling joint venture partners	—	—			—	—			—			(1,816		)	(1,816		)
Change in fair value of interest rate swaps and other	—	—			—	—			282			—			282
Net loss	—	(1		)	—	(13,343		)	—			(2,046		)	(15,390		)
Capital, June 30, 2020	12,222	$	35		137,619,869	$	3,258,995		$	(26,465	)	$	38,465		$	3,271,030

See accompanying notes to consolidated financial statements.

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) Income			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.

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



	Six Months Ended June 30,
	2020			2019
Operating activities
Net income	$	66,639		$	41,578
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss from disposition of real estate	(48,525		)	282
Loss from early extinguishment of debt	4,827			—
Provision for impairment	—			3,201
Depreciation and amortization	132,610			137,570
Amortization of deferred financing costs and debt premiums/discounts	379			53
Share-based compensation	8,427			7,509
Income tax provision	760			678
Amortization of interest rate swap terminations and other	855			268
Termination of interest rate swaps	—			(13,159		)
Changes in operating assets and liabilities:
Student contracts receivable, net	4,236			(970		)
Other assets	(3,988		)	(4,723		)
Accounts payable and accrued expenses	(17,304		)	(22,416		)
Other liabilities	(5,781		)	(1,492		)
Net cash provided by operating activities	143,135			148,379

Investing activities
Proceeds from disposition of properties and land parcels	146,144			8,854
Capital expenditures for owned properties	(25,075		)	(24,427		)
Investments in owned properties under development	(156,757		)	(220,925		)
Capital expenditures for on-campus participating properties	(1,166		)	(767		)
Other investing activities	(14,635		)	(2,342		)
Net cash used in investing activities	(51,489		)	(239,607		)

Financing activities
Proceeds from unsecured notes	795,808			398,816
Pay-off of mortgage and construction loans	(34,219		)	—
Costs paid related to early extinguishment of debt	(4,156		)	—
Pay-off of unsecured notes	(400,000		)	—
Proceeds from revolving credit facility	1,456,700			390,200
Paydowns of revolving credit facility	(1,695,900		)	(591,900		)
Proceeds from construction loans	—			26,051
Scheduled principal payments on debt	(3,983		)	(4,017		)
Debt issuance costs	(9,614		)	(6,562		)
Increase in ownership of consolidated subsidiary	(77,200		)	—
Contribution by noncontrolling interests	—			704
Taxes paid on net-share settlements	(4,175		)	(3,975		)
Distributions paid to common and preferred unitholders	(129,722		)	(128,151		)
Distributions paid on unvested restricted stock awards	(1,181		)	(1,031		)
Distributions paid to noncontrolling interests - partially owned properties	(4,382		)	(6,698		)
Net cash (used in) provided by financing activities	(112,024		)	73,437

Net change in cash, cash equivalents, and restricted cash	(20,378		)	(17,791		)
Cash, cash equivalents, and restricted cash at beginning of period	81,348			106,517
Cash, cash equivalents, and restricted cash at end of period	$	60,970		$	88,726

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents	$	31,011		$	51,541
Restricted cash	29,959			37,185
Total cash, cash equivalents, and restricted cash at end of period	$	60,970		$	88,726

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



	Six Months Ended June 30,
	2020			2019
Supplemental disclosure of non-cash investing and financing activities
Conversion of common and preferred operating partnership units to common stock	$	—		$	251
Accrued development costs and capital expenditures	$	32,880		$	39,646
Change in fair value of derivative instruments, net	$	(10,374	)	$	(1,496	)
Change in fair value of redeemable noncontrolling interest	$	6,080		$	(1,887	)
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	$	56,362		$	54,186

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP 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 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 June 30, 2020, 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 June 30, 2020, ACC owned an approximate 99.6% 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 June 30, 2020, the Company’s property portfolio contained 166 properties with approximately 111,900 beds. The Company’s property portfolio consisted of 126 owned off-campus student housing properties that are in close proximity to colleges and universities, 34 American Campus Equity (“ACE^®”) properties operated under ground/facility leases, and 6 on-campus participating properties operated under ground/facility leases with the related university systems. Of the 166 properties, 3 were under development as of June 30, 2020, and when completed will consist of a total of approximately 10,500 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 June 30, 2020, also through one of ACC’s TRSs, the Company provided third-party management and leasing services for 35 properties that represented approximately 26,100 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 June 30, 2020, the Company’s total owned and third-party managed portfolio included 201 properties with approximately 138,000 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.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP 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 March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In March 2020, the Securities and Exchange Commission (“SEC”) adopted final rules that amend the financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities in Rule 3-10 of Regulation S-X. Under the amended rules, parent companies can provide alternative disclosures in lieu of separate audited financial statements of subsidiary issuers and guarantors that meet certain circumstances. The rule is effective on January 4, 2021, but earlier compliance is permitted. The Company is in the process of evaluating the rule and its potential effect on the consolidated financial statements of both ACC and ACCOP.

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



Accounting Standards Update		Effective Date

ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes"		January 1, 2021

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” The standard requires entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, and to present the net amount of the financial instrument expected to be collected. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” which amends the transition requirements and scope of ASU 2016-13 and clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. The Company adopted ASU 2016-13 on January 1, 2020.

The Company notes that a majority of its financial instruments result from operating leasing transactions, which as mentioned above, are not within the scope of the new standard. However, the Company did perform both a quantitative and qualitative analysis on the financial assets that are covered under this guidance, including its loans receivable. Based on this analysis, which included analyzing historical performance, occupancy rates, projected future performance, and macroeconomic trends, the Company concluded this new standard did not have a material impact on the consolidated financial statements.

In addition, on January 1, 2020, the Company adopted the following accounting pronouncements which did not have a material effect on the Company’s consolidated financial statements:


•	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”

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


•	ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”

In April 2020, the FASB issued a Staff Question & Answer (“Q&A”) which was intended to reduce the challenges of evaluating the enforceable rights and obligations of leases for concessions granted to lessees in response to the novel coronavirus disease (“COVID-19”), which was characterized on March 11, 2020 by the World Health Organization as a pandemic. Prior to this guidance, the Company was required to determine, on a lease by lease basis, if a lease concession should be accounted for as a lease modification, potentially resulting in any lease concessions granted being recorded as a reduction to revenue on a straight-line basis over the remaining terms of the leases. The Q&A allows both lessors and lessees to bypass this analysis and elect not to evaluate whether concessions provided in response to the COVID-19 pandemic are lease modifications. This relief is subject to certain conditions being met, including ensuring the total remaining lease payments are substantially the same or less as compared to the original lease payments prior to the concession being granted. The Company, as lessor, has elected to apply such relief and will therefore not evaluate if lease concessions that were granted in response to the COVID-19 pandemic meet the definition of a lease modification. Accordingly, the Company accounted for qualifying rent concessions as negative variable lease payments, which reduced revenue from such leases in the period the concessions were granted. The Company, as a lessee, has not received any concessions under its ground or other lease agreements resulting from the COVID-19 pandemic.

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 SEC. 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, 2019.

Restricted Cash

Restricted cash consists of funds 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 material for the periods presented.

Leasing Revenue

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 $176.9 million and $194.3 million for the three months ended June 30, 2020 and 2019, respectively, and $408.3 million and $416.0 million for the six months ended June 30, 2020 and 2019, respectively. During the three months ended June 30, 2020, through its Resident Hardship Program, the Company provided $8.6 million in rent abatements to its tenants experiencing financial hardship due to COVID-19 and an additional $15.1 million in rent abatements through its University Partnerships. As discussed above, these abatements were recorded as a reduction to Owned Properties Revenue. Also during the three months ended June 30, 2020, an additional $1.5 million in rent abatements were granted to tenants at the Company’s on-campus participating properties, which are reflected as a reduction to On-campus Participating Properties Revenue. The Company also waived all late fees and online payment fees and suspended financial related evictions. Lease income under commercial leases totaled $2.9 million and $3.2 million for the three months ended June 30, 2020 and 2019, respectively, and $6.1 million and $6.6 million for the six months ended June 30, 2020 and 2019, respectively.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidated VIEs

The Company has investments in various entities that qualify as VIEs for accounting purposes and for which the Company is the primary beneficiary and therefore includes the entities in its consolidated financial statements. These VIEs include the Operating Partnership, 5 joint ventures that own a total of 10 operating properties and a land parcel, and 6 properties owned under the on-campus participating property structure. The VIE assets and liabilities consolidated within the Company's assets and liabilities are disclosed at the bottom of the accompanying consolidated balance sheets.

Impairment of Long-Lived Assets

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. As of June 30, 2020, the Company has continued to assess whether the global economic disruption caused by the novel coronavirus disease (“COVID-19”), which was characterized on March 11, 2020 by the World Health Organization as a pandemic, was an impairment indicator. The Company examined a number of factors including the overall market and economic environment, economic and operating conditions of the Company’s properties, as well as the demand, creditworthiness, and performance from the properties’ tenants, and concluded that there were no impairments of the carrying values of the Company’s investments in real estate as of June 30, 2020.

3. Earnings Per Share

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 six months ended June 30, 2020 and 2019, 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,
	2020	2019	2020	2019
Common OP Units (Note 8)	468,475	594,788	468,475	594,788
Preferred OP Units (Note 8)	35,242	35,242	35,242	49,722
Unvested restricted stock awards (Note 9)	1,103,137	—	—	—
Total potentially dilutive securities	1,606,854	630,030	503,717	644,510

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP 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 June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Numerator – basic and diluted earnings per share:
Net (loss) income	$	(15,422	)	$	10,210		$	66,639		$	41,578
Net loss (income) attributable to noncontrolling interests	2,078			176			872			(1,552		)
Net (loss) income attributable to ACC, Inc. and Subsidiaries common stockholders	(13,344		)	10,386			67,511			40,026
Amount allocated to participating securities	(519		)	(458		)	(1,181		)	(1,031		)
Net (loss) income attributable to ACC, Inc. and Subsidiaries common stockholders	$	(13,863	)	$	9,928		$	66,330		$	38,995

Denominator:
Basic weighted average common shares outstanding	137,613,560			137,268,696			137,545,365			137,185,576
Unvested restricted stock awards (Note 9)	—			974,692			1,106,741			1,012,558
Diluted weighted average common shares outstanding	137,613,560			138,243,388			138,652,106			138,198,134

Earnings per share:
Net (loss) income attributable to common stockholders - basic and diluted	$	(0.10	)	$	0.07		$	0.48		$	0.28

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.

