UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2004.
[ ] 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 1-31717
AMERICAN CAMPUS COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Maryland 76-0753089
(State or other jurisdiction of (IRS employer identification number)
Incorporation or organization)
805 Las Cimas Parkway, Suite 400
Austin, TX 78746
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (512) 732-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
- --------------------------------------------------------------------------------
Class Outstanding at November 15, 2004
Common Stock, $.01 par value per share 12,615,000
- --------------------------------------------------------------------------------
AMERICAN CAMPUS COMMUNITIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2004
TABLE OF CONTENTS
PAGE NO.
-------------
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Consolidated and Combined Balance Sheets as of September 30, 2004
(unaudited) and December 31, 2003 1
Consolidated and Combined Statements of Operations for the Company for
the period from August 17, 2004 through September 30, 2004 and for the
American Campus Predecessor for the period from July 1, 2004 through
August 16, 2004, and for the American Campus Predecessor for the three
months ended September 30, 2003 (all unaudited) 2
Consolidated and Combined Statements of Operations for the Company for
the period from August 17, 2004 to September 30, 2004 and for the
American Campus Predecessor for the period from January 1, 2004
through August 16, 2004, and for the American Campus Predecessor for
the nine months ended September 30, 2003 (all unaudited) 3
Consolidated and Combined Statements of Comprehensive Loss for the
Company for the period from August 17, 2004 through September 30, 2004
and for the American Campus Predecessor for the period from January 1,
2004 through August 16, 2004, and for the American Campus Predecessor
nine months ended September 30, 2003 (all unaudited). 4
Consolidated and Combined Statements of Cash Flows for the Company and
the American Campus Predecessor for the nine months ended September
30, 2004 and September 30, 2003 (all unaudited) 5
Notes to Consolidated and Combined Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 37
ITEM 4. CONTROLS AND PROCEDURES 37
PART II. OTHER INFORMATION 38
ITEM 1. LEGAL PROCEEDINGS 38
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 38
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 38
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 38
ITEM 5. OTHER INFORMATION 38
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 38
SIGNATURES 39
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
CONSOLIDATED AND COMBINED BALANCE SHEETS
(In thousands, except share and per share data)
COMPANY PREDECESSOR
------------------------ ------------------------
SEPTEMBER 30, 2004 DECEMBER 31, 2003
------------------------ ------------------------
(Unaudited)
ASSETS
Investments in real estate:
Student housing facilities subject to leases, net $ 68,168 $ 69,713
Student housing facility subject to lease-held for sale - 7,976
Student housing properties, net 268,137 222,907
------------------------ ------------------------
Investments in real estate, net 336,305 300,596
Cash and cash equivalents 5,491 5,227
Restricted cash and short-term investments 7,385 9,503
Student contracts receivable, net 2,000 2,355
Other assets 10,969 12,885
------------------------ ------------------------
TOTAL ASSETS $ 362,150 $ 330,566
======================== ========================
LIABILITIES AND STOCKHOLDERS' AND PREDECESSOR OWNERS' EQUITY
Liabilities:
Mortgage loans, bonds payable, and lines of credit $ 193,028 $ 267,518
Note payable secured by leasehold held for sale - 8,080
Accounts payable and accrued expenses 6,856 3,847
Other liabilities 21,636 23,211
------------------------ ------------------------
Total liabilities 221,520 302,656
Minority interests 2,545 252
Commitments and contingencies (Note 9)
Stockholders' and Predecessor owners' equity:
Common stock, $.01 par value, 800,000,000 shares authorized, 12,615,000
shares issued and outstanding 126 -
Additional paid in capital 139,606 -
Accumulated deficit (1,538) -
Accumulated other comprehensive loss (109) (197)
Predecessor owners' equity - 27,855
------------------------ ------------------------
Total stockholders' and Predecessor owners' equity 138,085 27,658
------------------------ ------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' AND PREDECESSOR OWNERS' EQUITY $ 362,150 $ 330,566
======================== ========================
See accompanying notes to the consolidated and combined financial statements.
1
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
COMPANY PREDECESSOR
--------------------- --------------------------------------------------
PERIOD FROM PERIOD FROM THREE MONTHS
AUGUST 17, 2004 TO JULY 1, 2004 TO ENDED
SEPTEMBER 30, 2004 AUGUST 16, 2004 SEPTEMBER 30, 2003
--------------------- ----------------------- ----------------------
REVENUES:
Student housing rental revenue $ 5,045 $ 4,146 $ 7,500
Student housing facilities subject to leases revenue 2,483 845 2,893
Third party development services 332 178 2,679
Third party development services - student housing
facilities subject to leases 13 14 30
Third party facility management services - affiliates - 19 58
Third party management services 340 176 178
Resident services 114 - -
--------------------- ----------------------- ----------------------
TOTAL REVENUES 8,327 5,378 13,338
OPERATING EXPENSES:
Student housing 2,391 2,942 4,265
Student housing facilities subject to leases 431 1,601 2,170
Third party development and management services 718 612 1,401
General and administrative 2,888 24 345
Depreciation and amortization 1,401 1,284 2,209
Ground lease 100 202 43
--------------------- ----------------------- ----------------------
TOTAL OPERATING EXPENSES 7,929 6,665 10,433
--------------------- ----------------------- ----------------------
OPERATING INCOME (LOSS) 398 (1,287) 2,905
NONOPERATING INCOME AND (EXPENSES):
Interest income 14 18 20
Interest expense (2,006) (2,575) (4,235)
Amortization of deferred financing costs (702) (81) (140)
Other nonoperating income - 274 -
--------------------- ----------------------- ----------------------
TOTAL NONOPERATING EXPENSES (2,694) (2,364) (4,355)
--------------------- ----------------------- ----------------------
Loss before income tax benefit, minority interests,
and discontinued operations (2,296) (3,651) (1,450)
Income tax benefit 757 - -
Minority interests 1 85 (4)
--------------------- ----------------------- ----------------------
LOSS FROM CONTINUING OPERATIONS (1,538) (3,566) (1,454)
Loss attributable to discontinued operations - (104) (90)
--------------------- ----------------------- ----------------------
NET LOSS $ (1,538) $ (3,670) $ (1,544)
===================== ======================= ======================
Loss per share - basic:
Loss from continuing operations per share $ (0.13)
=====================
Net loss per share $ (0.13)
=====================
Loss per share - diluted:
Loss from continuing operations per share $ (0.13)
=====================
Net loss per share $ (0.13)
=====================
Weighted-average common shares outstanding:
Basic 12,290,256
=====================
Diluted 12,290,256
=====================
See accompanying notes to consolidated and combined financial statements.
2
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
COMPANY PREDECESSOR
--------------------- ----------------------------------------------
PERIOD FROM PERIOD FROM NINE MONTHS
AUGUST 17, 2004 TO JANUARY 1, 2004 TO ENDED
SEPTEMBER 30, 2004 AUGUST 16, 2004 SEPTEMBER 30, 2003
--------------------- --------------------- ---------------------
REVENUES:
Student housing rental revenue $ 5,045 $ 19,861 $ 23,815
Student housing facilities subject to leases revenue 2,483 9,340 10,904
Third party development services 332 3,896 6,253
Third party development services - student housing
facilities subject to leases 13 497 86
Third party facility management services - affiliates - 178 246
Third party management services 340 789 572
Resident services 114 - -
Other income - - 12
--------------------- --------------------- ---------------------
TOTAL REVENUES 8,327 34,561 41,888
OPERATING EXPENSES:
Student housing 2,391 10,120 11,544
Student housing facilities subject to leases 431 5,354 5,719
Third party development and management services 718 3,403 3,941
General and administrative 2,888 1,032 1,188
Depreciation and amortization 1,401 5,815 6,631
Ground lease 100 598 302
--------------------- --------------------- ---------------------
TOTAL OPERATING EXPENSES 7,929 26,322 29,325
--------------------- --------------------- ---------------------
OPERATING INCOME 398 8,239 12,563
NONOPERATING INCOME AND (EXPENSES):
Interest income 14 43 56
Interest expense (2,006) (11,142) (12,641)
Amortization of deferred financing costs (702) (369) (418)
Other nonoperating income - 274 -
--------------------- --------------------- ---------------------
TOTAL NONOPERATING EXPENSES (2,694) (11,194) (13,003)
--------------------- --------------------- ---------------------
Loss before income tax benefit, minority interests,
and discontinued operations (2,296) (2,955) (440)
Income tax benefit 757 - -
Minority interests 1 129 (25)
--------------------- --------------------- ---------------------
LOSS FROM CONTINUING OPERATIONS (1,538) (2,826) (465)
Discontinued operations:
Loss attributable to discontinued operations - (373) (102)
Gain from disposition of real estate - 58 -
--------------------- --------------------- ---------------------
Total discontinued operations - (315) (102)
--------------------- --------------------- ---------------------
NET LOSS $ (1,538) $ (3,141) $ (567)
===================== ===================== =====================
Loss per share - basic:
Loss from continuing operations per share $ (0.13)
=====================
Net loss per share $ (0.13)
=====================
Loss per share - diluted:
Loss from continuing operations per share $ (0.13)
=====================
Net loss per share $ (0.13)
=====================
Weighted-average common shares outstanding:
Basic 12,290,256
=====================
Diluted 12,290,256
=====================
See accompanying notes to consolidated and combined financial statements.
3
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
(UNAUDITED)
COMPANY PREDECESSOR
----------------------- ------------------------------------------------
PERIOD FROM
PERIOD FROM JANUARY 1, 2004
AUGUST 17, 2004 TO THROUGH NINE MONTHS ENDED
SEPTEMBER 30, 2004 AUGUST 16, 2004 SEPTEMBER 30, 2003
----------------------- ------------------------ ----------------------
Net loss $ (1,538) $ (3,141) $ (567)
Other comprehensive income (loss):
Change in fair value of interest rate swap 40 3 -
Change in fair value of interest rate cap 45 - (5)
----------------------- ------------------------ ----------------------
Net comprehensive loss $ (1,453) $ (3,138) $ (572)
======================= ======================== ======================
See accompanying notes to consolidated and combined financial statements.
4
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
2004 2003
------------------ -------------------
OPERATING ACTIVITIES
Net loss $ (4,679) $ (567)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 7,436 6,890
Amortization of deferred financing costs 1,123 420
Compensation expense recognized for award of profits interest units and restricted
stock units 2,236 -
Income tax benefit (757) -
Changes in operating assets and liabilities:
Restricted cash and short-term investments 1,800 (3,555)
Student contracts receivable, net 297 (395)
Other assets 2,918 (7,218)
Accounts payable and accrued expenses (3,906) 936
3,946 (1,098)
------------------ -------------------
Net cash provided by (used in) operating activities 10,414 (4,587)
------------------ -------------------
INVESTING ACTIVITIES
Investments in student housing facilities subject to leases (1,115) (11,902)
Investments in student housing properties (50,932) (2,809)
Purchase of furniture, fixtures and equipment (304) (168)
------------------ -------------------
Net cash used in investing activities (52,351) (14,879)
------------------ -------------------
FINANCING ACTIVITIES
Proceeds from short-term loans, net of paydowns 101 (487)
Proceeds from revolving credit facility, net of paydowns 4,000 -
Repayment of long-term debt (108,373) (2,296)
Repayment of notes payable - related parties - (1,000)
Proceeds from long-term debt 41,170 20,544
Proceeds from notes payable - related parties - 1,020
Change in construction accounts payable (5,278) 807
Issuance of common stock 220,763 -
Debt issuance and offering costs (22,381) (212)
Contributions from Predecessor owners 860 870
Distributions to Predecessor owners (2,662) (5,892)
Redemption of ownership interests of Predecessor owners (85,853) -
Minority interests (146) 8
------------------ -------------------
Net cash provided by financing activities 42,201 13,362
------------------ -------------------
Net change in cash and cash equivalents 264 (6,104)
Cash and cash equivalents at beginning of period 5,227 10,566
------------------ -------------------
Cash and cash equivalents at end of period $ 5,491 $ 4,462
================== ===================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Reduction of investment in student housing due to fire $ - $ (3,750)
================== ===================
Change in fair value of derivative instruments, net $ 88 $ (5)
================== ===================
Transfer of leasehold asset $ 7,976 $ -
================== ===================
Repayment by transferee of note payable on leasehold asset held for sale $ (8,080) $ -
================== ===================
Write off of miscellaneous assets & liabilities in connection with sale of
leasehold asset $ 46 $ -
================== ===================
Contribution of land from minority partner in development joint venture $ 1,220 $ -
================== ===================
Distribution of assets of The Village at Riverside and other non-core
assets to Predecessor owners, net of liabilities $ (13,968) $ -
================== ===================
Distribution of liabilities of The Village at Riverside and other non-core
assets to Predecessor owners, net of liabilities $ 11,842 $ -
================== ===================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 15,250 $ 14,327
================== ===================
See accompanying notes to consolidated and combined financial statements.
5
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
American Campus Communities, Inc. (the "Company") commenced operations as a
fully integrated real estate investment trust ("REIT") effective with the
completion of its initial public offering (the "IPO") on August 17, 2004.
Through the Company's controlling interest in American Campus Communities
Operating Partnership, L.P. (the "Operating Partnership"), of which the Company
is the sole general partner, and the subsidiaries of the Operating Partnership,
including American Campus Communities Services, Inc. (the "Services Company"),
the Company is one of the largest private owners, managers and developers of
high quality student housing properties in the United States in terms of beds
owned and under management. The Company is a fully integrated, self-managed and
self-administered equity REIT with expertise in the acquisition, design,
finance, development, construction management, leasing and management of student
housing properties.
