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Is ACC’s 2018 Story Intact With Stronger Core Fundamentals?

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Austin, TX-based American Campus Communities Inc. recently revealed financial results for the quarter ended March 31, 2018 and analysts were quick to note that despite a minor negative variance relative to a RW Baird Q1 2018 estimate, the REIT’s story for 2018 is “intact with stronger core fundamentals and third-party fee contributions expected in the back half of the year.” RW Baird analyst Drew Babin said that he is pleased that strong lease-up expectations for academic year 2018/2019 are unchanged.

“Sector maturity and optimism were on display at this month’s Interface Student Housing Conference with major players across the industry reflecting on the consistency of cash flows and further growth opportunities, which are attracting record levels of capital and compressing cap rates for core assets located near major universities across the nation,” says Bill Bayless, American Campus CEO. “With the constrained equity capital environment facing most public REITs, we currently intend to selectively pursue only the highest risk-adjusted return opportunities. We plan to fund these investments via our strategic capital recycling initiatives focused on harvesting value from our existing portfolio of core assets, through joint ventures and/or dispositions, taking advantage of the strong private market conditions.”

Highlights from the ACC Q1 2018 report include the following:

Reported net income attributable to ACC of $25.9 million or $0.18 per fully diluted share, versus $34.1 million or $0.25 per fully diluted share in the first quarter 2017.

Reported quarterly FFOM of $85.8 million or $0.62 per fully diluted share versus $83.2 million or $0.62 per fully diluted share in the first quarter prior year.

Grew same store net operating income (“NOI”) by 0.1 percent over the first quarter 2017. Revenues increased 1.9 percent and operating expenses increased 4.5 percent primarily due to the anticipated growth in property taxes combined with expenses associated with excessive winter storms. Excluding expenses of approximately $0.5 million related to these excessive winter conditions, same store operating expenses would have increased by 3.8 percent and same store NOI would have increased by 0.6 percent.

Achieved same store average physical occupancy of 96.2 percent for the first quarter 2018 compared to 96.9 percent for the first quarter 2017.

Executed a presale agreement for a new 443-bed development project located pedestrian to the University of Oregon. Upon delivery in Fall 2019, the $70.6 million asset will further diversify the company’s existing product offering and provide additional opportunities for multi-asset market efficiencies.

Began pre-development services for a proposed third-party development project on the campus of Prairie View A&M University.

Won an industry-leading five Innovator Awards at this year’s Student Housing Business National Conference including Best Public/Private Partnership Development, Best Use of Green & Sustainable Construction or Development (on and off campus), Best Architecture/Design and Best Bandwidth/Connectivity Solution. Additionally, two projects acquired by American Campus Communities and developed by Core Spaces won awards for Best New Development (400 beds or fewer) and Best Architecture/Design (more than 400 beds). Since the inception of the Innovator Awards, ACC and its communities have won an industry-leading total of 31 awards, furthering its best-in-class reputation among colleges, universities and industry partners.