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,
	2020			2019			2020			2019
Numerator – basic and diluted earnings per unit:
Net (loss) income	$	(15,422	)	$	10,210		$	66,639		$	41,578
Net loss (income) attributable to noncontrolling interests – partially owned properties	2,046			230			1,130			(1,338		)
Series A preferred unit distributions	(14		)	(9		)	(28		)	(40		)
Amount allocated to participating securities	(519		)	(458		)	(1,181		)	(1,031		)
Net (loss) income attributable to common unitholders	$	(13,909	)	$	9,973		$	66,560		$	39,169

Denominator:
Basic weighted average common units outstanding	138,082,035			137,863,484			138,013,840			137,780,364
Unvested restricted stock awards (Note 9)	—			974,692			1,106,741			1,012,558
Diluted weighted average common units outstanding	138,082,035			138,838,176			139,120,581			138,792,922



Earnings per unit:
Net (loss) income attributable to common unitholders - basic and diluted	$	(0.10	)	$	0.07	$	0.48	$	0.28

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

4. Property Dispositions

Property Dispositions

In March 2020, the Company sold The Varsity, an owned property located near University of Maryland in College Park, Maryland, containing 901 beds for $148.0 million, resulting in net cash proceeds of approximately $146.1 million. The net gain on this disposition totaled approximately $48.5 million.

In May 2019, the Company sold College Club Townhomes, an owned property located near Florida A&M University in Tallahassee, Florida, containing 544 beds for $9.5 million, resulting in net proceeds of approximately $8.9 million. The net loss on this disposition totaled approximately $0.3 million. Concurrent with the classification of this property as held for sale in 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 $3.2 million.

5. Investments in Real Estate

Owned Properties

Owned properties, both wholly-owned and those owned through investments in VIEs, consisted of the following:



	June 30, 2020			December 31, 2019
Land	$	643,401		$	654,985
Buildings and improvements	6,705,075			6,749,757
Furniture, fixtures and equipment	397,746			391,208
Construction in progress	456,192			341,554
	8,202,414			8,137,504
Less accumulated depreciation	(1,542,475		)	(1,442,789		)
Owned properties, net	$	6,659,939		$	6,694,715

Project costs directly associated with the development and construction of an owned real estate project, which include interest, property taxes, and amortization of deferred financing 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 million and $3.7 million was capitalized during the three months ended June 30, 2020 and 2019, respectively, and interest totaling approximately $6.6 million and $6.4 million was capitalized during the six months ended six months ended June 30, 2020 and 2019, respectively.

On-Campus Participating Properties

Our on-campus participating properties segment includes 6 on-campus properties that are operated under long-term ground/facility leases with 3 university systems. Under our ground/facility leases, we receive an annual distribution representing 50% of these properties’ net cash flows, as defined in the ground/facility lease agreements. We also manage these properties under long-term management agreements and are paid management fees equal to a percentage of defined gross receipts.

On-campus participating properties consisted of the following:



	June 30, 2020			December 31, 2019
Buildings and improvements	$	156,568		$	155,941
Furniture, fixtures and equipment	14,098			13,552
Construction in progress	—			6
	170,666			169,499
Less accumulated depreciation	(98,393		)	(94,311		)
On-campus participating properties, net	$	72,273		$	75,188

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

6. Debt

A summary of the Company’s outstanding consolidated indebtedness, including unamortized debt premiums and discounts, is as follows:



	June 30, 2020			December 31, 2019
Debt secured by owned properties:
Mortgage loans payable:
Unpaid principal balance	$	656,453		$	693,584
Unamortized deferred financing costs	(1,069		)	(1,294		)
Unamortized debt premiums	4,161			6,596
Unamortized debt discounts	(175		)	(199		)
	659,370			698,687
Debt secured by on-campus participating properties:
Mortgage loans payable⁽¹⁾	64,872			65,942
Bonds payable ⁽¹⁾	23,215			23,215
Unamortized deferred financing costs	(371		)	(418		)
	87,716			88,739
Total secured mortgage, construction and bond debt	747,086			787,426
Unsecured notes, net of unamortized OID and deferred financing costs ⁽²⁾	2,373,767			1,985,603
Unsecured term loans, net of unamortized deferred financing costs ⁽³⁾	199,297			199,121
Unsecured revolving credit facility	186,500			425,700
Total debt, net	$	3,506,650		$	3,397,850


⁽¹⁾	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.


⁽²⁾	Includes net unamortized original issue discount (“OID”) of $6.1 million and $2.3 million at June 30, 2020 and December 31, 2019, respectively, and net unamortized deferred financing costs of $20.1 million and $12.1 million at June 30, 2020 and December 31, 2019, respectively.


⁽³⁾	Includes net unamortized deferred financing costs of $0.7 million and $0.9 million at June 30, 2020 and December 31, 2019, respectively.

Mortgage Loans Payable

In February 2020, the Company paid off approximately $34.2 million of fixed rate mortgage debt secured by 1 owned property.

In January 2019, the Company refinanced $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 of 4.00%. Refer to Note 10 for information related to derivatives.

Unsecured Notes

In June 2020, the Operating Partnership closed a $400.0 million offering of senior unsecured notes under its existing shelf registration. These 10-year notes were issued at 99.142% of par value with a coupon of 3.875% and are fully and unconditionally guaranteed by the Company. Interest on the notes is payable semi-annually on January 30 and July 30, with the first payment due and payable on January 30, 2021. The notes will mature on January 30, 2031. Net proceeds from the sale of the senior unsecured notes totaled approximately $391.7 million, after deducting the underwriting discount and offering expenses which will be amortized over the term of the unsecured notes. The Company used the proceeds to repay borrowings under its revolving credit facility.

In January 2020, the Operating Partnership closed a $400 million offering of senior unsecured notes under its existing shelf registration. These 10-year notes were issued at 99.81% of par value with a coupon of 2.85% and are fully and unconditionally guaranteed by the Company. Interest on the notes is payable semi-annually on February 1 and August 1, with the first payment due and payable on August 1, 2020. The notes will mature on February 1, 2030. Net proceeds from the sale of the senior unsecured notes totaled approximately $394.5 million, after deducting the underwriting discount and offering expenses which will be amortized over the term of the unsecured notes. The Company used the proceeds to fund the early redemption of its $400 million 3.35%

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Senior Notes due October 2020. The prepayment resulted in a loss from early extinguishment of debt of approximately $4.8 million, which is included in the accompanying statements of comprehensive income.

The following senior unsecured notes issued by the Company are outstanding as of June 30, 2020:



Date Issued	Amount		% of Par Value	Coupon		Yield			Original Issue Discount		Term (Years)
April 2013	$	400,000	99.659	3.750	%	3.791	%		$	1,364	10
June 2014	400,000		99.861	4.125	%	4.269	%	⁽¹⁾	556		10
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
January 2020	400,000		99.810	2.850	%	2.872	%		760		10
June 2020	400,000		99.142	3.875	%	3.974	%		3,432		10
	$	2,400,000							$	7,648


⁽¹⁾	The yield includes the effect of the amortization of interest rate swap terminations (see Note 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 June 30, 2020, the Company was in compliance with all such covenants.

Unsecured Revolving Credit Facility

In February 2019, the Company exercised the option under the existing credit agreement to increase the capacity of the unsecured revolving credit facility from $700 million to $1.0 billion. It may be expanded by up to an additional $200 million upon the satisfaction of certain conditions. The maturity date of the revolving credit facility is 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 $1.0 billion revolving credit facility. As of June 30, 2020, the revolving credit facility bore interest at a weighted average annual rate of 1.38% (0.18% + 1.00% spread + 0.20% facility fee), and availability under the revolving credit facility totaled $813.5 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 June 30, 2020, the Company was in compliance with all such covenants.

Unsecured Term Loans

The Company is currently party to an Unsecured Term Loan Credit Agreement (the “Term Loan Facility”) totaling $200 million 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. In November and December 2019, the Company entered into two interest rate swap contracts to hedge the variable rate cash flows associated with the LIBOR-based interest payments on the Term Loan Facility. The weighted average annual rate on the Term Loan Facility was 2.54% (1.44% + 1.10% spread) at June 30, 2020. The terms of the Term Loan Facility include certain restrictions and covenants consistent with those of the unsecured revolving credit facility discussed above. As of June 30, 2020, the Company was in compliance with all such covenants.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

7. Stockholders’ Equity / Partners’ Capital

Stockholders’ Equity - Company

The Company has an 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. 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.

There was no activity under the Company’s ATM Equity Program during the six months ended June 30, 2020 and 2019. As of June 30, 2020, the Company had approximately $500.0 million available for issuance under its ATM Equity Program.

The Company has a Non-Qualified Deferred Compensation Plan (“Deferred Compensation Plan”) for the benefit of certain employees and members of the Company’s Board of Directors, in which vested share awards (see Note 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 six months ended June 30, 2020, 21,537 and 7,719 shares of vested stock were deposited into and withdrawn from the Deferred Compensation Plan, respectively. As of June 30, 2020, 91,746 shares of ACC’s common stock were held in the Deferred Compensation Plan.

8. Noncontrolling Interests

Interests in Consolidated Real Estate Joint Ventures

Noncontrolling interests - partially owned properties: As of June 30, 2020, the Operating Partnership consolidates 4 joint ventures that own and operate 10 owned off-campus 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): The noncontrolling interest holder in the Core Spaces / DRW Real Estate Investment joint ventures (the “Core Joint Ventures”), which were formed in 2017, had the option to redeem its noncontrolling interest in the entities through the exercise of put options. As the exercise of the options was outside of the Company’s control, the portion of net assets attributable to the third-party partner was classified as “redeemable noncontrolling interests” and “redeemable limited partners” in the mezzanine section of the December 31, 2019 consolidated balance sheets of ACC and the Operating Partnership, respectively. The redemption price was based on the fair value of the properties at the time of option exercise. These redeemable noncontrolling interests were marked to their redemption value at each balance sheet date. As the change in redemption value was based on fair value, there was no effect on the Company’s earnings per share. In January and February 2020, the noncontrolling interest holder exercised its option to redeem its remaining ownership interest in the Core Joint Ventures, which reduced the redeemable noncontrolling interest by $77.2 million. As of June 30, 2020, the Company had 100% ownership interest in all 5 properties initially held by the Core Joint Ventures.