The Company was formed to succeed certain businesses of the American Campus
Communities Predecessor (the "Predecessor"), which was not a legal entity but
rather a combination of real estate entities under common ownership and voting
control collectively doing business as American Campus Communities, L.L.C. and
Affiliated Student Housing Properties, entities engaged in the student housing
business since 1993. The Company was incorporated in Maryland on March 9, 2004.
Additionally, the Operating Partnership was formed and the Services Company was
incorporated in Maryland on July 14, 2004 and August 17, 2004, respectively,
each in anticipation of the IPO. The IPO was consummated on August 17, 2004,
concurrent with the consummation of various formation transactions, and
consisted of the sale of 12,100,000 shares of the Company's common stock at a
price per share of $17.50, generating gross proceeds of approximately $211.8
million. The aggregate proceeds to the Company, net of the underwriters'
discount and offering costs, were approximately $189.8 million. In connection
with the exercise of the underwriters' over-allotment option on September 15,
2004, the Company issued an additional 515,000 shares of common stock at the IPO
price per share, generating an additional $9.0 million of gross proceeds and
$8.4 million in net proceeds after the underwriters' discount and offering
costs. Also in connection with the IPO formation transactions, the Company used
approximately $85.9 million of IPO proceeds to redeem the ownership interests of
the Predecessor owners. The Company's operations commenced on August 17, 2004
after completion of the IPO and the formation transactions, and are carried on
primarily through the Operating Partnership and its wholly owned subsidiaries,
including the Services Company.
As of September 30, 2004, the Company owns, through its Operating Partnership,
17 student housing properties containing approximately 4,139 apartment units and
12,601 beds. The Company's owned portfolio includes 13 owned off-campus
properties that are in close proximities to public colleges and universities and
four on-campus properties operated under participating ground leases with the
related university systems. These communities contain modern housing units,
offer resort-style amenities and are supported by a classic resident assistant's
system and other student-oriented programming.
Through the Services Company, the Company provides development and construction
management services for student housing properties owned by colleges and
universities, charitable foundations, and others. The Company also provides
third party property management and leasing services for 18 student housing
properties (13 of which the Company served as the third party developer and
construction manager) that represent approximately 11,643 beds in approximately
4,615 units. Third party management and leasing services are typically provided
pursuant to multi-year management contracts that have an initial term that
ranges from two to five years. As of September 30, 2004, the Company's total
owned and managed portfolio includes 35 properties that represent more than
24,000 beds in more than 8,700 units.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND COMBINATION
The accompanying consolidated financial statements include all of the accounts
of the Company, the Operating Partnership and the subsidiaries of the Operating
Partnership. Ownership interests contributed to the Operating Partnership by the
Predecessor entities have been accounted for as a reorganization of entities
under common control in a manner similar to a pooling-of-interests. Accordingly,
the contributed assets and assumed liabilities were recorded at the
Predecessor's historical cost basis. This method of accounting also requires the
reporting of results of operations for the period in which the reorganization
occurred as though the entities had been combined at either the beginning of the
period or inception. The reorganization did not require any material adjustments
to conform the accounting policies of the separate entities. The historic
financial data prior to August 17, 2004 presented in this report is the
historical data for the Predecessor and reflects
6
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
the combined historical results of operations and financial position of the
Predecessor including the operations of The Village at Riverside and certain
other non-core assets which were distributed to the Predecessor owners as a part
of the formation transactions.
As a result, the historic results of operations and financial position prior to
the IPO are not indicative or in some instances directly comparable to our
results of operations and financial position after the IPO.
The Company consolidates entities over which it exercises significant control
over major operating decisions, such as approval of budgets, development
management, and changes in financing. The real estate entities included in the
consolidated and combined financial statements have been consolidated or
combined only for the periods that such entities were under control by the
Company or the Predecessor. All significant intercompany balances and
transactions have been eliminated in consolidation or combination.
The accompanying interim financial statements are unaudited, but have been
prepared in accordance with U.S. generally accepted accounting principles
("GAAP") for interim financial information and in conjunction with the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all disclosures required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting solely of normal
recurring matters) necessary for a fair presentation of the financial statements
for these interim periods have been included. Because of the seasonal nature of
the Company's operations, the results of operations and cash flows for any
interim period are not necessarily indicative of results for other interim
periods or for the full year. These financial statements should be read in
conjunction with the Company's consolidated financial statements and related
notes, together with management's discussion and analysis of financial position
and results of operations, contained in the Company's Registration Statement on
Form S-11 filed with the Securities and Exchange Commission dated as of August
11, 2004.
All dollar amounts in the tables herein, except share and per share amounts, are
stated in thousands unless otherwise indicated.
LONG-LIVED ASSETS-HELD FOR SALE
Long-lived assets to be disposed of are classified as held for sale in the
period in which all of the following criteria are met:
a. Management, having the authority to approve the action, commits to a
plan to sell the asset.
b. The asset is available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of such
assets.
c. An active program to locate a buyer and other actions required to
complete the plan to sell the asset have been initiated.
d. The sale of the asset is probable, and transfer of the asset is
expected to qualify for recognition as a completed sale, within one
year.
e. The asset is being actively marketed for sale at a price that is
reasonable in relation to its current fair value.
f. Actions required to complete the plan indicate that it is unlikely
that significant changes to the plan will be made or that the plan
will be withdrawn.
Concurrent with this classification, the asset is recorded at the lower of cost
or fair value, and depreciation ceases.
COMMON STOCK ISSUANCE COSTS
In accordance with the Securities and Exchange Commission's Staff Accounting
Bulleting No. 5, specific incremental costs directly attributable to the IPO
were deferred and charged against the gross proceeds of the offering. As such,
underwriting commissions and other common stock issuance costs are reflected as
a reduction of additional paid in capital.
INCOME TAXES
The Company intends to elect to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), commencing with the taxable year ended
December 31, 2004. To qualify as a REIT, the Company must meet a number of
organizational and operational requirements, including a requirement that it
currently distribute at least 90% of its adjusted taxable income to its
stockholders.
7
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
The Company believes that it has been organized and has operated in a manner
that will allow it to qualify for taxation as a REIT under the Code commencing
with the taxable year ended December 31, 2004, and it is management's intention
to adhere to these requirements and maintain the Company's REIT status.
As a REIT, the Company will generally not be subject to corporate level federal
income tax on taxable income it currently distributes to its stockholders. If
the Company fails to qualify as a REIT in any taxable year, it will be subject
to federal income taxes at regular corporate rates (including any applicable
alternative minimum tax) and may not be able to qualify as a REIT for the
subsequent four taxable years. Even if the Company qualifies for taxation as a
REIT, the company may be subject to certain state and local income and excise
taxes on its income and property, and to federal income and excise taxes on its
undistributed income.
The Company has elected to treat the Services Company as a taxable REIT
subsidiary ("TRS"), which manages the Company's non-REIT activities. The Service
Company, as a TRS, is subject to federal, state and local income taxes.
LOSS PER SHARE
Loss per share is calculated based on the weighted average number of shares of
the Company's common stock outstanding during the period. Restricted stock units
("RSUs") are included in both basic and diluted weighted average common shares
outstanding because they were fully vested on the date of grant and all
conditions required in order for the recipients to earn the RSUs have been
satisfied. Profits interest units ("PIUs") in the Operating Partnership are
excluded from basic weighted average common shares outstanding because the
conditions required in order for those units to be converted into common shares
have not yet been satisfied. PIUs have been excluded from diluted weighted
average common shares outstanding because they would be anti-dilutive for the
period presented. See Note 7 for a discussion of PIUs and RSUs.
The following is a summary of the elements used in calculating basic and diluted
loss per share for the period subsequent to the IPO (August 17, 2004 through
September 30, 2004):
PERIOD FROM
AUGUST 17, 2004 THROUGH
SEPTEMBER 30, 2004
--------------------------
Basic loss per share calculation
Loss from continuing operations and net loss $ (1,538)
==========================
Loss from continuing operations and net loss - per share $ (0.13)
==========================
Weighted average number of common shares outstanding 12,290,256
==========================
Diluted loss per share calculation
Loss from continuing operations and net loss $ (1,538)
==========================
Loss from continuing operations and net loss - per share $ (0.13)
==========================
Weighted average number of common shares outstanding 12,290,256
==========================
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
period presentation, which includes balance sheets presented in an unclassified
format.
8
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
3. INVESTMENTS IN STUDENT HOUSING PROPERTIES
Student housing properties consist of the following:
SEPTEMBER 30, 2004 DECEMBER 31, 2003
---------------------- ----------------------
Student housing properties:
Land $ 35,671 $ 35,434
Buildings and improvements 240,210 175,436
Furniture, fixtures and equipment 11,110 6,673
Construction in progress 2,075 22,961
----------------------- ----------------------
289,066 240,504
Less accumulated depreciation (20,929) (17,597)
----------------------- ----------------------
Student housing properties, net $ 268,137 $ 222,907
======================= ======================
4. STUDENT HOUSING FACILITIES SUBJECT TO LEASES
The Predecessor has entered into participating facility and ground lease
agreements ("Leases") with certain state university systems and colleges (the
"Lessor") for the purpose of developing, constructing, and operating student
housing facilities on university campuses. Under the terms of the leases, title
to the constructed facilities is held by the Lessor and the Lessor receives a de
minimus base rent paid at inception and 50% of defined net cash flows on an
annual basis through the term of the lease. The leases terminate upon final
repayment of the related debt, the amortization period of which is contractually
stipulated.
Pursuant to the Leases, in the event the leasehold estates do not achieve
Financial Break Even, (defined as revenues less operating expenses, excluding
management fees, less debt service) the Lessor would be required to make a
rental payment, also known as the Contingent Payment, sufficient to achieve
Financial Break Even until the facilities received investment grade ratings.
Future net cash flow distributions would be first applied to repay such
Contingent Payments. As a result of obtaining permanent financing (non recourse
to the Company), beginning November 1999 and December 2002, the Texas A&M
University System is no longer required to make Contingent Payments under the
Prairie View A&M University Phase I, II, III (University Village) and Phase IV
(University College) leases, respectively, as the facilities received investment
grade ratings.
In the event the Company seeks to sell its leasehold interest, the Leases
provide the Lessors the right of first refusal of a bona fide purchase offer and
an option to purchase the lessee's rights under the lease.
In conjunction with the execution of each ground lease, the Company has entered
into a separate five-year agreement to manage the facilities for 5% of defined
gross receipts. The five-year term of the management agreement is not contingent
upon the continuation of the facility lease. Upon expiration of the respective
five year management agreements, the agreements continue on a month-to-month
basis.
Student housing facilities subject to participating facility leases are as
follows:
LESSOR/UNIVERSITY LEASE COMMENCEMENT/ REQUIRED DEBT SEPTEMBER 30, 2004 DECEMBER 31, 2003
EXPIRATION REPAYMENT
- --------------------------------------------- ------------------------ --------------- ------------------------------------------
Texas A&M University System/Prairie View
A&M University 10/6/99 / 8/31/38 9/1/23 $ 37,817 $ 37,368
Texas A&M University System/Texas A&M
International 10/6/99 / 8/31/38 9/1/23 5,905 5,889
Texas A&M University System/Prairie View
A&M University 10/1/99 / 8/31/39 8/31/25 23,617 23,366
University of Houston System/University
of Houston 9/27/00 / 8/31/41 11/17/08 18,263 17,864
------------------------------------------
85,602 84,487
Less accumulated amortization (17,434) (14,774)
------------------------------------------
Student housing facilities subject to
leases, net $ 68,168 $ 69,713
==========================================
9
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
STUDENT HOUSING FACILITY SUBJECT TO LEASE - HELD FOR SALE
During 2003, the Predecessor entered into a ground lease with Weatherford
College, obtained construction financing and constructed a student housing
facility which opened in the Fall of 2003. This property's ground lease was
transferred to Weatherford College and the related debt was repaid in April
2004. The leasehold is reflected as Student Housing Facility Subject to Lease -
Held for Sale and the related construction loan is reflected as Note Payable
Secured by Leasehold Held for Sale as of December 31, 2003 in the accompanying
combined balance sheet.
5. JOINT VENTURE AND MINORITY INTERESTS
In August 2004, the Operating Partnership formed a limited liability company,
1772 Sweet Home Road, L.L.C. ("Sweet Home"), with a local landowner to develop
and own an off-campus student housing property located in Buffalo, New York. The
community will consist of nine residential buildings containing 271 units and
828 beds and is scheduled to be completed in the Fall of 2005. Upon the
formation of Sweet Home, an affiliate of the Operating Partnership (the
"Managing Member") caused Sweet Home to admit the local landowner (which was a
partner in the selling partnership) as a non-managing member of Sweet Home as
partial consideration for the land. In addition, the Managing Member will fund
all remaining development and construction costs of the project. A subsidiary of
the Services Company will serve as developer and construction manager of the
project. Each member receives a return on its investment and participates in
additional returns, as defined in the Operating Agreement. The non-managing
member's interest in Sweet Home is reflected as a minority interest in the
accompanying financial statements.
Minority interests also include PIUs received by certain executive and senior
officers equal to 1.0% of the shares issued in conjunction with the IPO (see
Note 7).
In connection with the IPO on August 17, 2004, a wholly-owned affiliate of the
Company acquired Titan Investments II ("Titan"), which held a minority ownership
in three development properties and one operating property in exchange for
approximately $5.7 million in cash. Subsequent to this transaction, the four
properties are now wholly owned by the Operating Partnership. This transaction
was accounted for using the purchase method and the purchase price was allocated
to the assets and liabilities acquired based on their respective fair values.
