Austin, TX-based American Campus Communities Inc. just recently revealed that it has entered into a non-binding letter of intent to lease land from Walt Disney World Resort in Lake Buena Vista, FL to develop and own housing for participants of the Disney College Program. According to a prepared statement, ACC and Walt Disney World Resort are still negotiating the terms of a definitive agreement, and if ACC and Walt Disney World Resort are able to reach a definitive agreement, the new purpose-built housing will include ACC-designed units that offer a variety of configurations and price points that provide privacy and individuality for residents.
If final negotiations are successfully concluded and a definitive agreement is executed, the parties will execute a ground lease conditioned upon the receipt of all necessary permits and final project feasibility. The release notes that the $615-million project is anticipated to be structured as an American Campus Equity transaction, whereby American Campus Communities will serve as the developer, manager and owner via a 75-year ground lease.
Although the final scope, feasibility and timing have not been finalized, the release says that the company currently expects the development to be delivered in multiple phases, with the first phase scheduled for occupancy in May 2020 with full development completion in May 2023. Upon completion, the project is targeting a stabilized yield of 6.8%.
In addition, as part of its capital allocation and funding strategy, given its growing high-quality development pipeline, the company completed the portfolio sale of three owned assets to an institutional partnership for $245 million. The transaction included the prepayment of $37 million of secured mortgage debt and represented an average economic cap rate of 4.1 percent based on in-place rental revenue, escalated trailing-12 operating expenses and historical average capital expenditures.
“We are pleased to have completed these capital recycling activities,” says Bill Bayless, American Campus Communities CEO. “We believe the additional dispositions further prove the value and attractiveness of student housing to institutional real estate investors and provide us with the opportunity to recycle capital into higher risk-adjusted return investments. Further, the disposition of these assets provides a clear indication of the private market value for core student housing located within walking distance to tier-1 universities. The sold assets reflect the large majority of the company’s remaining portfolio and further underscore the significant dislocation in valuation currently ascribed to our company in relation to the value of the underlying real estate.”
The company has also completed the sale of a minority joint venture interest in a portfolio of owned assets to an institutional investor. The joint venture transaction was completed on terms consistent with those previously provided in the company’s 2018 earnings guidance. Additionally, the partnership originated $330 million of secured mortgage debt at a coupon of 4.07% with the full principal balance due at maturity in June 2028.