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 OP Units 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 June 30, 2020 and December 31, 2019, approximately 0.4% 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 six months ended June 30, 2020, 0 Common or Preferred OP Units were converted into an equal number of shares of ACC’s common stock. During the

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

year ended December 31, 2019, 126,313 Common OP Units and 42,271 Preferred OP Units were converted into an equal number of shares of ACC’s common stock.

Below is a table summarizing the activity of redeemable noncontrolling interests (ACC) / redeemable limited partners (Operating Partnership) for the three months ended March 31, 2020 and 2019 and June 30, 2020 and 2019, which includes both the redeemable joint venture partners and OP Units discussed above:



Balance, December 31, 2019	$	104,381
Net income	311
Distributions	(234		)
Purchase of noncontrolling interests	(77,200		)
Adjustments to reflect redeemable noncontrolling interests at fair value	(9,490		)
Balance, March 31, 2020	$	17,768
Net loss	(32		)
Distributions	(234		)
Adjustments to reflect redeemable noncontrolling interests at fair value	3,410
Balance, June 30, 2020	$	20,912



Balance, December 31, 2018	$	184,446
Net income	259
Distributions	(305		)
Conversion of OP Units into shares of ACC common stock	(252		)
Adjustments to reflect redeemable noncontrolling interests at fair value	2,547
Balance, March 31, 2019	$	186,695
Net income	163
Distributions	(288		)
Adjustments to reflect redeemable noncontrolling interests at fair value	(660		)
Balance, June 30, 2019	$	185,910

9. Incentive Award Plan

The Company has an Incentive Award Plan (the “Plan”) that 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 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 Plan, subject to certain adjustments for changes in the Company’s capital structure, as defined in the Plan.

Restricted Stock Units (”RSUs”)

Upon reelection to the Board of Directors in June 2020, all members of the Company’s Board of Directors were granted RSUs in accordance with the Plan. These RSUs were valued at $170,000 for the Chairman of the Board of Directors and at $122,500 for all other members. 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 Plan. All awards vested and settled immediately on the date of grant, and the Company delivered shares of common stock, as determined by the Compensation Committee of the Board of Directors. A compensation charge of approximately $1.0 million was recorded during the three months ended June 30, 2020 related to these awards.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

A summary of RSUs as of June 30, 2020 and activity during the six months then ended is presented below:



	Number of RSUs
Outstanding at December 31, 2019	—
Granted	30,137
Settled in common shares	(27,644	)
Settled in cash	(2,493	)
Outstanding at June 30, 2020	—

Restricted Stock Awards

A summary of RSAs as of June 30, 2020 and activity during the six months then ended is presented below:



	Number of RSAs
Nonvested balance at December 31, 2019	967,341
Granted	443,998
Vested⁽¹⁾	(295,385	)
Forfeited	(15,220	)
Nonvested balance at June 30, 2020	1,100,734

⁽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. Amortization expense for the three months ended June 30, 2020 and 2019 was approximately $3.5 million and $2.9 million respectively, and $7.5 million and $6.7 million for the six months ended June 30, 2020 and 2019.

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 borrowings.

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. These agreements contain provisions such that if the Company defaults on any of its indebtedness, regardless of whether the repayment of the indebtedness has been accelerated by the lender or not, then the Company could also be declared in default on its derivative obligations. As of June 30, 2020, the Company was not in default on any of its indebtedness or derivative instruments.

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 June 30, 2020:



Hedged Debt Instrument	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	$	12,300	$	(163	)
Cullen Oaks mortgage loan	Feb 18, 2014	Feb 15, 2021	2.2750%	LIBOR - 1 month	12,426		(165		)
Park Point mortgage loan	Feb 1, 2019	Jan 16, 2024	2.7475%	LIBOR - 1 month	70,000		(6,454		)
College Park mortgage loan	Oct 16, 2019	Oct 16, 2022	1.2570%	LIBOR - 1 month, with 1 day lookback	37,500		(983		)
Unsecured term loan	Nov 4, 2019	Jun 27, 2022	1.4685%	LIBOR - 1 month	100,000		(2,695		)
Unsecured term loan	Dec 2, 2019	Jun 27, 2022	1.4203%	LIBOR - 1 month	100,000		(2,598		)
				Total	$	332,226	$	(13,058	)

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 June 30, 2020 and December 31, 2019:



	Asset Derivatives					Liability Derivatives
		Fair Value as of					Fair Value as of
Description	Balance Sheet Location	6/30/2020		12/31/2019		Balance Sheet Location	6/30/2020		12/31/2019

Interest rate swap contracts	Other assets	$	—	$	743	Other liabilities	$	13,058	$	3,436
Total derivatives designated as hedging instruments		$	—	$	743		$	13,058	$	3,436

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, 2020 and 2019.



	Three Months Ended June 30,						Six Months Ended June 30,
Description	2020			2019			2020			2019
Change in fair value of derivatives and other recognized in Other Comprehensive Income ("OCI")	$	(1,187	)	$	4,368		$	(11,507	)	$	(1,537	)
Swap interest accruals reclassified to interest expense	1,042			32			1,133			41
Termination of interest rate swap payment recognized in OCI	—			(13,159		)	—			(13,159		)
Amortization of interest rate swap terminations ⁽¹⁾	427			166			855			268
Total change in OCI due to derivative financial instruments	$	282		$	(8,593	)	$	(9,519	)	$	(14,387	)

Interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	27,168		$	27,068		$	54,951		$	54,129


⁽¹⁾	Represents amortization from OCI into interest expense.

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, 2019.

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 June 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. 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. Refer to Note 8 for a discussion of the Level 3 activity during the period related to the redeemable noncontrolling interests in partially owned properties.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



	Fair Value Measurements as of
	June 30, 2020								December 31, 2019
		Level 2			Level 3		Total		Level 2			Level 3			Total
Assets:
Derivative financial instruments		$	—		$	—	$	—	$	743	⁽¹⁾	$	—		$	743
Liabilities:
Derivative financial instruments		$	13,058	⁽¹⁾	$	—	$	13,058	$	3,436	⁽¹⁾	—			$	3,436
Mezzanine:
Redeemable noncontrolling interests (Company)/Redeemable limited partners (Operating Partnership)		$	17,912	⁽²⁾	$	3,000	$	20,912	$	23,690	⁽²⁾	$	80,691	⁽³⁾	$	104,381


⁽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 reported at the greater of the fair value of the Company’s common stock or historical cost 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, 2020 and December 31, 2019, the carrying values for the following instruments represent fair values due to the short maturity of the instruments: Cash and Cash Equivalents, Restricted Cash, Student Contracts Receivable, certain items in Other Assets (including receivables, deposits, and prepaid expenses), Accounts Payable, Accrued Expenses, and Other Liabilities.

As of June 30, 2020 and December 31, 2019, the carrying values for the following instruments represent fair values due the variable interest rate feature of the instruments: Unsecured Revolving Credit Facility and Mortgage Loan Payable (variable rate).

The table below contains the estimated fair value and related carrying amounts for the Company’s other financial instruments as of June 30, 2020 and December 31, 2019. There were no Level 1 measurements for the periods presented.



	June 30, 2020									December 31, 2019
				Estimated Fair Value									Estimated Fair Value
	Carrying Amount			Level 2			Level 3			Carrying Amount			Level 2			Level 3
Assets
Loans receivable	$	51,984		$	—		$	48,307	⁽¹⁾	$	50,553		$	—		$	48,307	⁽¹⁾
Liabilities ⁽²⁾
Unsecured notes	$	2,373,767		$	2,431,498	⁽³⁾	$	—		$	1,985,603		$	2,069,817	⁽³⁾	$	—
Mortgage loans payable (fixed rate)	$	721,407	⁽⁴⁾	$	770,468	⁽⁵⁾	$	—		$	761,296	⁽⁴⁾	$	766,821	⁽⁵⁾	$	—
Bonds payable	$	23,033		$	25,375	⁽⁶⁾	$	—		$	23,001		$	25,110	⁽⁶⁾	$	—
Unsecured term loan (fixed rate)	$	199,297		$	204,446	⁽⁷⁾	$	—		$	199,121		$	198,687	⁽⁷⁾	$	—


⁽¹⁾	Valued 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, net unamortized deferred financing costs, and net unamortized debt premiums and discounts (see Note 6).


⁽³⁾	Valued using interest rate and spread assumptions that reflect current creditworthiness and market conditions available for the issuance of unsecured notes with similar terms and remaining maturities.


⁽⁴⁾	Does not include 1 variable rate mortgage loan with a principal balance of $2.6 million as of June 30, 2020 and $3.1 million as of December 31, 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⁾	Valued using quoted prices in markets that are not active due to the unique characteristics of these financial instruments.


⁽⁷⁾	In 2019, the Company entered into 2 interest rate swap contracts to hedge the variable rate cash flows associated with the LIBOR-based interest payments on the Term Loan Facility (see Note 6). Valued using the present value of the cash flows at interpolated 1-month LIBOR swap rates through maturity that primarily fall within the Level 2 category.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. Commitments and Contingencies

Commitments

Construction Contracts: As of June 30, 2020, the Company estimates additional costs to complete 3 owned development projects under construction to be approximately $278.9 million.

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 in 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 $8.8 million as of June 30, 2020.

As of June 30, 2020, management does not anticipate any material deviations from schedule or budget related to third-party development projects currently in progress. Although the company currently anticipates completing these projects on time and within budget, the project locations were subject to and could be subject to restrictions on physical movement imposed by governmental entities in response to the COVID-19 pandemic. Some of these orders may adversely affect the timely completion and final project costs of some or all of our projects under development if, for example, we are required to temporarily cease construction entirely, experience delays in obtaining governmental permits and authorizations, or experience disruption in the supply of materials or labor; however, the Company anticipates that deviations from schedule or budget related due to the effects of the COVID-19 pandemic will qualify as force majeure events.

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 May 2020, the Company substantially completed construction on Phase I of the project within the targeted delivery timeline. 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 remaining 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 3 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.

Other Guarantees: 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

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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.