6. DEBT
A summary of the Company's outstanding consolidated and combined indebtedness is
as follows:
SEPTEMBER 30, 2004 DECEMBER 31, 2003
---------------------- ---------------------
Debt secured by student housing properties:
Revolving credit facility and short-term notes payable $ 4,000 $ 74
Mortgage loans payable 112,265 170,780
Construction loans payable - 26,447
Debt secured by student housing facilities subject to leases:
Construction loan payable 17,108 17,287
Bonds payable 59,655 61,010
---------------------- ---------------------
Total debt $ 193,028 $ 275,598
====================== =====================
10
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
During the nine months ended September 30, 2004, the following transactions
occurred:
NINE MONTHS ENDED
SEPTEMBER 30, 2004
-------------------------
Balance, beginning of period $ 275,598
Additions
Draws on lines of credit, net of payoffs 4,101
Draws under advancing construction loans 41,170
Deductions:
Scheduled repayments of principal (2,874)
Repayment of note payable secured by leasehold held for sale (8,080)
Reduction in debt due to distribution of assets in connection with
IPO (11,388)
Repayment of construction loans in connection with IPO (59,537)
Repayment of mortgage loans in connection with IPO (45,962)
-------------------------
Balance, end of period $ 193,028
=========================
In connection with the IPO on August 17, 2004, the Company paid off the
Predecessor's line of credit facility as well as three construction loans and
three mortgage loans. In addition, the Operating Partnership obtained a senior
secured revolving credit facility. The credit facility has a term of 36 months
and provides a maximum capacity of $75.0 million, subject to certain conditions
as contained in the Credit Agreement (the "Agreement"). The maximum capacity may
be increased by up to an additional $25 million, subject to certain borrowing
base requirements, as outlined in the Agreement. The facility bears interest at
a variable rate, at the Company's option, based upon a base rate or one-, two-,
three-, or six-month LIBOR plus, in each case, a spread based upon the Company's
total leverage. The credit facility is secured by the Company's ownership
interests in a minimum of four unlevered owned off-campus student housing
facilities. The Company guarantees the Operating Partnership's obligations under
the credit facility. As of September 30, 2004, the balance outstanding on our
revolving credit facility totaled $4.0 million bearing interest at 3.8%, with
remaining availability (subject to certain financial covenants) totaling $61.1
million.
The terms of the credit facility include certain restrictions and covenants,
which limit, among other things, the payment of dividends (as discussed below),
the incurrence of additional indebtedness, liens, and the disposition of assets.
The terms also require compliance with financial ratios relating to consolidated
net worth and leverage requirements. Commencing with the earlier of the day the
outstanding balance exceeds $25.0 million or December 31, 2005, the Company will
also be subject to compliance with additional fixed charge and debt coverage
ratios. The dividend restriction previously mentioned provides that, except to
enable the Company to continue to qualify as a REIT for federal income tax
purposes, before December 31, 2005, the Company may not pay dividends greater
than $5.0 million in any given quarter. Subsequent to December 31, 2005, the
Company will be prohibited from making distributions which exceed 95% of the
Company's funds from operations, as defined, over any four consecutive fiscal
quarters. As of September 30, 2004, the Company was in compliance with all such
covenants.
7. INCENTIVE AWARD PLAN
The Company has adopted the 2004 Incentive Award Plan (the "Plan"). The Plan
provides for the grant to selected employees and directors of the Company and
the Company's affiliates of stock options, PIUs in the Operating Partnership,
RSUs, restricted stock, and other stock-based incentive awards. The Company has
reserved a total of 1,210,000 shares of the Company's common stock for issuance
pursuant to the Plan, subject to certain adjustments for changes in the
Company's capital structure, as defined in the Plan.
11
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Of the total shares reserved for issuance under the Plan, 367,682 shares have
been reserved for issuance to the Company's executive officers, certain senior
officers and key employees related to an outperformance award plan. These awards
consist of a bonus pool equal to the value on the date of vesting of a certain
number of shares of common stock, as outlined in the Plan. No dividends or
dividend equivalent payments will accrue with respect to the shares of common
stock underlying this bonus pool. Vesting of the awards will occur on the third
anniversary of the IPO, provided that the employees have maintained continued
service and that certain performance measures have been achieved, as outlined in
the Plan. Payments of vested awards will be made within 120 days of vesting.
Such payments will be paid in cash; however, the Compensation Committee of the
Board of Directors may, in its sole discretion, elect to pay such an award
through the issuance of shares of common stock, PIUs or similar securities,
valued at the date of issuance.
Upon consummation of the IPO, 121,000 PIUs were issued to certain executive and
senior officers. PIUs are a special class of interests in the Operating
Partnership, and each PIU awarded is deemed equivalent to one share of the
Company's common stock. PIUs will receive the same quarterly per unit
distribution as the per share distributions on the Company's common stock. Under
the terms of the PIU agreements, the Operating Partnership will revalue its
assets upon the occurrence of certain "book-up events", at which time the PIUs
will achieve full parity with common units of the Operating Partnership. PIUs
will thereafter be automatically converted into an equal number of common units
of the Operating Partnership. The Operating Partnership recognized approximately
$2.1 million of compensation expense on the IPO date, reflecting the fair value
of the PIUs issued.
Additionally, in conjunction with the IPO, 7,145 RSUs were issued to certain
independent directors. No shares of stock were issued at the time of the RSU
awards, and the Company is not required to set aside a fund for the payment of
any such award; however, the stock is deemed to be awarded on the date of grant.
Upon the Settlement Date, which is three years from the date of grant, the
Company will deliver to the recipients a number of shares of common stock equal
to the number of RSUs held by the recipients. In addition, recipients of RSUs
are entitled to dividend equivalents equal to the cash dividends paid by the
Company on one share of common stock for each RSU issued, payable currently or
on the Settlement Date, as determined by the Compensation Committee of the Board
of Directors. The Company recognized approximately $0.1 million of compensation
expense on the IPO date, reflecting the fair value of the RSUs issued.
8. INTEREST RATE HEDGES
In connection with the 2001 acquisition of a student housing facility, the
Predecessor purchased an interest rate cap effective November 16, 2001 through
December 10, 2004, for approximately $0.1 million. The rate cap paid interest
above LIBOR of 7.5% and was designated to hedge the Predecessor's exposure to
increases in cash outflows for interest payments on a variable rate loan in the
amount of $19.5 million. The debt underlying this hedge was repaid in connection
with the IPO and consequently the hedge is no longer considered an effective
cash flow hedge. This hedge has zero fair value at September 30, 2004 and
December 31, 2003.
In connection with the December 2003 extension of a construction note payable,
the Predecessor entered into an interest rate swap on November 19, 2003
(effective December 15, 2003 through November 15, 2008) that was designated to
hedge its exposure to fluctuations on interest payments attributed to changes in
interest rates associated with payments on its advancing construction note
payable. Under the terms of the interest rate swap agreement, the Company pays a
fixed rate of 5.5% and receives a floating rate of LIBOR plus 1.9%. The interest
rate swap had a negative fair value of approximately $0.1 million and $0.2
million at September 30, 2004 and December 31, 2003, respectively, and is
reflected in other liabilities in the accompanying consolidated and combined
balance sheets.
The Company does not expect to reclassify a material amount of net gains on
hedge instruments from accumulated other comprehensive income to earnings in
2004. Ineffectiveness resulting from the Company's hedges is not material.
9. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is subject to claims, lawsuits,
and legal proceedings. While it is not possible to ascertain the ultimate
outcome of such matters, management believes that the aggregate amount of such
liabilities, if any, in excess of amounts provided or covered by insurance, will
not have a material adverse effect on the consolidated financial position or
results of operations of the Company.
12
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
GUARANTEES
The Company provides project costs guarantees, subject to force majeure. These
guarantees are typically limited to the amount of the projects' related
development fees or a contractually agreed-upon maximum exposure amount. Our
maximum exposure under such guarantees is approximately $4.0 million. The
development budget consists primarily of costs included in the general
contractors' guaranteed maximum price contract ("GMP"). The GMP obligates the
general contractor, subject to force majeure and approved change orders, to
cover cost overruns. In addition, the GMP is secured with payment and
performance bonds.
In 2002, on a project not included above, the Company provided a guarantee of
all performance obligations under the development agreement, limited to $4.0
million. This project was completed in 2003. On one completed project, in
addition to the project cost guarantees discussed above, the Company has
guaranteed losses up to $3.0 million in excess of the development fee if the
loss is due to any failure of the Company to maintain, or cause its
professionals to maintain, required insurance for a period of five years beyond
completion of the project (August 2009).
Except for the $3.0 million guarantee related to maintaining required insurance,
these guarantees expire upon completion of certain developer obligations of the
related projects, which are normally satisfied within one year after completion
of the project.
At September 30, 2004 all projects were on schedule and within budget. The
Company has estimated the fair value of guarantees entered into or modified
after December 31, 2002, the effective date of FASB Interpretation No. 45
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others," to be immaterial.
RAP Student Housing Properties, L.L.C.'s (an entity wholly owned by the
Operating Partnership) limited guarantee of the mortgage loan for the Village at
Riverside, which was distributed to the Predecessor owners in connection with
the IPO, continues to be in effect. As part of the formation transactions, the
Predecessor owners have indemnified the Company and its affiliates from and
against all claims, costs, expenses, losses and damages incurred by the Company
under or in connection with this guarantee.
LEASE COMMITMENTS
The Company has a sublease for corporate office space beginning August 15, 2002,
and expiring December 31, 2010. The terms of the sublease provide for a period
of free rent and scheduled rental rate increases and common area maintenance
charges upon expiration of the free rent period.
The Company also has a ground lease agreement dated October 2, 2003 for the
purpose of constructing a student housing facility near the campus of Temple
University in Philadelphia, Pennsylvania. The agreement terminates on June 30,
2079 and has four six year extensions available; however the university may
unilaterally elect not to extend the term. Under the terms of the ground lease,
the lessor receives annual minimum rents of $0.1 million and contingent rental
payments based on a defined formula.
The Company also has various operating and capital leases for furniture, office
and technology equipment, which expire through 2009.
10. DISCONTINUED OPERATIONS
During 2003, the Predecessor entered into a ground lease with Weatherford
College, obtained construction financing and constructed a student housing
facility which opened in the Fall of 2003. This leasehold was transferred to
Weatherford College and the related debt was repaid in April 2004. The related
gain on transfer was approximately $0.1 million. In addition, in connection with
the IPO, the Company distributed its interests in the entities owning the
Village at Riverside to an affiliate of the Company's Predecessor owners along
with certain other non-core assets, consisting of a single condominium unit and
an undeveloped parcel of land.
13
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
The related net loss for the properties sold or distributed is reflected in the
accompanying consolidated and combined statements of operations as discontinued
operations for the periods presented in accordance with Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-term Assets." Below is a summary of the results of operations for the
properties sold or distributed through their respective sale or distribution
dates:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
2004 2003 2004 2003
--------------- --------------- --------------- ---------------
Total revenues $ 266 $ 689 $ 1,586 $ 1,868
Total operating expenses 261 534 1,294 1,310
--------------- --------------- --------------- ---------------
Operating income 5 155 292 558
Total nonoperating expenses (109) (245) (665) (660)
--------------- --------------- --------------- ---------------
Net loss $ (104) $ (90) $ (373) $ (102)
=============== =============== =============== ===============
There were no assets and liabilities attributable to properties sold or
distributed as of September 30, 2004. As of December 31, 2003, assets and
liabilities attributable to the properties sold or distributed consisted of the
following:
DECEMBER 31, 2003
---------------------
Cash and cash equivalents $ 404
Other assets $ 729
Land, buildings and improvements, and furniture,
fixtures, and equipment, net of accumulated
depreciation $ 21,654
Accounts payable and accrued expenses $ 489
Notes payable $ 19,548
Other liabilities $ 514
14
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
11. SEGMENTS
The Company defines business segments by their distinct customer base and
service provided. The Company has identified three reportable segments: Student
Housing Rentals (rentals from student housing properties and student housing
facilities subject to leases), Construction Management and Development Services,
and Property Management Services. Management evaluates each segment's
performance based on operating income before depreciation, amortization,
minority interests and allocation of corporate overhead. Intercompany fees are
reflected at the contractually stipulated amounts.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
2004 2003 2004 2003
-------------- -------------- -------------- --------------
STUDENT HOUSING RENTALS
Rental revenues $ 12,632 $ 10,453 $ 36,862 $ 34,703
Interest and other income 35 18 40 84
-------------- -------------- -------------- --------------
Total revenues from external customers 12,667 10,471 36,902 34,787
Operating expenses before depreciation, amortization,
and ground lease 6,590 5,921 16,886 15,756
Ground lease 302 42 698 302
Interest expense
4,487 4,219 13,035 12,591
-------------- -------------- -------------- --------------
Operating income before depreciation, amortization,
minority interests and allocation of corporate overhead $ 1,288 $ 289 $ 6,283 $ 6,138
============== ============== ============== ==============
Depreciation and amortization $ 3,947 $ 2,369 $ 8,867 $ 7,081
============== ============== ============== ==============
Total segment assets at September 30, $ 351,045 $ 315,843 $ 351,045 $ 315,843
============== ============== ============== ==============
CONSTRUCTION MANAGEMENT AND DEVELOPMENT SERVICES
Development and construction management fees from external
customers $ 537 $ 2,708 $ 4,738 $ 6,339
Intersegment revenues 132 124 457 286
-------------- -------------- -------------- --------------
Total revenues 669 2,832 5,195 6,625
Operating expenses 861 915 2,735 2,483
-------------- -------------- -------------- --------------
Operating (loss) income before depreciation, amortization,
minority interests and allocation of corporate overhead $ (192) $ 1,917 $ 2,460 $ 4,142
============== ============== ============== ==============
Total segment assets at September 30, $ 6,419 $ 3,814 $ 6,419 $ 3,814
============== ============== ============== ==============
PROPERTY MANAGEMENT SERVICES
Property management fees from external customers $ 533 $ 179 $ 1,305 $ 818
Intersegment revenues 288 250 775 765
-------------- -------------- -------------- --------------
Total revenues 821 429 2,080 1,583
Operating expenses 358 337 1,088 1,175
-------------- -------------- -------------- --------------
Operating income before depreciation, amortization,
minority interests and allocation of corporate overhead $ 463 $ 92 $ 992 $ 408
============== ============== ============== ==============
Total segment assets at September 30, $ 1,253 $ 541 $ 1,253 $ 541
============== ============== ============== ==============
RECONCILIATIONS
Total segment revenues $ 14,157 $ 13,732 $ 44,177 $ 42,995
Elimination of intersegment revenues (420) (374) (1,232) (1,051)
-------------- -------------- -------------- --------------
Total consolidated revenues $ 13,737 $ 13,358 $ 42,945 $ 41,944
============== ============== ============== ==============
Segment operating income before depreciation, amortization,
minority interests and allocation of corporate overhead $ 1,559 $ 2,298 $ 9,735 $ 10,688
Depreciation and amortization 3,468 2,349 8,287 7,049
Net unallocated expenses relating to corporate overhead 4,038 1,399 6,699 4,079
Income tax benefit 757 - 757 -
Minority interests 86 (4) 130 (25)
-------------- -------------- -------------- --------------
Loss from continuing operations $ (5,104) $ (1,454) $ (4,364) $ (465)
============== ============== ============== ==============
Total segment assets $ 358,717 $ 320,198 $ 358,717 $ 320,198
Unallocated corporate assets 3,433 301 3,433 301
-------------- -------------- -------------- --------------
Total assets $ 362,150 $ 320,499 $ 362,150 $ 320,499
============== ============== ============== ==============
15
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
12. SUBSEQUENT EVENTS
In October 2004, the Company received a partial insurance settlement related to
a fire that occurred in May 2003 at one of the Company's off-campus facilities
under development at the time of the fire. The Company recognized a gain of
approximately $0.6 million in October 2004 upon receipt of this payment.