Pre-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, 2020, the Company has deferred approximately $13.0 million in pre-development costs related to third-party and owned development projects that have not yet commenced construction. Such costs are net of any contractual arrangements through which the Company could be reimbursed by another party. Such costs are included in other assets on the accompanying consolidated balance sheets.

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.

Litigation Settlement: Although the Company denied any wrongdoing in this matter and believes it has valid defenses to the claims asserted, in March 2020, the Company entered into a memorandum of settlement to resolve an alleged collective action pursuant to which the Company agreed to pay an aggregate of $1.5 million to the plaintiffs, which memorandum is subject to court approval. During the quarter ended December 31, 2019, when the settlement became probable and reasonably estimable, the Company recorded litigation expense of $0.4 million based on legal counsel’s estimate of the settlement amount which was not yet determined. During the first quarter 2020, the Company recorded an additional $1.1 million in litigation expense to reflect the amount owed under the memorandum of settlement, which is reflected in general and administrative expenses in the accompanying consolidated statements of operations.

13. Segments

The Company defines business segments by their distinct customer base and service provided. The Company has identified 4 reportable segments: Owned Properties, On-Campus Participating Properties, Development Services, and Property Management Services. Management evaluates each segment’s performance based on operating income before depreciation, amortization and minority interests.

During the year ended December 31, 2019, the Company updated the presentation of certain items in the reconciliations section in the segment disclosures by including additional detail in the reconciliation of segment income before depreciation and amortization to consolidated net income. These updates were also made in the tables below.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Owned Properties
Rental revenues and other income	$	177,488		$	203,903		$	410,299		$	429,104
Interest income	115			119			232			238
Total revenues from external customers	177,603			204,022			410,531			429,342
Operating expenses before depreciation, amortization, and ground/facility lease expense	(85,749		)	(90,763		)	(178,223		)	(182,932		)
Ground/facility lease expense	(2,639		)	(2,408		)	(5,848		)	(5,075		)
Interest expense, net ⁽¹⁾	(3,057		)	(4,014		)	(6,103		)	(8,777		)
Operating income before depreciation and amortization	$	86,158		$	106,837		$	220,357		$	232,558
Depreciation and amortization	$	63,511		$	65,628		$	126,754		$	131,132
Capital expenditures	$	85,621		$	129,833		$	181,832		$	245,352

On-Campus Participating Properties
Rental revenues and other income	$	4,101		$	6,396		$	14,810		$	17,844
Interest income	7			70			26			111
Total revenues from external customers	4,108			6,466			14,836			17,955
Operating expenses before depreciation, amortization, and ground/facility lease expense	(3,208		)	(3,806		)	(6,574		)	(7,763		)
Ground/facility lease expense	(254		)	(828		)	(1,114		)	(1,710		)
Interest expense, net ⁽¹⁾	(1,173		)	(1,311		)	(2,315		)	(2,614		)
Operating (loss) income before depreciation and amortization	$	(527	)	$	521		$	4,833		$	5,868
Depreciation and amortization	$	2,045		$	2,016		$	4,082		$	4,045
Capital expenditures	$	601		$	537		$	1,166		$	767

Development Services
Development and construction management fees	$	1,290		$	3,607		$	3,345		$	6,778
Operating expenses	(2,080		)	(1,985		)	(4,605		)	(4,285		)
Operating (loss) income before depreciation and amortization	$	(790	)	$	1,622		$	(1,260	)	$	2,493

Property Management Services
Property management fees from external customers	$	2,668		$	3,465		$	6,497		$	5,776
Operating expenses	(2,897		)	(2,528		)	(6,579		)	(4,414		)
Operating (loss) income before depreciation and amortization	$	(229	)	$	937		$	(82	)	$	1,362

Reconciliations
Total segment revenues and other income	$	185,669		$	217,560		$	435,209		$	459,851
Unallocated interest income earned on investments and corporate cash	748			780			1,463			1,546
Total consolidated revenues, including interest income	$	186,417		$	218,340		$	436,672		$	461,397

Segment income before depreciation and amortization	$	84,612		$	109,917		$	223,848		$	242,281
Segment depreciation and amortization	(65,556		)	(67,644		)	(130,836		)	(135,177		)
Corporate depreciation	(885		)	(1,171		)	(1,774		)	(2,393		)
Net unallocated expenses relating to corporate interest and overhead	(31,957		)	(29,078		)	(64,995		)	(56,622		)
(Loss) gain from disposition of real estate	—			(282		)	48,525			(282		)
Amortization of deferred financing costs	(1,255		)	(1,218		)	(2,542		)	(2,350		)
Provision for impairment	—			—			—			(3,201		)
Loss from early extinguishment of debt	—			—			(4,827		)	—
Income tax provision	(381		)	(314		)	(760		)	(678		)
Net (loss) income	$	(15,422	)	$	10,210		$	66,639		$	41,578


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

14. Subsequent Events

Distributions: On July 29, 2020, the Board of Directors of the Company declared a distribution per share of $0.47, which will be paid on August 21, 2020 to all common stockholders of record as of August 10, 2020. At the same time, the Operating Partnership

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 8).

COVID-19 Pandemic: COVID-19, which was characterized on March 11, 2020 by the World Health Organization as a pandemic, has currently resulted in a widespread health crisis, which has adversely affected international, national and local economies and financial markets generally, and continues to have an unprecedented effect on many businesses, including the student housing industry. Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, the Company is not able to estimate the resulting effects on its results of operations, cash flows, financial condition, or liquidity for the year ending December 31, 2020, or for future years. The Company will continue to closely monitor the magnitude and duration of the economic disruption associated with the COVID-19 pandemic, especially as it relates to whether future evolving facts and circumstances indicate if an impairment indicator has occurred with respect to the Company’s investments in real estate.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. We caution investors that any forward-looking statements presented in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions, 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; risks related to the novel coronavirus disease (“COVID-19”) pandemic as outlined in Part II, Item 1A of this report and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and the other factors discussed in the “Risk Factors” contained in Item 1A of our Form 10-K for the year ended December 31, 2019.

COVID-19, which was characterized on March 11, 2020 by the World Health Organization as a pandemic, has currently resulted in a widespread health crisis, which has adversely affected international, national and local economies and financial markets generally, and continues to have an unprecedented effect on many businesses, including the student housing industry. The discussions below, including without limitation statements with respect to outlooks of future operating performance and liquidity, are subject to the future effects of the COVID-19 pandemic and the global responses to curb its spread, which continue to evolve daily. As such, the full magnitude of the pandemic and its ultimate effect on our results of operations, cash flows, financial condition, and liquidity for the year ending December 31, 2020, as well as for future years, is uncertain at this time.

Our Company and Our Business

Overview

We are the one of the largest owners, managers, and developers of high quality student housing properties in the United States. We are a fully integrated, self-managed, and self-administered equity REIT with expertise in the acquisition, design, financing, development, construction management, leasing, and management of student housing properties. Refer to Note 1 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1 for additional information regarding our business objectives and investment strategies. Refer to Note 13 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1 for information about our operating segments.

Property Portfolio

We believe that the ownership and operation of student housing communities in close proximity to selected colleges and universities presents an attractive long-term investment opportunity for our investors. We intend to continue to execute our strategy of identifying existing differentiated, typically highly amenitized, student housing communities or development opportunities in close proximity to university campuses with high barriers to entry which are projected to experience substantial increases in enrollment and/or are under-serviced in terms of existing on and/or off-campus student housing.

Below is a summary of our property portfolio as of June 30, 2020:



Property portfolio:	Properties	Beds
Owned operating properties:
Off-campus properties	126	70,221
On-campus ACE ^{(1) (2)}	31	25,909
Subtotal – operating properties	157	96,130

Owned properties under development:
On-campus ACE^{(2) (3)}	3	10,518
Subtotal – properties under development	3	10,518

Total owned properties	160	106,648

On-campus participating properties	6	5,230

Total owned property portfolio	166	111,878

Managed properties	35	26,073
Total property portfolio	201	137,951


⁽¹⁾	Includes two 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 that consists of ten phases to be delivered from 2020 - 2023, one of which was delivered in May 2020.


⁽³⁾	The Walt Disney World^®Resort project will be delivered in multiple phases from 2020 to 2023; as such, only the beds for remaining phases to be completed are included in the beds for owned properties under development. Beds for any completed phases of this project are included in owned operating properties beds.

Leasing Results

Our financial results for the year ended December 31, 2020 are impacted by the results of our annual leasing process for the 2019/2020 and 2020/2021 academic years. As of September 30, 2019, the beginning of the 2019/2020 academic year, occupancy at our 2020 same store properties was 97.4% with a rental rate increase of 1.4% compared to the prior academic year, and occupancy at our total owned property portfolio (including 2019 development deliveries) was also 97.4%.

As previously discussed, the COVID-19 pandemic has had an unprecedented effect on the student housing industry. In response, the Company has adapted its marketing strategies to conduct various leasing activities for the upcoming 2020/2021 academic year through virtual channels. The ultimate impact of the pandemic on the annual leasing results for the 2020/2021 academic year is unknown at this time, including any diminishment associated with students who elect to not take possession of their units, as well as relet requests.

Development

Recently Completed Owned Development Projects:

In the second quarter of 2020, the final stages of construction were completed on one phase of an on-campus ACE property which is summarized in the table below:

Project

Location

Primary University /

Market Served

Project Type

Beds

Total Project Cost

Construction Completion

Disney College Program Phase I ⁽¹⁾

Orlando, FL

Walt Disney World^® Resort

ACE

778

61,600

May 2020

⁽¹⁾

The first phase of the Disney College Program development was delivered in May 2020, and the remaining phases are anticipated to be delivered from 2020-2023. Due to Walt Disney World^® Resort being closed when construction was completed and the COVID-19 related temporary suspension of the Disney College Program, the phase was not occupied as originally scheduled. Initial occupancy of the phase is expected to occur upon reinstatement of the program.

Owned Development Projects Under Construction:

At June 30, 2020, we were in the process of constructing three on-campus ACE properties, including one property at Walt Disney World^® Resort housing college students participating in the Disney student internship program (the “Disney College Program”),

which will be delivered in multiple phases from 2020 to 2023. These properties are summarized in the table below:



Project	Location	Primary University / Market Served	Project Type	Beds	Estimated Project Cost		Total Costs Incurred		Scheduled Occupancy

Disney College Program Phase II ⁽¹⁾	Orlando, FL	Walt Disney World^® Resort	ACE	849	$	46,900	$	43,201	August 2020
Currie Hall Phase II⁽²⁾	Los Angeles, CA	Univ. of Southern California	ACE	272	42,000		38,487		August 2020
Manzanita Square⁽²⁾	San Francisco, CA	San Francisco State Univ.	ACE	584	129,200		119,331		August 2020
		SUBTOTAL - 2020 DELIVERIES		1,705	$	218,100	$	201,019

Disney College Program Phases III-V⁽¹⁾	Orlando, FL	Walt Disney World^® Resort	ACE	3,369	$	190,400	$	152,774	Jan, May & Aug 2021
		SUBTOTAL - 2021 DELIVERIES		3,369	$	190,400	$	152,774

Disney College Program Phases VI-VIII ⁽¹⁾	Orlando, FL	Walt Disney World^® Resort	ACE	3,235	$	193,000	$	63,465	Jan, May & Aug 2022
SUBTOTAL – 2022 DELIVERIES				3,235	$	193,000	$	63,465

Disney College Program Phases IX-X ⁽¹⁾	Orlando, FL	Walt Disney World^® Resort	ACE	2,209	$	122,700	$	28,088	Jan & May 2023
SUBTOTAL - 2023 DELIVERIES				2,209	$	122,700	$	28,088


⁽¹⁾	Initial occupancy of the project is expected to occur upon reinstatement of the Disney College Program. The remaining phases are expected to be completed as originally anticipated through 2023. At this time, the Company continues to expect to meet its original targeted stabilized development yield in 2023.


⁽²⁾	The completion of these development projects remains on schedule and within budget. Due to university policies related to COVID-19, the Company anticipates initial occupancy levels for these new developments to be below those initially anticipated, but at this time continues to expect to meet the targeted stabilized development yields for Academic Year 2021-2022.

Third-Party Development and Management Services

As of June 30, 2020, we were under contract on three third-party development projects that are currently under construction and whose fees total $14.2 million. As of June 30, 2020, fees of approximately $3.5 million remained to be earned by the Company with respect to these projects, which have scheduled completion dates in 2020 and 2021.

Although the completion of the third-party development projects currently under construction is anticipated to occur as originally scheduled, the timely completion of the projects is subject to events of force majeure, including the imposition of any COVID-19 related orders issued by state and/or local municipalities affecting construction sites. To the extent any of these events delay the construction of such projects, the timing of the recognition of third-party development revenue could be adversely impacted.

Critical Accounting Policies

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, 2019. Refer to Note 2 in the accompanying Notes to Consolidated Financial statements contained in Item 1 for information regarding recently adopted accounting standards.

Results of Operations

COVID 19, which was characterized on March 11, 2020 by the World Health Organization as a pandemic, affected our results of operations for the three months ended June 30, 2020, as more fully described below. However, for the reasons described previously, the Company is unable to predict the full magnitude of the pandemic and its effect on our results of operations for the remainder of the year ending December 31, 2020, or for future years. The most significant factors affecting the Company’s future results of operations include: (1) the ultimate outcome of the Company’s leasing efforts for the 2020/2021 academic year; (2) the level of lease terminations and rent refunds and/or abatements granted to student and commercial tenants; (3) economic hardship experienced by student and commercial tenants and its ultimate effect on rent collections and thus the provision for uncollectible accounts; (4) any reduction to revenues from our third-party development and management services segments due to canceled or delayed third-party development projects or reduced revenues at our third-party managed properties; (5) the impact of any stimulus payments that may be received by the Company, our tenants, and/or our University partners under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and any future similar governmental actions; and (6) any increase in, or reduction to, operating expenses as a result of the pandemic.

Comparison of the Three Months Ended June 30, 2020 and June 30, 2019

The following table presents our results of operations for the three months ended June 30, 2020 and 2019, including the amount and percentage change in these results between the two periods.



	Three Months Ended June 30,
	2020			2019			Change ($)			Change (%)
Revenues:
Owned properties	$	177,186		$	203,156		$	(25,970	)	(12.8	)%
On-campus participating properties	4,101			6,396			(2,295		)	(35.9	)%
Third-party development services	1,290			3,607			(2,317		)	(64.2	)%
Third-party management services	2,668			3,465			(797		)	(23.0	)%
Resident services	302			747			(445		)	(59.6	)%
Total revenues	185,547			217,371			(31,824		)	(14.6	)%

Operating expenses:
Owned properties	85,749			90,763			(5,014		)	(5.5	)%
On-campus participating properties	3,208			3,806			(598		)	(15.7	)%
Third-party development and management services	4,977			4,513			464			10.3	%
General and administrative	9,767			8,115			1,652			20.4	%
Depreciation and amortization	66,441			68,815			(2,374		)	(3.4	)%
Ground/facility leases	2,893			3,236			(343		)	(10.6	)%
Loss from disposition of real estate	—			282			(282		)	(100.0	)%
Total operating expenses	173,035			179,530			(6,495		)	(3.6	)%

Operating income	12,512			37,841			(25,329		)	(66.9	)%

Nonoperating income (expenses):
Interest income	870			969			(99		)	(10.2	)%
Interest expense	(27,168		)	(27,068		)	(100		)	0.4	%
Amortization of deferred financing costs	(1,255		)	(1,218		)	(37		)	3.0	%
Total nonoperating expenses	(27,553		)	(27,317		)	(236		)	0.9	%

(Loss) income before income taxes	(15,041		)	10,524			(25,565		)	(242.9	)%
Income tax provision	(381		)	(314		)	(67		)	21.3	%

Net (loss) income	(15,422		)	10,210			(25,632		)	(251.0	)%

Net loss attributable to noncontrolling interests	2,078			176			1,902			1,080.7	%
Net (loss) income attributable to ACC, Inc. and Subsidiaries common stockholders	$	(13,344	)	$	10,386		$	(23,730	)	(228.5	)%

Same Store and New Property Operations

We define our same store property portfolio as owned properties that were owned and operating for both of the full years ended December 31, 2020 and December 31, 2019, which are not conducting or planning to conduct substantial development, redevelopment, or repositioning activities, and are not classified as held for sale as of June 30, 2020. It also includes the full operating results of properties owned through joint ventures in which the company has a controlling financial interest and which are consolidated for financial reporting purposes.

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. 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/other property operations to our consolidated statements of comprehensive income is set forth below:



	Same Store Properties				New Properties				Sold Properties/Other⁽¹⁾					Total - All Properties
	Three Months Ended June 30,				Three Months Ended June 30,				Three Months Ended June 30,					Three Months Ended June 30,
	2020		2019		2020		2019		2020		2019			2020		2019
Number of properties	152		152		5		—		—		5		⁽²⁾	157		157
Number of beds	92,193		92,193		3,159		—		—		2,911			95,352		95,104

Revenues ⁽³⁾	$	169,366	$	197,400	$	8,122	$	222	$	—	$	6,281		$	177,488	$	203,903
Operating expenses	82,112		87,043		3,589		659		48		3,061			85,749		90,763


⁽¹⁾	Does not include the allocation of payroll and other administrative costs related to corporate management and oversight. Also includes recurring professional fees related to the operation of the ACC / Allianz Joint Venture.


⁽²⁾	Includes properties sold in 2019 and 2020 and one property transferred to the lender in July 2019 in settlement of its mortgage loan.


⁽³⁾	Includes revenues which are reflected as resident services revenue on the accompanying consolidated statements of comprehensive income.

Same Store Properties: The decrease in revenue from our same store properties was primarily due to the following impacts of COVID-19: (i) approximately $15.1 million in rent refunds and/or early lease terminations was provided to tenants at our on-campus ACE properties and certain off-campus residence halls; (ii) approximately $8.3 million in rent was forgiven as part of our Resident Hardship Program for residents and families who experienced financial hardship due to COVID-19; and (iii) approximately $7.2 million of the decrease as compared to the prior year was a result of lost summer camp and conference revenue, waived fees, an increase in the provision for uncollectible accounts and other items.

The decrease in operating expenses for our same store properties was primarily due to the following factors which resulted from COVID-19: (i) a decrease in general and administrative expenses due to significantly less travel as well as lower payments made to our university partners under Marketing & Licensing Agreements (ii) a decrease in utilities expense resulting from decreased occupancy at our same store properties, and (iii) a reduction in marketing expenses due to transitioning our marketing and leasing activities to primarily virtual channels. These decreases were offset by an increase in property taxes resulting from an increase in assessed values in certain markets.

New Property Operations: Our new properties for the three and six months ended June 30, 2020 include development properties that completed construction and opened for operations in Fall 2019. These properties are summarized in the table below:



Property	Location	Primary University Served	Beds	Opening Date

191 College	Auburn, AL	Auburn University	495	August 2019
LightView (ACE)	Boston, MA	Northeastern University	825	August 2019
University of Arizona Honors College (ACE)	Tucson, AZ	University of Arizona	1,056	August 2019
The Flex at Stadium Centre	Tallahassee, FL	Florida State University	340	August 2019
959 Franklin	Eugene, OR	University of Oregon	443	September 2019
		Total - New Properties	3,159

On-Campus Participating Properties (“OCPP”) Operations

Same Store OCPP Properties: As of June 30, 2020, we had six on-campus participating properties containing 5,230 beds. Revenues from these properties decreased by $2.3 million, from $6.4 million for the three months ended June 30, 2019, to $4.1 million for the three months ended June 30, 2020. This decrease was primarily due the universities’ decisions to provide rent abatements and/or early lease terminations to tenants due to COVID-19, in addition to an increase in the provision for uncollectible accounts. Operating expenses at these properties decreased by $0.6 million, from $3.8 million for the three months ended June 30, 2019, to $3.2 million for the three months ended June 30, 2020. This decrease was primarily due to decreases in payroll, maintenance and utilities as a result of decreased occupancy at the properties due to COVID-19.

Third-Party Development Services Revenue

Third-party development services revenue decreased by approximately $2.3 million, from $3.6 million during the three months ended June 30, 2019, to $1.3 million for the three months ended June 30, 2020. The decrease was primarily due to the closing of bond financing and commencement of construction of the ninth phase at Prairie View A&M University during the prior year quarter, which contributed approximately $1.5 million in revenue for the three months ended June 30, 2019, in addition to a decrease in the number of third-party development projects under construction during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. During the three months ended June 30, 2020 we had three projects under construction with an average contractual fee of $4.7 million, as compared to seven projects under construction during the three months ended June 30, 2019 with an average contractual fee of $3.7 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.