On November 10 2004, the Company declared a distribution per share of $0.1651
which will be paid on November 29, 2004 to all common shareholders of record as
of November 22, 2004. At the same time, the Company expects to pay or set aside
an equivalent amount per unit to holders of PIUs in the Operating Partnership
and holders of RSUs, respectively (see Note 7). This distribution to common
shareholders was prorated to reflect third quarter operations subsequent to the
IPO and therefore reflects the period from August 17, 2004 through September 30,
2004.
16
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report. This report
contains forward-looking statements within the meaning of the federal securities
laws. We caution investors that any forward-looking statements presented in this
report, or which management may make orally or in writing from time to time, are
based on management's beliefs and assumptions made by, and information currently
available to, management. When used, the words "anticipate," "believe,"
"expect," "intend," "may," "might," "plan," "estimate," "project," "should,"
"will," "result" and similar expressions, which do not relate solely to
historical matters, are intended to identify forward-looking statements. Such
statements are subject to risks, uncertainties and assumptions and may be
affected by known and unknown risks, trends, uncertainties and factors that are
beyond our control. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated or projected. We caution
you that while forward-looking statements reflect our good faith beliefs when we
make them, they are not guarantees of future performance and are impacted by
actual events when they occur after we make such statements. We expressly
disclaim any responsibility to update forward-looking statements, whether as a
result of new information, future events or otherwise. Accordingly, investors
should use caution in relying on past forward-looking statements, which are
based on results and trends at the time they were made, to anticipate future
results or trends.
Some of the risks and uncertainties that may cause our actual results,
performance or achievements to differ materially from those expressed or implied
by forward-looking statements include, among others, the following: general
risks affecting the real estate industry (including, without limitation, the
inability to enter into or renew leases, dependence on tenants' financial
condition, and competition from other developers, owners and operators of real
estate); risks associated with the availability and terms of financing and the
use of debt to fund acquisitions and developments; failure to manage effectively
our growth and expansion into new markets or to integrate acquisitions
successfully; risks and uncertainties affecting property development and
construction (including, without limitation, construction delays, cost overruns,
inability to obtain necessary permits and public opposition to such activities);
risks associated with downturns in the national and local economies, increases
in interest rates, and volatility in the securities markets; costs of compliance
with the Americans with Disabilities Act and other similar laws; potential
liability for uninsured losses and environmental contamination; risks associated
with our company's potential failure to qualify as a REIT under the Internal
Revenue Code of 1986, as amended, and possible adverse changes in tax and
environmental laws; and risks associated with our dependence on key personnel
whose continued service is not guaranteed.
The risks included here are not exhaustive, and additional factors could
adversely affect our business and financial performance, including factors and
risks included in other sections of this report. In addition, we discussed a
number of material risks in our Form S-11 dated as of August 11, 2004. Those
risks continue to be relevant to our performance and financial condition.
Moreover, we operate in a very competitive and rapidly changing environment. New
risk factors emerge from time to time and it is not possible for management to
predict all such risk factors, nor can it assess the impact of all such risk
factors on our company's business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.
FORMATION AND STRUCTURE OF OUR COMPANY
The terms "the Company," "us," "we" and "our" as used in this report refer to
American Campus Communities, Inc. Through our controlling interest in American
Campus Communities Operating Partnership, L.P. (the "Operating Partnership"), of
which we (through a wholly owned subsidiary) are the sole general partner, and
the subsidiaries of the Operating Partnership, including American Campus
Communities Services, Inc. (the "Services Company") which serves as our taxable
REIT Subsidiary ("TRS"). The Company is one of the largest private owners,
managers and developers of high quality student housing properties in the United
States in terms of beds owned and under management. The Company is a fully
integrated, self-managed and self-administered equity REIT with expertise in the
acquisition, design, finance, development, construction management, leasing and
management of student housing properties.
17
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We were formed to succeed the business of the American Campus Communities
Predecessor (the "Predecessor"), which was not a legal entity but rather a
combination of real estate entities under common ownership and voting control
collectively doing business as American Campus Communities, L.L.C. and
Affiliated Student Housing Properties, entities engaged in the student housing
business since 1993. Our Company was incorporated in Maryland on March 9, 2004.
Additionally, the Operating Partnership was formed and the Services Company was
incorporated in Maryland on July 14, 2004 and August 17, 2004, respectively,
each in anticipation of our initial public offering of common stock (the "IPO").
The IPO was consummated on August 17, 2004, concurrent with the consummation of
various formation transactions, and consisted of the sale of 12,100,000 shares
of our common stock at a price per share of $17.50, generating gross proceeds of
approximately $211.8 million. The aggregate proceeds to our Company, net of the
underwriters' discount were approximately $189.8 million. In connection with the
exercise of the underwriters' over-allotment option on September 15, 2004, we
issued an additional 515,000 shares of common stock at the IPO price per share,
generating an additional $9.0 million of gross proceeds and $8.4 million in net
proceeds after the underwriters' discount. Our operations commenced on August
17, 2004 after completion of the IPO and the formation transactions, and are
conducted substantially through the Operating Partnership and its wholly owned
subsidiaries, including the Services Company.
In connection with the IPO we completed the following formation transactions:
o Redeemed 100% of the ownership interests of the Predecessor owner in
RAP Student Housing Properties L.L.C. ("RAP SHP") for a total of
approximately $80.2 million.
o Acquired the minority ownership interest of Titan Investments II
("Titan") in certain owned off-campus properties in exchange for
approximately $5.7 million.
o Repaid certain construction and permanent indebtedness totaling
approximately $105.5 million.
o Distributed The Village at Riverside and certain other non-core assets
to our Predecessor owner (by RAP SHP).
o Entered into a senior secured revolving credit facility with a maximum
limit of $75.0 million subject to certain ratios and covenants.
o Received a four-year option from our Predecessor owners to acquire The
Village at Riverside property for a cash price equal to its most
recent net operating income (before debt service) over the preceding
four calendar quarters divided by an 8% cap rate, but in no case less
than $12.0 million during the option's first 24 months and $13.0
million during the option's final 24 months.
o Received a four-year option from our Predecessor owners to acquire
their 23% non-controlling interest in Dobie Center, a property that we
currently manage.
As our Predecessor was not a REIT and provided certain services to residents
which are impermissible under IRS REIT regulations, in conjunction with the
formation of our Company we restructured our operations relative to the
provision of these services. Subsequent to the commencement of our operations as
a REIT, these resident services have been provided by our Services Company which
serves as our TRS, resulting in lower rental revenue and higher resident
services revenue.
OVERVIEW
Quarterly information discussed herein reflects the combination of our and the
Predecessor's operations for the period. Our results in the third quarter of
2004 were impacted by a series of charges totaling approximately $2.6 million
related to our recent IPO and related formation transactions. The primary
components of the charges include: (i) PIU grants of approximately $2.1 million,
(ii) RSU grants of $0.1 million, (iii) write-off of loan origination costs and
exit fees associated with the repayment of indebtedness of approximately $1.2
million, and (iv) offset by the recognition of a deferred tax asset associated
with a step up in the tax basis of participating properties owned by our TRS,
resulting in an income tax benefit of $0.8 million.
For the three and nine months ended September 30, 2004, our net loss totaled
$5.2 million and $4.7 million, respectively, compared to $1.5 million and $0.6
million for the comparable periods in 2003. Funds from Operations ("FFO") for
the three and nine months ended September 30, 2004 totaled $(2.6 million) and
$2.4 million, respectively, compared to $0.7 million and $6.1 million for the
corresponding periods in 2003. See "Funds From Operations" included hereinafter
for definitions of FFO and for a reconciliation of FFO to net loss, the most
directly comparable GAAP measure.
18
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PROPERTY OPERATIONS
As of September 30, 2004, our property portfolio consisted of the
following:
YEAR
ACQUIRED / PRIMARY UNIVERSITY
PROPERTY AGE DEVELOPED LOCATION SERVED UNITS BEDS
- -------- --- ---------------- ------------------ ------------------------ -------- --------
OWNED OFF CAMPUS PROPERTIES:
Commons On Apache 17 1999 Tempe, AZ Arizona State
University Main
Campus 111 444
The Village at Blacksburg 6/14 2000 Blacksburg, VA Virginia Polytechnic
Institute and State
University 288 1,056
The Village on University 6 1999 Tempe, AZ Arizona State
University Main
Campus 288 918
River Club Apartments 8 1999 Athens, GA The University
of Georgia-Athens 266 794
River Walk Townhomes 6 1999 Athens, GA The University of
Georgia-Athens 100 340
The Callaway House 5 2001 College Station, TX Texas A&M University 173 538
The Village at Alafaya Club 5 2000 Orlando, FL The University of
Central Florida 228 840
The Village at Science Drive 4 2001 Orlando, FL The University of
Central Florida 192 732
University Village at Boulder 2 2002 Boulder, CO The University of
Creek Colorado at Boulder 82 309
University Village at Fresno - 2004 Fresno, CA California State
University, Fresno 105 406
University Village at San - 2004 San Bernardino, CA California State
Bernardino University,
San Bernardino 132 480
University Village at TU - 2004 Philadelphia, PA Temple University 220 749
-------- --------
Total owned off campus properties 2,185 7,606
ON CAMPUS PARTICIPATING
PROPERTIES:
Prairie View A&M
University Village--PVAMU 6/7/8 1996 / 97 / 98 Prairie View, TX University 612 1,920
Prairie View A&M
University College--PVAMU 1/4 2000 / 2003 Prairie View, TX University 756 1,470
Texas A&M
International
University Village--TAMIU 7 1997 Laredo, TX University 84 252
The University of
Cullen Oaks 3 2001 Houston, TX Houston 231 525
-------- --------
Total on campus participating 1,683 4,167
properties
GROWTH PROPERTIES (DISCUSSED
BELOW):
University Village at Sweet State University of
Home - 2005 Buffalo, NY New York - Buffalo 271 828
Proctor Portfolio
University Club Tallahassee Florida State
Phase I 4 2004 Tallahassee, FL University 152 608
University Club Tallahassee Florida State
Phase II 2 2004 Tallahassee, FL University 64 128
College Club Tallahassee Florida State
Phase I 3 2004 Tallahassee, FL University 96 384
College Club Tallahassee Florida State
Phase II - 2004 Tallahassee, FL University 40 160
University Club Gainesville 5 2004 Gainesville, FL University of
Florida 94 376
-------- --------
Total growth properties 717 2,484
-------- --------
TOTAL - ALL PROPERTIES 4,585 14,257
======== ========
19
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GROWTH
In August 2004, we commenced construction of a $35.8 million owned off campus
development located in close proximity to the campus of State University of New
York - Buffalo. This 19.5 acre project consists of 318,827 projected square feet
and nine buildings containing 271 units featuring 828 private bedroom and
bathroom accommodations. The community also features a 16,065 square-foot
clubhouse featuring resort style amenities. This project is scheduled to open in
August of 2005 in conjunction with the commencement of the 2005/2006 academic
year. This property is currently accepting applications for the 2005/2006 lease
term at an average marketed per bed monthly rental of approximately $556.
In September of 2004, we entered into a purchase and sale agreement to acquire a
five-property portfolio (the "Proctor Portfolio") with four of the properties
located in Tallahassee, Florida and one property located in Gainesville,
Florida. These five communities total 53 buildings, 446 units, and 1,656 beds.
The purchase and sale agreement contemplates a purchase price of $53.5 million
which includes the assumption of $35.5 million in debt at a weighted average
interest rate of 7.4% and a weighted average remaining term of 6.4 years.
Subject to completion of certain contingencies, we anticipate this acquisition
to close in early December 2004. Occupancy at these properties as of September
30, 2004 was approximately 94.7% and current leases in effect reflect an average
monthly per bed revenue of $445.