Third-Party Management Services Revenue

Third-party management services revenue decreased by approximately $0.8 million, from $3.5 million during the three months ended June 30, 2019, to $2.7 million for the three months ended June 30, 2020. The decrease was primarily due to decreased revenue at our managed properties resulting from COVID-19, upon which our management fees are based.

General and Administrative

General and administrative expenses increased by approximately $1.7 million, from $8.1 million during the three months ended June 30, 2019, to $9.8 million for the three months ended June 30, 2020. The increase was primarily due to additional expenses incurred in connection with enhancements to our operating systems platform and other general inflationary factors.

Depreciation and Amortization

Depreciation and amortization decreased by approximately $2.4 million, from $68.8 million during the three months ended June 30, 2019, to $66.4 million for the three months ended June 30, 2020. The decrease was primarily due to a $4.3 million decrease related to assets at our same store properties that became fully depreciated or amortized over the last year, a decrease of approximately $1.8 million related to properties sold in 2019 and 2020, and a decrease of approximately $0.3 million in depreciation of corporate assets. These decreases were offset by an increase of approximately $4.0 million related to the completion of construction and opening of owned development properties in Fall 2019.

Interest Expense

Interest expense increased by approximately $0.1 million, from $27.1 million during the three months ended June 30, 2019, to $27.2 million for the three months ended June 30, 2020. The increase was primarily due to $3.5 million of additional interest incurred related to our offerings of unsecured notes in June 2019, January 2020 and June 2020, net of unsecured notes repaid in January 2020 that were originally scheduled to mature in October 2020. This increase was offset by: (i) a $1.9 million decrease related to the timing of borrowings under our unsecured revolving credit facility during the respective three-month periods; (ii) a $0.9 million decrease in default interest related to a property that was transferred to the lender in settlement of the property’s mortgage loan in July 2019; and (iii) a $0.5 million decrease in interest on our term loan facility due to interest rate swaps executed in November and December 2019.

Net Loss Attributable to Noncontrolling Interests

Net loss attributable to noncontrolling interests represents consolidated joint venture partners’ share of net loss, as well as net loss allocable to holders of Operating Partnership units. Net loss attributable to noncontrolling interests increased by $1.9 million, from $0.2 million for the three months ended June 30, 2019 to $2.1 million for the three months ended June 30, 2020. The increase is primarily due to decreased operating performance at certain properties held through joint ventures due to the impact of COVID-19, partially offset by the purchase of the remaining ownership interests in properties held in a joint venture as part of the Core Transaction.

Comparison of the Six Months Ended June 30, 2020 and June 30, 2019

The following table presents our results of operations for the six months ended June 30, 2020 and 2019, including the amount and percentage change in these results between the two periods.



	Six Months Ended June 30,
	2020			2019			Change ($)			Change (%)
Revenues
Owned properties	$	409,277		$	427,575		$	(18,298	)	(4.3	)%
On-campus participating properties	14,810			17,844			(3,034		)	(17.0	)%
Third-party development services	3,345			6,778			(3,433		)	(50.6	)%
Third-party management services	6,497			5,776			721			12.5	%
Resident services	1,022			1,529			(507		)	(33.2	)%
Total revenues	434,951			459,502			(24,551		)	(5.3	)%

Operating expenses (income)
Owned properties	178,223			182,932			(4,709		)	(2.6	)%
On-campus participating properties	6,574			7,763			(1,189		)	(15.3	)%
Third-party development and management services	11,184			8,699			2,485			28.6	%
General and administrative	19,925			15,430			4,495			29.1	%
Depreciation and amortization	132,610			137,570			(4,960		)	(3.6	)%
Ground/facility leases	6,962			6,785			177			2.6	%
(Gain) loss from disposition of real estate	(48,525		)	282			(48,807		)	(17,307.4	)%
Provision for impairment	—			3,201			(3,201		)	(100.0	)%
Total operating expenses	306,953			362,662			(55,709		)	(15.4	)%

Operating income	127,998			96,840			31,158			32.2	%

Nonoperating income (expenses)
Interest income	1,721			1,895			(174		)	(9.2	)%
Interest expense	(54,951		)	(54,129		)	(822		)	1.5	%
Amortization of deferred financing costs	(2,542		)	(2,350		)	(192		)	8.2	%
Loss from extinguishment of debt	(4,827		)	—			(4,827		)	100.0	%
Total nonoperating expenses	(60,599		)	(54,584		)	(6,015		)	11.0	%

Income before income taxes	67,399			42,256			25,143			59.5	%
Income tax provision	(760		)	(678		)	(82		)	12.1	%
Net income	66,639			41,578			25,061			60.3	%

Net loss (income) attributable to noncontrolling interests	872			(1,552		)	2,424			(156.2	)%
Net income attributable to ACC, Inc. and Subsidiaries common stockholders	$	67,511		$	40,026		$	27,485		68.7	%

Same Store and New Property Operations

A reconciliation of our same store, new property and sold/other property operations to our consolidated statements of comprehensive income is set forth below:



	Same Store Properties				New Properties				Sold Properties/Other ⁽¹⁾					Total - All Properties
	Six Months Ended June 30,				Six Months Ended June 30,				Six Months Ended June 30,					Six Months Ended June 30,
	2020		2019		2020		2019		2020		2019			2020		2019
Number of properties	152		152		5		—		1		5		⁽²⁾	158		157
Number of beds	92,193		92,193		3,159		—		901		2,911			96,253		95,104

Revenues ⁽³⁾	$	389,133	$	415,631	$	18,465	$	443	$	2,701	$	13,030		$	410,299	$	429,104
Operating expenses	170,225		175,163		6,880		1,184		1,118		6,585			178,223		182,932


⁽¹⁾	Does not include the allocation of payroll and other administrative costs related to corporate management and oversight. Also includes recurring professional fees related to the operation of the ACC / Allianz Joint Venture.


⁽²⁾	Includes properties sold in 2019 and 2020 and one property transferred to the lender in July 2019 in settlement of its mortgage loan.


⁽³⁾	Includes revenues which are reflected as resident services revenue on the accompanying consolidated statements of comprehensive income.

Same Store Properties: The decrease in revenue from our same store properties was primarily due to the same factors that contributed to the decrease for the three months ended June 30, 2020. This decrease was partially offset by an increase in average rental rates for the 2019/2020 academic year.

The decrease in operating expenses from our same store properties was primarily due to the same factors that contributed to the decrease for the three months ended June 30, 2020.

New Property Operations: Our new properties for the six months ended June 30, 2020 are summarized in the table of new properties contained in the discussion of our results of operations for the three months ended June 30, 2020 and 2019.

On-Campus Participating Properties (“OCPP”) Operations

As of June 30, 2020, we had six OCPPs containing 5,230 beds. Revenues from these properties decreased by $3.0 million, from $17.8 million for the six months ended June 30, 2019, to $14.8 million for the six months ended June 30, 2020. The increase is primarily due to the same factors that contributed to the increase for the three months ended June 30, 2020.

Operating expenses at these properties decreased by approximately $1.2 million, from $7.8 million for the six months ended June 30, 2019 to $6.6 million for the six months ended June 30, 2020. The decrease is primarily due to the same factors that contributed to the increase for the three months ended June 30, 2020.

Third-Party Development Services Revenue

Third-party development services revenue decreased by approximately $3.5 million, from $6.8 million during the six months ended June 30, 2019, to $3.3 million for the six months ended June 30, 2020. The decrease was primarily due to the closing of bond financing and commencement of construction of three projects during the six months ended June 30, 2019, which contributed $4.3 million in revenue during the prior year period, in addition to a decrease in the number of third-party development projects under construction during the six months ended June 30, 2020, as compared to the six months ended June 30, 2019. During the six months ended June 30, 2020 we had three projects under construction with an average contractual fee of $4.7 million, as compared to eight projects under construction during the six months ended June 30, 2019 with an average contractual fee of $3.7 million.

Third-Party Management Services Revenue

Third-party management services revenue increased by approximately $0.7 million, from $5.8 million during the six months ended June 30, 2019, to $6.5 million for the six months ended June 30, 2020. The increase was primarily due to reimbursed payroll and other costs from the Disney College Program management contract which began in April 2019. As facilities manager, the Company is responsible for the operations and maintenance of the projects. Because of the company’s role in funding payroll costs for on-site personnel at the properties, as well as other miscellaneous costs, accounting guidance requires the management fee for this project to be recorded on a gross basis in the Company’s consolidated financial statements. Accordingly, both management services revenue and third-party management services expenses for the six months ended June 30, 2020 include approximately $2.1 million in such reimbursed costs as compared to approximately $1.1 million during the six months ended June 30, 2019. This increase was partially offset by the same factors that contributed to the decrease in third-party management services revenue for the three months ended June 30, 2020, as discussed above.

Third-Party Development and Management Services Expenses

Third-party development and management services expenses increased by approximately $2.5 million, from $8.7 million during the six months ended June 30, 2019, to $11.2 million for the six months ended June 30, 2020. The increase is primarily due to an increase in reimbursed payroll and other costs from the Disney College Program management contract as described above, increased pursuit activity for potential third-party development and management contracts, and an increase in the provision for uncollectible accounts related to accounts receivable from third-party development and management projects.

General and Administrative

General and administrative expenses increased by approximately $4.5 million from $15.4 million during the six months ended June 30, 2019, to $19.9 million for the six months ended June 30, 2020. The increase was primarily due to $1.1 million in litigation settlement expenses incurred during the three months ended March 31, 2020, as well as additional expenses incurred in connection with enhancements to our operating systems platform and other general inflationary factors.

Depreciation and Amortization

Depreciation and amortization decreased by approximately $5.0 million, from $137.6 million during the six months ended June 30, 2019, to $132.6 million for the six months ended June 30, 2020. The decrease was primarily due to an $8.5 million decrease at our same store properties due to assets that became fully amortized or depreciated over the last year, a $3.5 million decrease related to properties sold in 2019 and 2020 and a decrease of approximately $0.6 million in depreciation of corporate assets. These decreases were offset by an increase of approximately $7.6 million related to the completion of construction and opening of owned development properties in Fall 2019.

(Gain) Loss from Disposition of Real Estate

During the six months ended June 30, 2020, we sold one owned property containing 901 beds, resulting in a net gain from disposition of real estate of approximately $48.5 million. During the six 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. Refer to Note 4 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1.

Provision for Impairment

During the six months ended June 30, 2019, we recorded an impairment charge of approximately $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 was sold in May 2019.

Interest Expense

Interest expense increased by approximately $0.9 million, from $54.1 million during the six months ended June 30, 2019, to $55.0 million for the six months ended June 30, 2020. The increase was primarily due to $6.9 million of additional interest incurred related to our offerings of unsecured notes in June 2019, January 2020 and June 2020, net of unsecured notes repaid in January 2020 that were originally scheduled to mature in October 2020, and a $0.3 million decrease in capitalized interest. This increase was offset by: (i) a $2.1 million decrease related to the timing of borrowings under our unsecured revolving credit facility during the respective six-month periods; (ii) a $1.7 million decrease in default interest related to a property that was transferred to the lender in settlement of the property’s mortgage loan in July 2019; (iii) a $1.0 million decrease in interest on our term loan facility due to interest rate swaps executed in November and December 2019; (iv) a $0.6 million decrease due to the pay-off of mortgage debt in 2020; and (v) a $0.3 million decrease at our on-campus participating properties due to scheduled principal payments.

Loss from Early Extinguishment of Debt

During the six months ended June 30, 2020, we recognized a $4.8 million loss on the extinguishment of debt related to the early redemption of our $400 million 3.35% Senior Notes due October 2020. The redemption was funded using net proceeds from the Operating Partnership’s closing of a $400 million offering of senior unsecured notes under its existing shelf registration in January 2020. Refer to Note 6 in the accompanying Notes to Consolidated Financial Statements in Item 1 for a detailed discussion of this transaction.

Net Loss (Income) Attributable to Noncontrolling Interests

Net loss (income) attributable to noncontrolling interests represents consolidated joint venture partners’ share of net loss (income), as well as net loss (income) allocable to holders of Operating Partnership units. Net income attributable to noncontrolling interests decreased by $2.5 million, from net income of $1.6 million for the six months ended June 30, 2019, to a net loss of $0.9 million for the six months ended June 30, 2020. This decrease is primarily due to the purchase of the remaining ownership interests in properties held in a joint venture as part of the Core Transaction, as well as decreased operating performance at certain properties held through joint ventures due to COVID-19.

Liquidity and Capital Resources

Cash Balances and Cash Flows

As of June 30, 2020, we had $61.0 million in cash and cash equivalents and restricted cash as compared to $81.3 million in cash and cash equivalents and restricted cash as of December 31, 2019. Restricted cash primarily consists of escrow accounts held by lenders, 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 six months ended June 30, 2020, net cash provided by operating activities was approximately $143.1 million, as compared to approximately $148.4 million for the six months ended June 30, 2019, a decrease of $5.3 million. This decrease was primarily due to rent abatements, early lease terminations, and other financial relief provided by the Company due to COVID-19, the sale of properties in 2019 and 2020, and the timing of property tax payments for owned properties. This decrease was partially offset by operating cash flows from the completion of construction of owned development properties and presale development properties in 2019, the timing of property tax payments for owned properties and the timing of interest payments.

Investing Activities: Investing activities utilized approximately $51.5 million and $239.6 million for the six months ended June 30, 2020 and 2019, respectively. The $188.1 million decrease in cash utilized was primarily a result of $146.1 million in proceeds from the disposition of one property during the six months ended June 30, 2020 as compared to $8.9 million in proceeds in the prior year related to the sale of one property and a $64.2 million decrease in cash used to fund the construction of our owned development properties. These decreases in cash utilized were partially offset by a $12.3 million increase in other investing activities due to the reimbursement of construction costs for the Disney Education Center, which was classified as a deferred financing lease.

Financing Activities: For the six months ended June 30, 2020, net cash utilized in financing activities totaled approximately $112.0 million as compared to net cash provided by financing activities of $73.4 million for the six months ended June 30, 2019. The $185.4 million increase in cash utilized by financing activities was primarily a result of the following: (i) the $404.2 million pay-off of unsecured notes including costs associated with the early extinguishment of the notes; (ii) the purchase of the remaining ownership interest in two properties for $77.2 million; (iii) a $37.5 million increase in net paydowns on our revolving credit facility;

(iv) the $34.2 million pay-off of mortgage debt; and (v) a $26.1 million decrease due to proceeds from construction loans in the prior year period. These increases in cash utilized by financing activities were partially offset by a $393.9 million increase in proceeds from the issuance of unsecured notes, net of issuance costs.

Liquidity Needs, Sources and Uses of Capital

As previously discussed, the ultimate effect of the COVID-19 pandemic on the student housing industry generally, and the Company specifically, is uncertain at this time. As such, the Company is unable to predict the full magnitude of the pandemic and its effect on our future cash flows and liquidity needs. The most significant factors affecting our future results are outlined above under Results of Operations.

As of June 30, 2020, the Company has met its financial obligations and believes it has sufficient liquidity to withstand future disruption. The Company has no additional debt maturities for the remainder of 2020, and has enacted expense reduction initiatives, including suspending all non-essential capital improvement projects. Additionally, in June 2020, the Company closed a $400 million offering of 3.875% 10-year senior unsecured notes, resulting in net proceeds of $391.7 million. The proceeds were used to repay borrowings under the Company’s revolving credit facility, thus providing additional liquidity.

As of June 30, 2020, our short-term liquidity needs included, but were not limited to, the following: (i) potential distribution payments to our common and restricted stockholders totaling approximately $260.8 million assuming no change from the Company’s most recent quarterly distribution of $0.47 per share and the number of our shares outstanding as of June 30, 2020; (ii) potential distribution payments to our Operating Partnership unitholders totaling approximately $0.9 million assuming no change from the Operating Partnership’s most recent quarterly distribution of $0.47 per unit and the number of units outstanding as of June 30, 2020 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 June 30, 2020; (iii) estimated development costs over the next 12 months totaling approximately $226.7 million for our owned properties currently under construction; (iv) the pay-off of approximately $126.3 million of outstanding fixed rate mortgage debt scheduled to mature in the next 12 months; (v) potential future developments, property or land acquisitions; and (vi) recurring capital expenditures.

We expect to meet our short-term liquidity requirements by: (i) utilizing current cash on hand and net cash provided by operations; (ii) borrowing under our existing revolving credit facility, which has availability of $813.5 million as of June 30, 2020; (iii) accessing the unsecured bond market; (iv) exercising debt extension options to the extent they are available; (v) issuing securities, including common stock, under our ATM Equity Program discussed more fully in Note 7 in the accompanying Notes to Consolidated Financial Statements contained in Item 1, or otherwise; and (vi) potentially disposing of properties and/or entering into joint venture arrangements, depending on market conditions. 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.

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. The impact of the pandemic on global capital markets and the related effect on the Company’s stock price has introduced additional economic uncertainty which could affect our ability to obtain additional financing to meet short-term and/or long-term liquidity needs.

Although the Company believes it has sufficient liquidity as of June 30, 2020 to withstand future disruption related to COVID-19, the impact of the pandemic on global capital markets has impacted our stock price and credit ratings and introduced additional economic uncertainty, which could affect our ability to obtain additional financing to meet short-term and/or long-term liquidity needs.

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 July 29, 2020, our Board of Directors declared a distribution per share of $0.47, which will be paid on August 21, 2020 to all common stockholders of record as of August 10, 2020. 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.

Although the ultimate magnitude of the impact of COVID-19 on the Company’s future cash flows is uncertain, any curtailed or deferred tenant demand, additional lease terminations, rent refunds or abatements, or increased uncollectible accounts could have a material adverse effect on our cash flows from operations, and thus the Company’s ability to make distributions to stockholders and unitholders.

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 6 in the accompanying Notes to the Consolidated Financial Statements contained in Item 1). A summary of our consolidated indebtedness as of June 30, 2020 is as follows:



	Amount		% of Total		Weighted Average Rates⁽¹⁾		Weighted Average Maturities
Secured	$	744,540	21.2	%	4.5	%	6.0 Years
Unsecured	2,786,500		78.8	%	3.4	%	6.1 Years
Total consolidated debt	$	3,531,040	100.0	%	3.6	%	6.0 Years

Fixed rate debt
Secured
Project-based taxable bonds	$	23,215	0.7	%	7.6	%	4.4 Years
Mortgage	718,679		20.4	%	4.4	%	6.0 Years
Unsecured
April 2013 Notes	400,000		11.3	%	3.8	%	2.8 Years
June 2014 Notes	400,000		11.3	%	4.1	%	4.0 Years
October 2017 Notes	400,000		11.3	%	3.6	%	7.4 Years
June 2019 Notes	400,000		11.3	%	3.3	%	6.0 Years
January 2020 Notes	400,000		11.3	%	2.9	%	9.6 Years
June 2020 Notes	400,000		11.3	%	3.9	%	10.6 Years
Term loans	200,000		5.7	%	2.5	%	2.0 Years
Total - fixed rate debt	3,341,894		94.6	%	3.7	%	6.3 Years

Variable rate debt:
Secured
Mortgage	2,646		0.1	%	2.7	%	25.1 Years
Unsecured
Unsecured revolving credit facility	186,500		5.3	%	1.4	%	1.7 Years
Total - variable rate debt	189,146		5.4	%	1.4	%	2.0 Years
Total consolidated debt	$	3,531,040	100.0	%	3.6	%	6.0 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.