OWNED OFF CAMPUS PROPERTIES
Owned off campus rental revenues for the nine months ended September 30, 2004
totaled $24.9 million as compared to $23.8 million for the comparable period in
2003. In August of 2004, we completed construction of three communities
containing 457 units and 1,635 beds, resulting in a total of 13 owned off campus
properties containing 2,456 units and 8,434 beds. Also, during the third
quarter, our 2003/2004 academic year resident leases terminated and our
2004/2005 academic year leases commenced. Average occupancy for same store
properties at September 30, 2004 was 96.9% compared to 88.2% at September 30,
2003. Average occupancy at the recently completed development properties was
98.7% at September 30, 2004.
ON CAMPUS PARTICIPATING PROPERTIES
Rental revenues from our on campus participating properties totaled $11.8
million for the nine months ended September 30, 2004 as compared to $10.9
million for the comparable period in 2003. At September 30, 2004, these
properties comprised 33.1% of our owned beds and represent 27.5% of our revenues
for the nine months then ended. These ratios are expected to decrease
significantly in the future given the opening of our three owned off campus
assets, the Sweet Home development and the acquisition of the Proctor Portfolio.
Our on campus participating properties have lease terms which generally follow
the academic sessions of the related university commencing in August and
terminating in May of the following year. Leases are separately executed for
summer sessions. Average occupancy for the 2004/2005 lease term at September 30,
2004 was 98.0% compared to 99.7% at September 30, 2003. Due to the unique nature
of the participating ground leases, these on campus participating properties are
owned by our Services Company (TRS).
Under our participating ground leases, we receive an annual distribution
representing 50% of these properties' net cash available for distribution after
payment of operating expenses (which includes our management fees), debt service
(which includes repayment of principal) and capital expenditures. We also manage
these properties under multi-year management agreements and are paid a
management fee representing 5% of receipts.
20
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We do not have access to the cash flows and working capital of these
participating properties except for the annual net cash distribution as
described above. Additionally, a substantial portion of these properties' cash
flow is dedicated to capital reserves required under the applicable property
indebtedness and to the amortization of such indebtedness. These amounts do not
increase our economic interest in these properties since our interest, including
our right to share in the net cash available for distribution from the
properties, terminates upon the amortization of their indebtedness. Our economic
interest in these properties is therefore limited to our interest in the net
cash flow and management fees from these properties. Accordingly, when
considering these properties' contribution to our operations, we focus upon our
share of these properties' net cash available for distribution and the
management fees that we receive from these properties rather than upon their
contribution to our gross revenues and expenses for financial reporting
purposes.
The following table reflects the contribution to our consolidated/combined
income and expense of our on-campus participating properties for the three and
nine months ended September 30, 2004 and 2003. These results include the
contribution of certain on-campus participating properties that were developed
by us and by pre-arrangement transferred to the university after the necessary
financing had been secured:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------- ----------------------------------
2004 2003 2004 2003
---------------- ----------------- --------------- ---------------
Revenues $ 3,328 $ 3,064 $ 12,135 $ 11,075
Direct Operating Expenses(1) 1,892 2,103 5,538 5,383
Amortization 950 821 2,660 2,420
Amortization of deferred financing costs 47 38 193 114
Ground Lease Expense 302 43 698 302
---------------- ----------------- --------------- ---------------
Net Operating Income 137 59 3,046 2,856
Interest Income 23 7 36 26
Interest Expense (1,379) (1,310) (4,199) (3,857)
Other Non-operating Income (Expense) 251 (29) 169 (57)
---------------- ----------------- --------------- ---------------
NET LOSS $ (968) $ (1,273) $ (948) $ (1,032)
================ ================= =============== ===============
Our Share of Excess Cash Distribution $ 302 $ 43 $ 698 $ 302
================ ================= =============== ===============
Management Fees Paid by Facilities to our
Services Company $ 158 $ 141 $ 586 $ 525
================ ================= =============== ===============
- -----------
(1) Excludes the property management fees described above. This expense and the
corresponding fee revenue recognized by us have been eliminated in
consolidation/combination. Also excludes allocation of expenses related to
corporate management and oversight.
Three of our on-campus participating properties are encumbered by $59.7 million
of taxable insured bond financing that are without recourse to us. The fourth
property (Cullen Oaks) is encumbered by approximately $17.1 million of floating
rate debt that matures in November 2008 for which we have purchased an interest
rate swap that effectively fixes the interest rate of this construction
financing at 5.5% through its maturity.
THIRD PARTY SERVICES
Through the Services Company, the Company provides development and construction
management services and facility management services for student housing
properties owned by colleges and universities, charitable foundations, and
others, and certain services to residents at our properties. Revenues from third
party services totaled approximately $1.1 million and $6.0 million for the three
and nine months ended September 30, 2004, respectively and reflected
approximately 7.8% and 14.1% of our total revenues for those periods.
21
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DEVELOPMENT SERVICES
During the third quarter, we opened six projects that we developed for third
parties with total development budgets of approximately $218.2 million and fees
of approximately $8.1 million. These projects were completed on time and within
the approved budgets. In August, we commenced two third party development
projects with total fees of approximately $0.8 million. One of the projects
relates to pre-development design consulting, and the other is scheduled to
complete construction in August 2005. Additionally, at September 30, 2004, we
were awarded three additional projects that are in pre-development with proposed
fees of $5.1 million. These projects are scheduled to commence construction in
the fourth quarter of 2004 and first quarter of 2005. We were also in
discussions with the University of Houston regarding a second phase to be
constructed at Cullen Oaks, with proposed fees of approximately $1.1 million. We
anticipate receiving formal approval on this project from the University of
Houston's Board of Regents in the fourth quarter. Development services revenues
are dependent on our ability to successfully obtain such projects, the amount of
the contractual fee related to the project and the timing and completion of the
construction of the project. Revenue from these services is recognized for
financial reporting purposes utilizing the percentage of completion method.
MANAGEMENT SERVICES
The Company provides third party property management and leasing services for 18
student housing properties that represent 15 third party contracts,
approximately 11,643 beds, and approximately 4,615 units, 13 of which we
developed for the third party owner. This compares to 14 properties under
management at September 30, 2003. Third party management and leasing services
are typically provided pursuant to multi-year management contracts that have an
initial term that ranges from two to five years.
RESIDENT SERVICES
Concurrent with our commencement of operations and our designation as a REIT,
certain services previously provided to residents by our properties are now
provided by our Services Company (our TRS). These services generally consist of
food service and housekeeping (at Callaway House), and certain resident
programming activities. These services are provided to the residents at market
rates and, under an agreement between the Services Company and the Operating
Partnership, payments from residents are collected by the properties on behalf
of the Services Company in conjunction with their collection of rents. Resident
Services for the three months ending September 30, 2004 approximated $0.1
million. As a business strategy, our level of services provided to residents by
the Services Company is only incidental to that which is necessary to maintain
or increase occupancy.
22
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003
The following table presents our results of operations for the three months
ended September 30, 2004 and 2003, including the amount and percentage change in
these results between the two periods:
9/30/2004 9/30/2003 Change($) Change(%)
-------------- ------------- -------------- ------------
REVENUES:
Student housing rental revenue $ 9,191 $ 7,500 $ 1,691 22.5%
On-campus participating properties rental revenue 3,328 2,893 435 15.0%
Third party development services 537 2,709 (2,172) -80.2%
Third party management services 535 236 299 126.7%
Resident services 114 - 114 100.0%
-------------- ------------- -------------- ------------
Total revenues 13,705 13,338 367 2.8%
OPERATING EXPENSES:
Student housing 5,333 4,265 1,068 25.0%
On-campus participating properties 2,032 2,170 (138) -6.4%
Third party development and management services 1,330 1,401 (71) -5.1%
General and administrative 2,912 345 2,567 744.1%
Depreciation and amortization 2,685 2,209 476 21.5%
Ground lease (on-campus participating properties) 302 43 259 602.3%
-------------- ------------- -------------- ------------
Total operating expenses 14,594 10,433 4,161 39.9%
-------------- ------------- -------------- ------------
Operating (loss) income (889) 2,905 (3,794) 130.6%
NONOPERATING INCOME AND (EXPENSES):
Interest income 32 20 12 60.0%
Interest expense (4,581) (4,235) (346) 8.2%
Amortization of deferred financing costs (783) (140) (643) 459.3%
Other nonoperating income 274 - 274 100.0%
-------------- ------------- -------------- ------------
Total nonoperating expenses (5,058) (4,355) (703) 16.1%
-------------- ------------- -------------- ------------
Loss before taxes, minority interests, and discontinued (5,947) (1,450) (4,497) 310.1%
operations
Income tax benefit 757 - 757 100.0%
Minority interests 86 (4) 90 2250.0%
-------------- ------------- -------------- ------------
Loss from continuing operations (5,104) (1,454) (3,650) 251.0%
Loss attributable to discontinued operations (104) (90) (14) 15.6%
-------------- ------------- -------------- ------------
NET LOSS $ (5,208) $ (1,544) $ (3,664) 237.3%
============== ============= ============== ============
STUDENT HOUSING PROPERTIES OPERATIONS (OWNED OFF-CAMPUS)
Revenues from our owned off-campus student housing properties for the three
months ended September 30, 2004 compared with the same period in 2003 increased
$1.7 million primarily due to the opening of three properties in August 2004 and
higher occupancy at the majority of the same store properties operated during
both the three month periods ended September 30, 2004 and 2003, as described
below. Operating expenses increased $1.1 million for the three months ended
September 30, 2004 compared with the same period in 2003.
NEW PROPERTY OPERATIONS. In the third quarter of 2004 we opened a 406-bed
property serving California State University, Fresno; a 480-bed property serving
California State University, San Bernardino; and a 749-bed property serving
Temple University. These new properties contributed $1.3 million of additional
revenues and $0.7 million of additional operating expenses during 2004 as
compared with 2003. Included in these additional 2004 expenses is approximately
$0.3 million of operating expenses related to our Predecessor operations that
will not be ongoing.
23
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAME STORE PROPERTY OPERATIONS (EXCLUDING NEW PROPERTY ACTIVITY). We had nine
properties containing 5,971 beds which were operating during both the three
month periods ended September 30, 2004 and 2003, and which had weighted average
occupancy rates during these periods of 89.0% and 84.7%, respectively. These
properties produced revenues of $7.9 million and $7.5 million during the three
month periods ended September 30, 2004 and 2003, respectively. This increase was
the result of the improved Fall 2004 lease up and was offset by certain
non-rental revenues reflected as property revenues by the Predecessor which are
now reflected as Resident Services revenues in our TRS.
At these existing properties, operating expenses increased $0.3 million for the
three months ended September 30, 2004 compared with the same period in 2003.
This increase was the result of such operating expenses as bad debt,
maintenance, employee benefits, and taxes from the nine properties operating
during both periods. These increases are due to a combination of increases in
inflation, overall higher occupancy rates and decreased collection prospects at
certain properties.
STUDENT HOUSING PROPERTIES SUBJECT TO LEASES (ON-CAMPUS PARTICIPATING
PROPERTIES) OPERATIONS
Revenues from our on-campus participating properties increased $0.4 million for
the three months ended September 30, 2004 compared with the same period in 2003
primarily due to increased rental rates at certain properties and an increase in
rents as a result of summer conferences.
NEW PROPERTY OPERATIONS. In August 2003 we opened a 210-bed phase of University
College-Prairie View A&M University. This new property contributed $0.1 million
of revenue and $0.1 million of operating expense during both the three month
periods ended September 30, 2004 and 2003.
SAME STORE PROPERTY OPERATIONS (EXCLUDING NEW PROPERTY ACTIVITY). We had four
properties containing 3,957 beds which were operating during both the three
month periods ended September 30, 2004 and 2003, and which had weighted average
occupancy rate of 71.1% during both periods. These properties produced revenues
of $3.2 million and $2.8 million during the three month periods ended September
30, 2004 and 2003, respectively.
Operating expenses for our existing properties decreased to $1.9 million for the
three months ended September 30, 2004 from $2.0 million for the three months
ended September 30, 2003, a decrease of $0.1 million. This decrease is primarily
due to reduced maintenance expenses as a result of increased operational
efficiencies.
THIRD PARTY SERVICES
Third party services revenue decreased to $1.1 million for the three months
ended September 30, 2004. Third party services revenue consists of development
services revenue and management services revenue.
DEVELOPMENT SERVICES. Third party development services revenue for the three
months ended September 30, 2004 represented a decrease of $2.2 million compared
with the same period in 2003. This decrease is due to a combination of fewer
projects, a lower average project development cost and corresponding contractual
fee per project and the percentage of the contractual fee recognized during the
respective period. We had five projects in progress during the three month
period ended September 30, 2004 with an average contractual fee of $1.4 million
compared with the three month period ended September 30, 2003 in which we had
six projects in progress with an average contractual fee of $1.6 million. In
addition, due to the differences in the percentage of construction completed
during the periods, of the total contractual fees of the projects in progress
during the respective periods, 6.9% was recognized (on a percentage of
completion basis) during the three months ended September 30, 2004 compared with
26.4% for the same period in 2003.
MANAGEMENT SERVICES. Third party property management revenues increased $0.3
million for the three months ended September 30, 2004 compared with the same
period in 2003. The increase was due to five contracts that commenced in Fall
2003 and three contracts that commenced during the quarter ended September 30,
2004.
24
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL AND ADMINISTRATIVE
General and administrative costs of $2.9 million for the three months ended
September 30, 2004 included $2.2 million of expenses related to the IPO and
formation transactions. Excluding these expenses, general and administrative
costs increased $0.4 million for the three months ended September 30, 2004
compared with the same period in 2003. The IPO and formation transactions
consisted of the recognition of compensation expense of $2.1 million and $0.1
million in connection with the issuance of PIUs and RSUs, respectively. The
remaining increase was primarily a result of expenses incurred as a public
company which were not present in the Predecessor's operations such as
directors' fees, investor relations and director and officer liability
insurance. As a result of being a public company, we anticipate our future
general and administrative costs will exceed those of our Predecessor's.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $0.5 million for the three months ended
September 30, 2004 compared with the same period in 2003 primarily due to the
opening of the three owned off-campus student housing development properties in
August 2004. Amortization of deferred financing costs increased $0.6 million for
the three months ended September 30, 2004 compared with the same period in 2003
primarily due to the write-off of unamortized deferred financing costs
associated with the repayment of debt in connection with the IPO.
INTEREST EXPENSE
Interest expense of $4.6 million for the three months ended September 30, 2004
represented an increase of $0.4 million from $4.2 million for the three months
ended September 30, 2003. This increase is a result of loan prepayment penalties
incurred with certain long-term debt that was repaid with the funds received in
connection with the IPO.
OTHER INCOME
Other income increased $0.3 million for the three months ended September 30,
2004 compared with the same period in 2003 due to a gain recognized related to a
property insurance settlement.
INCOME TAX BENEFIT
As a result of the formation transactions, we have elected to treat the Services
Company as a taxable REIT subsidiary ("TRS"), which manages our non-REIT
activities. The Services Company, as a TRS, is subject to federal, state and
local income taxes. The TRS was required to recognize the future tax benefits
attributable to deductible temporary differences between book and tax basis, to
the extent that the asset will be realized. Based on projected future earnings
of the TRS, we recorded a deferred tax asset, net of allowance, and related
income tax benefit of $0.8 million in connection with the formation
transactions.
25
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003.
The following table presents our results of operations for the nine months ended
September 30, 2004 and 2003, including the amount and percentage change in these
results between the two periods:
9/30/2004 9/30/2003 Change($) Change(%)
------------- ------------- ------------ ------------
REVENUES:
Student housing rental revenue $ 24,906 $ 23,815 $ 1,091 4.6%
On-campus participating properties rental revenue 11,823 10,904 919 8.4%
Third party development services 4,738 6,339 (1,601) -25.3%
Third party management services 1,307 818 489 59.8%
Resident services 114 - 114 100.0%
Other income - 12 (12) -100.0%
------------- ------------- ------------ ------------
Total revenues 42,888 41,888 1,000 2.4%
OPERATING EXPENSES:
Student housing 12,511 11,544 967 8.4%
On-campus participating properties 5,785 5,719 66 1.2%
Third party development and management services 4,121 3,941 180 4.6%
General and administrative 3,920 1,188 2,732 230.0%
Depreciation and amortization 7,216 6,631 585 8.8%
Ground lease (on-campus participating properties) 698 302 396 131.1%
------------- ------------- ------------ ------------
Total operating expenses 34,251 29,325 4,926 16.8%
------------- ------------- ------------ ------------
Operating income 8,637 12,563 (3,926) -31.3%
NONOPERATING INCOME AND (EXPENSES):
Interest income 57 56 1 1.8%
Interest expense (13,148) (12,641) (507) 4.0%
Amortization of deferred financing costs (1,071) (418) (653) 156.2%
Other nonoperating income 274 - 274 100.0%
------------- ------------- ------------ ------------
Total nonoperating expenses (13,888) (13,003) (885) 6.8%
------------- ------------- ------------ ------------
Loss before taxes, minority interests, and (5,251) (440) (4,811) 1093.4%
discontinued operations
Income tax benefit 757 - 757 100.0%
Minority interests 130 (25) 155 620.0%
------------- ------------- ------------ ------------
Loss from continuing operations (4,364) (465) (3,899) 838.5%
Discontinued operations:
Loss attributable to discontinued operations (373) (102) (271) 265.7%
Gain from disposition of real estate 58 - 58 100.0%
------------- ------------- ------------ ------------
Total discontinued operations (315) (102) (213) 208.8%
------------- ------------- ------------ ------------
NET LOSS $ (4,679) $ (567) $ 4,112 725.2%
============= ============= ============ ============
STUDENT HOUSING PROPERTIES OPERATIONS (OWNED OFF-CAMPUS)
Revenues from our owned off-campus student housing properties for the nine
months ended September 30, 2004 compared with the same period in 2003 increased
$1.1 million primarily due to the opening of the three owned off-campus student
housing properties in August 2004. Operating expenses increased $1.0 million for
the nine months ended September 30, 2004 compared with the same period in 2003.
NEW PROPERTY OPERATIONS. In the third quarter of 2004 we opened three properties
containing 1,635 beds that contributed $1.3 million of additional revenues and
$0.7 million of additional operating expenses during 2004 as compared with 2003.
Included in this amount is approximately $0.3 million of operating expenses
related to our Predecessor operations that will not be ongoing.
SAME STORE PROPERTY OPERATIONS (EXCLUDING NEW PROPERTY ACTIVITY). We had nine
properties containing 5,971 beds which were operating during both the nine month
periods ended September 30, 2004 and 2003, and which had weighted average
occupancy rates during these periods of 87.2% and 86.4%, respectively. These
properties produced revenues of $23.6 million and $23.8 million during the nine
month periods ended September 30, 2004 and 2003, respectively.
At these existing properties, operating expenses increased $0.3 million for the
nine months ended September 30, 2004 compared with the same period in 2003.
Contributing to the increase was an increase in compensation and benefits
expense, an increase in bad debt expense and an increase in maintenance
expenses.
26
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STUDENT HOUSING PROPERTIES SUBJECT TO LEASES (ON-CAMPUS PARTICIPATING
PROPERTIES) OPERATIONS
Revenues from our on-campus participating properties increased $0.9 million for
the nine months ended September 30, 2004 compared with the same period in 2003
due to the opening of 210 additional beds at the University College - PVAMU
property in August 2003, and an increase in both average occupancy and rental
rates for properties which were operating during both the nine month periods
ended September 30, 2004 and 2003.
NEW PROPERTY OPERATIONS. The August 2003 opening of the on-campus property
contributed $0.5 million and $0.1 million of revenues for the nine month periods
ended September 30, 2004 and 2003, respectively, an increase of $0.4 million.
This property also contributed a $0.2 million increase in operating expenses
from $0.1 million for the nine month period ended September 30, 2003 to $0.3
million for the same period in 2004.
SAME STORE PROPERTY OPERATIONS (EXCLUDING NEW PROPERTY ACTIVITY). We had four
properties containing 3,957 beds in our on-campus participating properties
portfolio during each of the nine month periods ended September 30, 2004 and
2003, which had average occupancy rates during these periods of 78.0% and 72.3%,
respectively. These properties produced revenues of $11.3 million and $10.8
million during the nine month periods ended September 30, 2004 and 2003,
respectively.
Operating expenses for our existing properties decreased to $5.5 million for the
nine months ended September 30, 2004 from $5.6 million for the nine months ended
September 30, 2003, a decrease of $0.1 million. This decrease is primarily due
to reduced maintenance expenses as a result of increased operational
efficiencies.
Ground lease expense increased by $0.4 million for the nine months ended
September 30, 2004 compared with the same period in 2003. Ground lease payments
reflect the Universities' 50% share of the related facilities' cash flows, which
have increased in 2004 as compared to 2003. The increased cash flows primarily
relate to improvements in operations resulting from increased occupancy and
rates as well as reductions in turn costs and bad debt expense.
THIRD PARTY SERVICES
Third party services revenue decreased $1.1 million from $7.2 million for the
nine months ended September 30, 2003 to $6.0 million for the nine months ended
September 30, 2004.
DEVELOPMENT SERVICES. Third party development services revenues for the nine
months ended September 30, 2004 represented a decrease of $1.6 million compared
with the same period in 2003. This decrease is due to a combination of a lower
average contractual fee per project and the percentage of the contractual fee
recognized during the respective period. We had seven projects in progress
during the nine month period ended September 30, 2004 with an average
contractual fee of $1.4 million compared with the nine month period ended
September 30, 2003 in which we had seven projects in progress with an average
contractual fee of $1.5 million. In addition, due to the timing of construction,
of the total contractual fee of the projects in progress during the respective
periods, 35.7% was recognized during the nine months ended September 30, 2004
compared with 52.8% for the same period in 2003. These items were partially
offset by the recognition of $0.3 million of deferred revenue upon the transfer
of the ground lease for the 280-bed property on the campus of Weatherford
College to the lessor in April 2004.
MANAGEMENT SERVICES. Third party property management revenues increased $0.5
million for the nine months ended September 30, 2004 compared with the same
period in 2003. The increase was due to five contracts that commenced in Fall
2003 and three contracts that commenced during the quarter ended September 30,
2004.
GENERAL AND ADMINISTRATIVE
General and administrative costs of $3.9 million for the nine months ended
September 30, 2004 included $2.2 million of expenses related the issuance of
PIUs and RSUs upon consummation of our IPO. Excluding these expenses, general
and administrative costs increased $0.5 million for the nine months ended
September 30, 2004 compared with the same period in 2003. This increase was
primarily a result of expenses associated with being a public company which were
not incurred by our Predecessor. Due to the increased cost of being a public
company, we expect our future general and administrative expenses to exceed that
of our Predecessor.
27
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $0.6 million for the nine months ended
September 30, 2004 compared with the same period in 2003 primarily due to the
opening of the three owned off-campus student housing properties in August 2004
and the opening of the on-campus participating property in August 2003.
Amortization of deferred financing costs increased $0.7 million for the nine
months ended September 30, 2004 compared with the same period in 2003 primarily
due to the write-off of unamortized deferred financing costs associated with the
repayment of debt in connection with the IPO.
INTEREST EXPENSE
Interest expense of $13.1 million for the nine months ended September 30, 2004
represented an increase of $0.5 million from $12.6 million for the nine months
ended September 30, 2003. This increase is a result of loan prepayment penalties
incurred with debt repayment in connection with the IPO and an increase in
interest expense recognized on the opening of the on-campus participating
property in August 2003.
OTHER INCOME
Other income increased $0.3 million for the nine months ended September 30, 2004
compared with the same period in 2003 due to a gain recognized related to a
property insurance settlement.
INCOME TAX BENEFIT
As a result of the formation transactions, we have elected to treat the Services
Company as a taxable REIT subsidiary ("TRS"), which manages our non-REIT
activities. The Services Company, as a TRS, is subject to federal, state and
local income taxes. The TRS was required to recognize the future tax benefits
attributable to deductible temporary differences between book and tax basis, to
the extent that the asset will be realized. Based on projected future earnings
of the TRS, we recorded a deferred tax asset, net of allowance, and related
income tax benefit of $0.8 million in connection with the formation
transactions.
CASH FLOWS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003
OPERATING ACTIVITIES
For the nine months ended September 30, 2004, net cash provided by operating
activities before changes in working capital accounts provided approximately
$5.4 million, as compared to $6.7 million for the nine months ended September
30, 2003, a decrease of $1.3 million. This decrease resulted from a
corresponding increase in net loss of $4.1 million and a decrease of $0.8
million resulting from the non-cash income tax benefit recognized during the
nine months ended September 30, 2004 to account for the tax effect of our TRS
entity, which was newly created in connection with our IPO. These increases were
offset by an increase in depreciation and amortization of $1.2 million and a
non-cash compensation charge of $2.2 million recognized in the nine months ended
September 30, 2004 related to the issuance of PIUs and RSUs.
Changes in working capital accounts provided approximately $5.1 million for the
nine months ended September 30, 2004 while $11.3 million was utilized by changes
in working capital accounts for the nine months ended September 30, 2003, an
increase of $16.4 million. This change was primarily the result of the accrual
of insurance proceeds in 2003 related to a fire that occurred at one of our
owned off-campus student housing properties under development in Fresno,
California, and the subsequent receipt and use of those proceeds in 2004 to fund
the related rebuild costs. Additionally, in connection with the pay down of
three construction loans as part of our IPO formation transactions, certain
restricted funds were released by the lender in the third quarter 2004.
28
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INVESTING ACTIVITIES
Investing activities used $52.4 million and $14.9 million for the nine months
ended September 30, 2004 and 2003, respectively. The increase in the cash flows
used in investing activities during the nine months ended September 30, 2004
related primarily to the use of cash to fund the development costs at the
Village at Fresno, Village at San Bernardino, and Village at TU owned off-campus
construction projects, which were completed in the third quarter 2004.
Additionally, during the nine months ended September 30, 2004, we purchased land
and funded development costs for Sweet Home. For the nine months ended September
30, 2004 and 2003, our cash used in investing activities was comprised of the
following:
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
---------------------- ----------------------
Capital expenditures for on-campus participating properties $ 1,115 $ 11,902
Capital expenditures for owned off campus properties 3,284 239
Investments in development properties 44,292 2,570
Investment in Sweet Home 3,356 -
Purchase of non-real estate furniture, fixtures, and equipment 304 168
---------------------- ----------------------
$ 52,351 $ 14,879
====================== ======================
FINANCING ACTIVITIES
Cash provided by financing activities totaled $42.2 million and $13.4 million
for the nine months ended September 30, 2004 and 2003, respectively. In
connection with our IPO and our subsequent issuance of additional shares under
the exercise of the underwriters' over-allotment option, we generated gross
proceeds of approximately $220.8 million. Approximately $22.4 million of the
gross proceeds were used for the underwriters' discount, offering costs and
financing costs, leaving us with net proceeds of approximately $198.4 million.