As discussed previously, as of June 30, 2020, the Company has met its financial obligations including servicing its debt and believes it has sufficient liquidity to withstand future disruption. However, the ultimate magnitude of the pandemic on our future cash flows and liquidity position is uncertain at this time. While the Company was in compliance with all debt covenants for both secured and unsecured indebtedness as of June 30, 2020, the economic disruption caused by the COVID-19 pandemic could

adversely affect our future ability to remain in compliance with our debt covenants, depending on the ultimate impact on the valuation of collateral and the incurrence of any additional financing to meet our liquidity needs. The specific covenants that management is closely monitoring as the situation evolves include the debt-to-total asset value and fixed charge coverage requirements under the Company’s unsecured revolving credit facility. As it relates to the debt-to-total asset value covenant, which is highly dependent on net operating income levels of the Company’s operating properties, management believes that net operating income at such properties could decrease in the next 12 months by up to approximately $145 million before the Company is at risk of potentially violating the covenant. As it relates to the fixed charge coverage covenant, which is highly dependent upon a specific measure of Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”), as defined in the related agreement, management believes that the EBITDA measure for the next 12 months could decrease by up to approximately $255 million before the Company is at risk of potentially violating the covenant. In addition, our credit ratings given by Moody’s and Standard & Poor’s are based on a number of factors, which include their assessment of our financial strength, liquidity, capital structure, asset quality and sustainability of cash flow and earnings. If we are unable to maintain our current credit ratings due to the COVID-19 pandemic or any other matter, the cost of funds under our credit facilities and our liquidity and access to capital markets would be adversely affected. The Company has a BBB credit rating with a stable outlook from Moody’s Investors Services, Inc. and a Baa2 credit rating with a negative outlook from Standard & Poor’s Rating Group.

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 December 2018 White Paper, 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, the elimination of transaction costs, and other 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 owned 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.

During the year ended December 31, 2019, the Company updated the presentation of the calculation of FFO, as it relates to the presentation of consolidated joint venture partners' share of FFO and the presentation of corporate depreciation. Prior period amounts have been updated to conform to the current presentation. There were no changes to the FFO calculated or the underlying financial information used in the calculation.

The following table presents a reconciliation of our net income attributable to common stockholders to FFO and FFOM:



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Net (loss) income attributable to ACC, Inc. and Subsidiaries common stockholders	$	(13,344	)	$	10,386		$	67,511		$	40,026
Noncontrolling interests' share of net (loss) income	(2,078		)	(176		)	(872		)	1,552

Joint Venture ("JV") partners' share of FFO
JV partners' share of net loss (income)	2,046			230			1,130			(1,338		)
JV partners' share of depreciation and amortization	(1,927		)	(2,186		)	(3,892		)	(4,343		)
	119			(1,956		)	(2,762		)	(5,681		)

Loss (gain) from disposition of real estate	—			282			(48,525		)	282
Elimination of provision for real estate impairment	—			—			—			3,201
Total depreciation and amortization	66,441			68,815			132,610			137,570
Corporate depreciation ⁽¹⁾	(885		)	(1,171		)	(1,774		)	(2,393		)
FFO attributable to common stockholders and OP unitholders	50,253			76,180			146,188			174,557

Elimination of operations of on-campus participating properties ("OCPPs")
Net loss (income) from OCPPs	2,206			1,130			(1,500		)	(2,562		)
Amortization of investment in OCPPs	(2,045		)	(2,016		)	(4,082		)	(4,045		)
	50,414			75,294			140,606			167,950

Modifications to reflect operational performance of OCPPs
Our share of net cash flow⁽²⁾	254			828			1,114			1,710
Management fees and other	244			408			827			1,228
Contribution from OCPPs	498			1,236			1,941			2,938

Elimination of loss from extinguishment of debt ⁽³⁾	—			—			4,827			—
Elimination of litigation settlement expense⁽⁴⁾	—			—			1,100			—
Elimination of FFO from property in receivership ⁽⁵⁾	—			839			—			1,808
Funds from operations-modified ("FFOM") attributable to common stockholders and OP unitholders	$	50,912		$	77,369		$	148,474		$	172,696

FFO per share - diluted	$	0.36		$	0.55		$	1.05		$	1.26
FFOM per share - diluted	$	0.37		$	0.56		$	1.07		$	1.24
Weighted-average common shares outstanding - diluted	139,220,414			138,873,418			139,155,823			138,842,644


⁽¹⁾	Represents depreciation on corporate assets not added back for purposes of calculating FFO.

⁽²⁾

50% of the properties’ net cash available for distribution after payment of operating expenses, debt service (including repayment of principal) and capital expenditures which is included in ground/facility leases expense in the consolidated statements of comprehensive income. The decrease as compared to prior year is a result of the universities' decisions to provide rent abatements to tenants related to COVID-19.


⁽³⁾	Represents loss associated with the January 2020 redemption of the Company's $400 million 3.35% Senior Notes originally scheduled to mature in October 2020.


⁽⁴⁾	Represents the settlement of a litigation matter that is included in general and administrative expenses in the accompanying consolidated statements of comprehensive income.


⁽⁵⁾	Represents FFO for an owned property that was transferred to the lender in July 2019 in settlement of the property's 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

The Company manages its 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 Company is exposed to adverse changes in prevailing market rates and the impact of adverse interest rate changes on its unsecured credit facility as well as its ability to incur more debt without stockholder approval. However, the Company uses derivative instruments to manage exposure to interest rates, and the majority of its outstanding debt has fixed interest rates. No material changes have occurred in relation to market risk since our Annual Report on Form 10-K for the year ended December 31, 2019, except as disclosed in Part II, Item 1A, herein, “Risk Factors.”

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. We have not experienced any material impacts to our internal control over financial reporting to date as a result of a majority of our corporate office employees working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing our internal control environment to ensure that our controls continue to be designed effectively and continue to operate effectively throughout the duration of the pandemic.

American Campus Communities Operating Partnership LP


(a)	Evaluation of Disclosure Controls and Procedures


(b)	Changes in 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 our consolidated financial position or our results of operations.

Item 1A. Risk Factors

Except as described below, 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, 2019 and in Part II, Item 1A of the Company’s and the Operating Partnership’s Quarterly Report on from 10-Q for the quarterly period ended March 31, 2020.

The effects of the COVID-19 pandemic have materially affected how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

The novel coronavirus disease (“COVID-19”), which was characterized on March 11, 2020 by the World Health Organization as a pandemic, has currently resulted in a widespread health crisis, which has adversely affected international, national and local economies and financial markets generally, and has had an unprecedented effect on many businesses including the student housing industry.

Beginning in April 2020, our operations began to be negatively affected by a range of external factors related to the COVID-19 pandemic that are not within our control. All of the colleges and universities our properties serve canceled in-person classes for the remainder of the spring and summer term and many closed their on-campus residence halls or encouraged students living in on-campus residence halls to return to their permanent residences for the remainder of the spring term and in some cases for the summer term. Also, a wide range of restrictions on physical movement imposed by governmental entities to limit the spread of COVID-19 have been in effect. While our properties remain open, as a result of these actions, we have experienced significant decreases in students physically occupying their units at many of our properties. We have waived all late fees, online payment fees and financial-related eviction proceedings temporarily and are working with residents and families who endure financial hardship on a case by case basis. In certain circumstances, we have provided financial assistance including rent abatements and/or early lease terminations at both our off-campus properties and our on-campus properties based on individual university policies. In addition, we transitioned property tours and other leasing activities to virtual experiences. Furthermore, we have experienced cancellations of summer camps, conferences and other events, which has impacted revenue we typically earn during the summer months at certain of our properties. We have also experienced delays in the closing of financing and commencement of construction for our third-party development projects, resulting in the revenue anticipated to be earned from such projects being delayed to future years. Curtailed or deferred tenant demand and additional delays in our third-party development projects could materially adversely affect our revenues and cash flows from operations, and thus our ability to make distributions to stockholders and unitholders and service indebtedness.

As of July 19, 2020, a third party source reported that 63 of the 68 universities served by the Company’s communities are planning for a return to in-person classes or a hybrid in-person model for Fall 2020, while only five are planning for primarily online classes. However, at this time, there remains uncertainty as to the dates for reopening by colleges and universities, and whether these plans will change. Should a significant number of the colleges and universities that our properties serve fail to resume in-person classes for the upcoming 2020/2021 academic year or decide to cancel classes due to a resurgence of COVID-19 cases or additional governmental actions restricting physical movement, we would experience further adverse effects.

A significant number of the locations in which we conduct business have been subject to “shelter in place” or “stay at home” orders adopted by state and local authorities. This resulted in a temporary closing of our corporate headquarters and other offices and the implementation of travel restrictions, all of which disrupted how we operate our business. We have taken steps to allow our workforce to render critical business functions remotely. Many of these measures are being deployed for the first time and there is no guarantee that the data security and privacy safeguards we have put in place will be completely effective or that we will not encounter some of the common risks associated with employees accessing data and systems remotely. Additionally, some of these orders may adversely affect the completion of some or all of our projects under development at both universities and at Walt Disney World^® Resort if we are required to temporarily cease construction entirely, experience delays in obtaining governmental permits and authorizations, or experience disruption in the supply of materials or labor, which may result in our not completing these development projects on schedule or within budgeted amounts.

The COVID-19 pandemic has impacted the capital markets and could impact our cost of borrowing. Also, the pandemic may pose risks arising from market liquidity and credit concerns. Any deterioration of the capital markets could cause our income and expense to vary from expectations. As of June 30, 2020, we had no impairment charges associated with our long-term real estate investments, but we cannot predict future market conditions, market liquidity or credit availability, and can provide no assurance that our real estate portfolio will remain materially unimpaired. While we were in compliance with all debt covenants for both secured and unsecured indebtedness as of June 30, 2020, the economic disruption caused by the COVID-19 pandemic could affect our future ability to remain in compliance with our debt covenants, depending on the ultimate impact to the valuation of collateral and any additional financing we obtain to meet our liquidity needs. In addition, our credit ratings given by Moody’s and Standard & Poor’s are based on a number of factors, which include their assessment of our financial strength, liquidity, capital structure, asset quality and sustainability of cash flow and earnings. If we are unable to maintain our current credit ratings due to the COVID-19 pandemic or other changes in market conditions, the cost of funds under our credit facilities and our liquidity and access to capital markets would be adversely affected.

The COVID-19 pandemic and the responses to curb its spread continue to evolve daily. As such, it is uncertain as to the full magnitude of the pandemic on our results of operations, cash flows, financial condition, or liquidity for the year ending December 31, 2020, or future years.

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

31.1		American Campus Communities, Inc. - Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		American Campus Communities, Inc. - Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.3		American Campus Communities Operating Partnership LP - Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.4		American Campus Communities Operating Partnership LP - Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		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.

32.2		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.

32.3		American Campus Communities Operating Partnership 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.

32.4		American Campus Communities Operating Partnership 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

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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:	July 31, 2020



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:	July 31, 2020



AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP 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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American Campus Communities (ACC) 10-Q2020 Q2 Quarterly report

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