Approximately $85.9 million of our gross proceeds were used to purchase the
equity interests of our Predecessor owners. In addition, prior to our IPO, we
borrowed approximately $41.2 million to fund the three development projects
described above, and we subsequently paid off those loans using approximately
$59.5 million from our IPO proceeds. We also used our IPO proceeds to pay off
$46.0 million of mortgage debt and the $1.7 million balance on our Predecessor's
line of credit. In connection with the IPO, we also made an initial draw on our
revolving credit facility of $16.0 million, $12.0 million of which was paid down
in September 2004 with available cash and the proceeds from the underwriters'
over-allotment.
LIQUIDITY AND CAPITAL RESOURCES
CASH BALANCES AND LIQUIDITY
Upon commencement of our IPO, we sold 12.1 million shares of our common stock
and generated gross proceeds of approximately $211.8 million. The aggregate
proceeds to our Company, net of the underwriters' discount and offering costs,
were approximately $189.8 million. We used approximately $85.9 million of the
proceeds to purchase the equity interests of our Predecessor owners and a
minority partner. In addition, we paid off our Predecessor line of credit
facility balance of approximately $1.7 million and paid down approximately $59.5
million and $46.0 million of construction loans and mortgage debt, respectively.
In connection with the IPO transactions, we drew an initial amount on the senior
secured revolving credit facility discussed below of $16.0 million. In
connection with the exercise of the underwriters' over-allotment option on
September 15, 2004, we issued an additional 515,000 shares of common stock at
the IPO price per share, generating an additional $9.0 million of gross proceeds
and $8.4 million in net proceeds after the underwriters' discount and offering
costs. These proceeds were used, along with additional available cash, to pay
down our revolving credit facility in the amount of $12.0 million, resulting in
a balance of $4.0 million as of September 30, 2004.
29
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of September 30, 2004, we had $12.9 million in cash and cash equivalents,
restricted cash, and short-term investments, as compared to $14.7 million in
cash and cash equivalents, restricted cash, and short-term investments as of as
of December 31, 2003. Restricted cash primarily consists of escrow accounts held
by lenders and resident security deposits, as required by law in certain states.
Additionally, restricted cash as of September 30, 2004 also includes $0.8
million of funds held in escrow that will eventually be paid to our Predecessor
owners related to budgeted construction savings on three of our recently
completed owned off campus development properties.
Our short-term liquidity needs include, but are not limited to, the following:
(i) anticipated distribution payments to our stockholders, totaling
approximately $15.0 million based on an anticipated annual dividend of $1.35 per
share or unit, including those required to maintain our REIT status and satisfy
our current distribution policy (ii) remaining development costs for our three
owned off-campus properties that commenced operations in the third quarter,
estimated to be approximately $5.2 million , (iii) remaining development costs
on the project owned by Sweet Home, estimated to be approximately $33.8 million,
(iv) funds for the acquisition of the Proctor Portfolio, as previously
discussed, estimated to be approximately $19.4 million, and (v) funds for
potential future acquisitions and development projects. We expect to meet our
short-term liquidity requirements generally through net cash provided by
operations and borrowings under our revolving credit facility, and permanent
property level debt.
Our ability to meet our long-term liquidity requirements for the funding of
property development, property acquisitions and other non-recurring capital
improvements will depend upon our ability to generate sufficient net cash from
operations, incur long-term secured and unsecured indebtedness, including
borrowings under our revolving credit facility, and issue equity and debt
securities, including units of our Operating Partnership, as to which no
assurances can be given. We may seek to replace borrowings under our revolving
credit facility with long-term mortgage financing.
We anticipate that our existing working capital, cash from operations and the
cash available from borrowings under our revolving credit facility will be
adequate to meet our liquidity requirements for at least the next twelve months.
REVOLVING CREDIT FACILITY
The Operating Partnership has a senior secured revolving credit facility with a
term of 36 months that provides a maximum capacity of $75.0 million, subject to
certain conditions as contained in the Credit Agreement (the "Agreement"). The
maximum capacity may be increased by up to an additional $25 million, subject to
certain borrowing base requirements, as outlined in the Agreement. The facility
bears interest at a variable rate, at the Company's option, based upon a base
rate or one-, two-, three-, or six-month LIBOR plus, in each case, a spread
based upon the Company's total leverage. The credit facility is secured by the
Company's ownership interests in a minimum of four unlevered owned off-campus
student housing facilities. The Company guarantees the Operating Partnership's
obligations under the credit facility. As of September 30, 2004, the balance
outstanding on our revolving credit facility totaled $4.0 million bearing
interest at 3.8%, with remaining availability (subject to certain financial
covenants) totaling $61.1 million.
The terms of our credit facility include certain restrictions and covenants,
which limit, among other things, the payment of dividends (as discussed below),
the incurrence of additional indebtedness, liens, and the disposition of assets.
The terms also require compliance with financial ratios relating to consolidated
net worth and leverage requirements. Commencing with the earlier of the day the
outstanding balance exceeds $25.0 million or December 31, 2005, we will also be
subject to compliance with additional fixed charge and debt coverage ratios. The
dividend restriction previously mentioned provides that, except to enable us to
continue to qualify as a REIT for federal income tax purposes, before December
31, 2005, we may not pay dividends greater than $5.0 million in any given
quarter. Subsequent to December 31, 2005, we will be prohibited from making
distributions which exceed 95% of our funds from operations, as defined, over
any four consecutive fiscal quarters. As of September 30, 2004, the Company was
in compliance with all such covenants.
30
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DISTRIBUTIONS
We are required to distribute 90% of our REIT taxable income (excluding capital
gains) on an annual basis in order to qualify as a REIT for federal income tax
purposes. Accordingly, we intend to make, but are not contractually bound to
make, regular quarterly distributions to common stockholders and PIU holders.
All such distributions are at the discretion of the Board of Directors. We may
be required to use borrowings under the credit facility, if necessary, to meet
REIT distribution requirements and maintain our REIT status. We consider market
factors and our company's performance in addition to REIT requirements in
determining distribution levels.
On November 10, 2004, the Company declared a distribution per share of $0.1651
which will be paid on November 29, 2004 to all common shareholders of record as
of November 22, 2004. At the same time, the Company expects to pay or set aside
an equivalent amount per unit to holders of PIUs in the Operating Partnership
and holders of RSUs, respectively (see Note 7). This distribution to common
shareholders was prorated to reflect third quarter operations subsequent to the
IPO and therefore reflects the period from August 17, 2004 through September 30,
2004.
DISTRIBUTIONS TO PREDECESSOR OWNERS
An entity newly formed by our Predecessor owners will be entitled to any savings
in the budgeted completion cost of three of our recently completed off-campus
construction properties. If, upon completion, there are designated funds that
are unspent, the Company will distribute these unspent amounts to such entity
and will credit cash and debit equity for the distribution. The Company does not
have any ownership interest in such entity and the entity does not have any
ownership interest in the Company. Upon completion of construction at University
Village at TU, which occurred during the third quarter, our Predecessor owners
received $0.5 million relating to a construction guarantee fee, which was paid
from the remaining construction budget, and will likely receive future amounts
related to the previously described savings. As discussed above, these payments
are accounted for as a distribution to Predecessor owners.
RECENT DEVELOPMENTS
In August 2004, we commenced construction of a $35.8 million owned off campus
development located in close proximity to the campus of State University of New
York - Buffalo. This 19.5 acre project consists of 318,827 projected square feet
and nine buildings containing 271 units featuring 828 private bedroom and
bathroom accommodations. The community also features a 16,065 square-foot
clubhouse featuring resort style amenities. This project is scheduled to open in
August of 2005 in conjunction with the commencement of the 2005/2006 academic
year. This property is currently accepting applications for the 2005/2006 lease
term at an average marketed per bed monthly rental of approximately $556.
In September of 2004, we entered into a purchase and sale agreement to acquire a
five-property portfolio (the "Proctor Portfolio") with four of the properties
located in Tallahassee, Florida and one property located in Gainesville,
Florida. These five communities total 53 buildings, 446 units, and 1,656 beds.
The purchase and sale agreement contemplates a purchase price of $53.5 million
which includes the assumption of $35.5 million in debt at a weighted average
interest rate of 7.4% and a weighted average remaining term of 6.4 years.
Subject to completion of certain contingencies, we anticipate this acquisition
to close in early December 2004. Occupancy at these properties as of September
30, 2004 was approximately 94.7% and current leases in effect reflect an average
monthly per bed revenue of $445.
RECURRING CAPITAL EXPENDITURES
Our properties require periodic investments of capital for general capital
expenditures and improvements. Our policy is to capitalize costs related to the
acquisition, development, rehabilitation, construction, and improvement of
properties including interest and certain internal personnel costs related to
the communities under rehabilitation and construction. Capital improvements are
costs that increase the value and extend the useful life of an asset. Ordinary
repair and maintenance costs that do not extend the useful life of the asset are
expensed as incurred. Recurring capital expenditures represent non-incremental
building improvements and leasing costs required to maintain current revenues
and typically include: appliances, carpeting and flooring, HVAC equipment,
kitchen/bath cabinets, new roofs, site improvements and various exterior
building improvements.
31
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Recurring capital expenditures do not include acquisition capital that was taken
into consideration when underwriting the purchase of a building or which are
incurred to bring a building up to "operating standard". Non-recurring capital
expenditures represent incremental building/property improvements that include,
among other items: community centers, new windows, and kitchen/bath apartment
upgrades. Additionally, we are required by certain of our lenders to contribute
amounts to reserves for capital repairs and improvements at their mortgaged
properties. These annual contributions may exceed the amount of capital
expenditures actually incurred in such year at such properties.
PRE-DEVELOPMENT EXPENDITURES
Our third party development activities have historically required us to fund
pre-development expenditures such as architectural fees, permits and deposits.
Because the closing of a development project's financing is often subject to
third party delay, we cannot always predict accurately the liquidity needs of
these activities. We frequently incur these predevelopment expenditures before a
financing commitment has been obtained and, accordingly, bear the risk of the
loss of these predevelopment expenditures if a financing cannot ultimately be
arranged on acceptable terms. Historically, the development projects that we
have been awarded have been successfully structured and financed; however, their
development has at times been delayed beyond the period initially scheduled,
causing revenue to be recognized in later periods.
COMMITMENTS
We have outstanding significant long-term obligations under participating ground
leases with respect to our on-campus participating properties. These ground
leases typically provide for payment of a nominal fixed rent (e.g., $100 per
annum over the lease term) but require, in addition, payment to the
university-ground lessor of 50% of the properties' net cash available for
distribution, calculated and distributed on an annual basis after payment of
operating expenses, debt service (which includes significant amounts towards
repayment of principal) and capital expenditures. We are not contractually
required to fund the liquidity needs (if any) of these properties and do not
have access to their cash flow (except as indicated above) for any purpose other
than operations at these properties.
We hold a leasehold interest in University Village at TU pursuant to a 75-year
ground lease with Temple University that requires us to pay annual minimum rent
of $0.1 million, plus (i) an annual "preferred return" (defined as the amount by
which net revenues exceed $0.2 million, not to exceed $0.1 million), and (ii) 1%
of the amount by which net revenues exceed the sum of the preferred return plus
$0.2 million. In addition, we must pay the University (a) 1% of the amount, if
any, of the refinancing net proceeds and (b) 1% of the amount, if any, of the
net proceeds from any sale of our leasehold interest, excluding sales to an
affiliate or the University. This property opened in Fall 2004.
We are required to pay $0.5 million in minimum lease payments over the next five
years under two capital lease obligations relating to technology, furniture,
fixtures and equipment.
The Company provides project costs guarantees, subject to force majeure. These
guarantees are typically limited to the amount of the projects' related
development fees or a contractually agreed-upon maximum exposure amount. Our
maximum exposure under such guarantees is approximately $4.0 million. The
development budget consists primarily of costs included in the general
contractors' guaranteed maximum price contract ("GMP"). The GMP obligates the
general contractor, subject to force majeure and approved change orders, to
cover cost overruns. In addition, the GMP is secured with payment and
performance bonds.
In 2002, on a project not included above, the Company provided a guarantee of
all performance obligations under the development agreement, limited to $4.0
million. This project was completed in 2003. On one completed project, in
addition to the project cost guarantees discussed above, the Company has
guaranteed losses up to $3.0 million in excess of the development fee if the
loss is due to any failure of the Company to maintain, or cause its
professionals to maintain, required insurance for a period of five years beyond
completion of the project (August 2009).
32
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the $3.0 million guarantee related to maintaining required insurance,
these guarantees expire upon completion of certain developer obligations of the
related projects, which are normally satisfied within one year after completion
of the project.
At September 30, 2004 all projects were on schedule and within budget. The
Company has estimated the fair value of guarantees entered into or modified
after December 31, 2002, the effective date of FASB Interpretation No. 45
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" to be immaterial.
RAP SHP's (an entity wholly owned by the Operating Partnership) limited
guarantee of the mortgage loan for the Village at Riverside, which was
distributed to the Predecessor owners in connection with the IPO, continues to
be in effect. As part of the formation transactions, the Predecessor owners have
indemnified the Company and its affiliates from and against all claims, costs,
expenses, losses and damages incurred by the Company under or in connection with
this guarantee.
INDEBTEDNESS
As of September 30, 2004, we had approximately $193.0 million of outstanding
consolidated debt, comprised of a $4.0 million balance on our revolving credit
facility secured by four properties, $112.2 million in mortgage debt secured by
seven of our owned off-campus properties, a $17.1 million construction loan
secured by Cullen Oaks, and $59.7 million in bond issuances secured by three of
our on-campus participating properties. The weighted average interest rate on
our consolidated indebtedness as of September 30, 2004 was 7.0% (based on the
30-day LIBOR rate at September 30, 2004 of 1.8%). As of September 30, 2004, only
our revolver balance (approximately $4.0 million at September 30, 2004), or
2.1%, of our total consolidated indebtedness, was variable rate debt.
OWNED OFF-CAMPUS PROPERTIES
The following table contains certain summary information concerning the mortgage
indebtedness that encumbers our owned off-campus properties as of September 30,
2004:
BALANCE AS OF
ORIGINAL INTEREST SEPTEMBER 30,
ASSET DATE RATE MATURITY DATE 2004
- -------------------------------------- ---------------- --------------- ------------------ ------------------
The Callaway House 03/30/2001 7.1% April 2011 $ 19,778
Commons on Apache 05/14/1999 7.7% June 2009 7,683
River Club Apartments 07/28/2000 8.2% August 2010 18,575
River Walk Townhomes 08/31/1999 8.0% September 2009 7,703
The Village at Alafaya Club 07/11/2000 8.2% August 2030 20,525
The Village at Blacksburg 12/15/2000 7.5% January 2011 21,407
University Village at Boulder Creek 12/01/2002 5.7% December 2012 16,594
------------------
TOTAL $ 112,265
==================
The weighted average interest rate of such indebtedness is 7.4% as of September
30, 2004. Each of these mortgages is a non-recourse obligation subject to
customary exceptions. Each of these mortgages has a 30 year amortization, and
none are cross-defaulted or cross-collateralized to any other indebtedness. The
loans generally may not be prepaid prior to maturity; in certain cases,
prepayment is allowed, subject to prepayment penalties.
33
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ON-CAMPUS PARTICIPATING PROPERTIES
We have bonds outstanding secured by three of our on-campus participating
properties, as listed below. Under the terms of these financings, one of our
special purpose subsidiaries publicly issued three series of taxable bonds and
loaned the proceeds to three special purpose subsidiaries that each hold a
separate leasehold interest. Although a default in payment by these special
purpose subsidiaries could result in a default under one or more series of
bonds, the indebtedness of any of these special purpose subsidiaries is not
cross-defaulted or cross-collateralized with indebtedness of the REIT, the
Operating Partnership or other special purpose subsidiaries. Repayment of
principal and interest on these bonds is insured by MBIA, Inc. The loans
encumbering the leasehold interests are non-recourse, subject to customary
exceptions.
The following table sets forth certain information concerning these bond
financings:
ORIGINAL ORIGINAL BALANCE AS OF
ASSET DATE TERM SEPTEMBER 30, 2004
---------------------------------------- -------------------- ---------------------- ---------------------
University Village-PVAMU(1) September 1999 24 years $ 30,851
University College-PVAMU
(Phase I)(2) May 2001 22 years 19,855
University College-PVAMU
(Phase II)(2) July 2003 25 years 4,230
University Village-TAMIU(1) September 1999 24 years 4,719
---------------------
TOTAL $ 59,655
=====================
- -----------
(1) Part of combined bond issuance. Separate loan agreements are not
cross-collateralized or cross-defaulted.
(2) Multiple financings of single facility.
In addition, Cullen Oaks is currently encumbered by a construction loan
originated in September 2000 in the original principal amount of approximately
$17.7 million. The loan bears interest at the prime rate, or LIBOR plus 1.9%, at
our election. We have in place an interest rate swap agreement which effectively
caps the interest on the outstanding balance as of September 30, 2004 of $17.1
million at 5.5%. The loan matures in November 2008. The university has a
continuing obligation to us to lease beds at this property for an amount
sufficient to pay all property expenditures, including debt service. In turn, we
have guaranteed payment of this property's indebtedness.
The weighted average interest rate of the indebtedness encumbering our on-campus
participating properties is 6.6% at September 30, 2004.
OFF BALANCE SHEET ITEMS
We do not have any off-balance sheet arrangements.
FUNDS FROM OPERATIONS
As defined by NAREIT, FFO represents income (loss) before allocation to minority
interests (computed in accordance with GAAP), excluding gains (or losses) from
sales of property, plus real estate related depreciation and amortization
(excluding amortization of loan origination costs) and after adjustments for
unconsolidated partnerships and joint ventures. We present FFO because we
consider it an important supplemental measure of our operating performance and
believe it is frequently used by securities analysts, investors and other
interested parties in the evaluation of REITs, many of which present FFO when
reporting their results. FFO is intended to exclude GAAP historical cost
depreciation and amortization of real estate and related assets, which assumes
that the value of real estate diminishes ratably over time. Historically,
however, real estate values have risen or fallen with market conditions. Because
FFO excludes depreciation and amortization unique to real estate, gains and
losses from property dispositions and extraordinary items, it provides a
performance measure that, when compared
34
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
year over year, reflects the impact to operations from trends in occupancy
rates, rental rates, operating costs, development activities and interest costs,
providing perspective not immediately apparent from net income.
We compute FFO in accordance with standards established by the Board of
Governors of NAREIT in its March 1995 White Paper (as amended in November 1999
and April 2002), which may differ from the methodology for calculating FFO
utilized by other equity REITs and, accordingly, may not be comparable to such
other REITs. Further, FFO does not represent amounts available for management's
discretionary use because of needed capital replacement or expansion, debt
service obligations or other commitments and uncertainties. FFO should not be
considered as an alternative to net income (loss) (computed in accordance with
GAAP) as an indicator of our financial performance or to cash flow from
operating activities (computed in accordance with GAAP) as an indicator of our
liquidity, nor is it indicative of funds available to fund our cash needs,
including our ability to pay dividends or make distributions.
The following table presents a reconciliation of our FFO to our net loss:
Period from Three Months Three Months Nine Months Nine Months
August 17, 2004 Ended Ended Ended Ended
to September September September 30, September September
30, 2004 30, 2004 2003 30, 2004 30, 2003
----------------- -------------- --------------- -------------- --------------
Net Loss $ (1,538) $ (5,208) $ (1,544) $ (4,679) $ (567)
Minority Interest In Income (Losses) (1) (86) 4 (130) 25
Gain from disposition of real estate - - - (58) -
Real Estate Related Depreciation
and Amortization:
Total depreciation and
amortization 1,401 2,685 2,209 7,216 6,631
Discontinued operations
depreciation and amortization - 44 90 219 259
Furniture, fixtures, and
equipment depreciation (36) (76) (69) (217) (215)
----------------- -------------- --------------- -------------- --------------
Funds From Operations $ (174) $ (2,641) $ 690 $ 2,351 $ 6,133
================= ============== =============== ============== ==============
Funds From Operations per share -
basic $ (0.01)
=================
Funds From Operations per share -
diluted $ (0.01)
=================
Weighted Average Common Shares
Outstanding:
Basic 12,290,256
=================
Diluted 12,290,256
=================
Our FFO for the three and nine months ended September 30, 2004 was impacted by a
series of charges totaling approximately $2.6 million related to our recent IPO
and related formation transactions. The primary components of the charges
include: (i) PIU grants of approximately $2.1 million, (ii) restricted stock
grants of $0.1 million, and (iii) write-off of loan origination costs and exit
fees associated with the repayment of indebtedness of approximately $1.2
million. These items were partially offset by the recognition of a deferred tax
asset associated with a step up in the tax basis of participating properties
owned by our TRS, resulting in an income tax benefit of $0.8 million.
While our on-campus participating properties contributed $11.8 million and $10.9
million to our revenues for the nine months ended September 30, 2004 and 2003,
respectively, and $3.3 million and $2.9 million to our revenues for the three
months ended September 30, 2004 and 2003, respectively, under our participating
ground leases, we and the participating university systems each receive 50% of
the properties' net cash available for distribution after payment of operating
expenses, debt service (which includes significant amounts towards repayment of
principal) and capital expenditures. A substantial portion of our revenues
attributable to these properties is reflective of cash that is required to be
used for capital expenditures and for the amortization of applicable property
indebtedness. These amounts do not increase our economic
35
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
interest in these properties or otherwise benefit us since our interest in the
properties terminates upon the repayment of the applicable property
indebtedness.
As noted above, FFO excludes GAAP historical cost depreciation and amortization
of real estate and related assets because these GAAP items assume that the value
of real estate diminishes over time. However, unlike the ownership of our owned
off-campus properties, the unique features of our ownership interest in our
on-campus participating properties cause the value of these properties to
diminish over time. For example, since the ground leases under which we operate
the participating properties require the reinvestment from operations of
specified amounts for capital expenditures and for the repayment of debt while
our interest in these properties terminates upon the repayment of the debt, such
capital expenditures do not increase the value of the property to us and
mortgage debt amortization only increases the equity of the ground lessor.
Accordingly, when considering our FFO, we believe it is also a meaningful
measure of our performance to modify FFO to exclude the operations of our
on-campus participating properties and to consider their impact on performance
by including only that portion of our revenues from those properties that are
reflective of our share of net cash flow and the management fees that we
receive, both of which increase and decrease with the operating measure of the
properties, a measure referred to herein as FFOM.
Funds From Operations--Modified for Operational Performance of On-Campus
Participating Properties:
Period from
August 17, Three Months Three Months Nine Months Nine Months
2004 to Ended Ended Ended Ended
September 30, September September 30, September 30, September
2004 30, 2004 2003 2004 30, 2003
--------------- -------------- --------------- --------------- --------------
Funds From Operations $ (174) $ (2,641) $ 690 $ 2,351 $ 6,133
Elimination of operations of on-campus
participating properties:
Net loss from on-campus participating
properties 156 968 1,273 948 1,032
Amortization of investment in on-campus
participating properties (438) (950) (821) (2,660) (2,420)
--------------- -------------- --------------- --------------- --------------
(456) (2,623) 1,142 639 4,745
Modifications to reflect operational
performance of on-campus participating
properties:
Our share of net cash flow (*) 115 302 43 698 302
Management fees 97 158 141 586 525
--------------- -------------- --------------- --------------- --------------
Impact of On-Campus Participating Properties 212 460 184 1,284 827
--------------- -------------- --------------- --------------- --------------
Funds from Operations - Modified for
Operational Performance of On-Campus
Participating Properties (FFOM) $ (244) $ (2,163) $ 1,326 $ 1,923 $ 5,572
=============== ============== =============== =============== ==============
FFOM per share - basic $ (0.02)
===============
FFOM per share - diluted $ (0.02)
===============
Weighted-average common shares outstanding:
Basic 12,290,256
===============
Diluted 12,290,256
===============
(*) 50% of the properties' net cash available for distribution after payment of
operating expenses, debt service (including repayment of principal) and
capital expenditures. Schedule reflects amounts accrued for the 50% lessor
distribution for all periods presented.
This narrower measure of performance measures our profitability for these
properties in a manner that is similar to the measure of our profitability from
our services business where we similarly incur no initial or ongoing capital
investment in a property and derive only consequential benefits from capital
expenditures and debt amortization. We believe, however, that
36
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
this narrower measure of performance is inappropriate in traditional real estate
ownership structures where debt amortization and capital expenditures enhance
the property owner's long-term profitability from its investment.
Our FFOM may have limitations as an analytical tool because it reflects the
unique contractual calculation of net cash flow from our on-campus participating
properties, which is different from that of our off campus owned properties.
Additionally, FFOM reflects features of our ownership interests in our on-campus
participating properties that are unique to us. Companies that are considered to
be in our industry may not have similar ownership structures; and therefore
those companies may not calculate a FFOM in the same manner that we do, or at
all, limiting its usefulness as a comparative measure. We compensate for these
limitations by relying primarily on our GAAP and FFO results and using our
modified FFO only supplementally.
INFLATION
Our leases do not typically provide for rent escalations. However, they
typically do not have terms that extend beyond 12 months. Accordingly, although
on a short term basis we would be required to bear the impact of rising costs
resulting from inflation, we have the opportunity to raise rental rates at least
annually to offset such rising costs. However, a weak economic environment or
declining student enrollment at our principal universities may limit our ability
to raise rental rates.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows and fair values relevant to financial instruments
are dependent upon prevailing market interest rates. Market risk refers to the
risk of loss from adverse changes in market prices and interest rates. Market
risk factors have not changed significantly since filing our Form S-11 on August
11, 2004.
CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We have adopted and maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms and that
such information is accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we have carried out an evaluation, under the
supervision and with the participation of management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of
the quarter covered by this report. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures for the quarter covered by this report were effective at the
reasonable assurance level.
There has been no change in our internal controls over financial reporting
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.
37
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the period
from August 17, 2004 to September 30, 2004
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
REPORTS ON FORM 8-K
The Company filed the following Current Reports on Form 8-K during the period
from August 17, 2004 to September 30, 2004:
On August 19, 2004, we filed a Form 8-K with the Securities and Exchange
Commission under Item 5 to report the Operating Partnership entering
into a Credit Agreement with Deutsche Bank Trust Company Americas and
Citigroup Global Markets Inc. and certain of their affiliates.
On September 14, 2004, we furnished to the Securities and Exchange
Commission under Item 9 of Form 8-K a copy of our Press Release, dated
September 13, 2004, regarding the exercise of our underwriters' option
to purchase an additional 515,000 shares of our common stock.
On September 29, 2004, we filed a Form 8-K with the Securities and
Exchange Commission under Item 1 to report the a wholly owned subsidiary
of the Operating Partnership entering into an Agreement to purchase five
student housing properties located in Florida.
38
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 15, 2004
AMERICAN CAMPUS COMMUNITIES, INC.
BY: /S/ WILLIAM C. BAYLESS, JR.
-------------------------------------
WILLIAM C. BAYLESS, JR.
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
BY: /S/ BRIAN B. NICKEL
-------------------------------------
BRIAN B. NICKEL
EXECUTIVE VICE PRESIDENT, CHIEF
INVESTMENT OFFICER, SECRETARY AND
DIRECTOR
BY: /S/ MARK J. HAGER
-------------------------------------
MARK J. HAGER
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL AND ACCOUNTING
OFFICER AND TREASURER
39