American Campus Communities (ACC) Misses Q1 EPS by 2c, Revenues Beat

American Campus Communities (NYSE: ACC) reported Q1 EPS of $0.11, $0.02 worse than the analyst estimate of $0.13. Revenue for the quarter came in at $232.7 million versus the consensus estimate of $219.3 million.

Highlights

• Reported net income attributable to ACC of $15.6 million or $0.11 per fully diluted share, versus $80.9 million or $0.58 per fully diluted share in the first quarter 2020.
• Reported FFOM of $79.5 million or $0.57 per fully diluted share, versus $97.6 million or $0.70 per fully diluted share in the first quarter prior year.
• Same store net operating income (“NOI”) decreased by 11.0 percent versus the first quarter prior year, as the COVID-19 impacts on the current academic year’s occupancy levels resulted in a 6.4 percent decrease in revenues and only a 0.5 percent increase in operating expenses.
• Awarded a third-party on-campus development project at Drexel University for the renovation of Kelly Hall, a 1960s-era community-bath residence hall.
• Commenced construction on a third-party on-campus development project at Concordia University.
• Published an Environmental, Social, Governance (“ESG”) report outlining the company’s year-in-review of ESG initiatives and its ongoing commitment to healthy, sustainable environments conducive to academic achievement.
• Awarded two National Association of Home Builders’ 2020 Multifamily Pillars of the Industry Awards for the Best in Green Market Rate Multifamily Community for Plaza Verde in Irvine, CA, and the Best Student Housing Community On Campus for The Academic and Residential Complex located on the campus of the University of Illinois at Chicago.

“The year is off to a good start with operating results trending well relative to our expectations,” said Bill Bayless, American Campus Communities CEO. “We are pleased with the positive signs we are seeing in the business fundamentals as students continue to return to campus this spring and universities continue to make announcements regarding plans for a return to in-person activity in Fall 2021. We are also excited to see universities begin to turn their focus to the future, as evidenced by our on-campus public-private partnership announcements, with a new project award at Drexel University and commencement of construction on a new development at Concordia University in Austin.”

Academic Year 2021-2022 Preleasing Update

“As anticipated and consistent with our comments last quarter, we’ve begun to see an acceleration in weekly preleasing velocity compared to the prior year, as we are now approximately one month into the period when leasing activity dramatically slowed at the beginning of the pandemic last year,” said Jennifer Beese, American Campus Communities COO. “While there remains a significant amount of work to do before the next academic year begins, through March our preleasing velocity is tracking in-line with the broader industry, as represented by the “AxioMetrics 175” markets. More importantly, in the majority of our markets, our velocity continues to outpace market averages. Additionally, asking rental rates for our portfolio as a whole remain in-line or slightly above prior year and operators in most markets continue to be patient in terms of their pricing policies. We remain cautiously optimistic that we will experience increased occupancy levels this Fall but do not expect to fully return to historical occupancy levels for Academic Year 2021-2022.”

2021 Outlook

Due to remaining uncertainty regarding the ongoing COVID-19 global pandemic, the company is unable to predict with a reasonable degree of certainty the full magnitude of the pandemic and its effect on its results of operations for the remainder of the year ended December 31, 2021; therefore, the company is only providing a financial outlook for the second quarter of 2021. The company believes that the financial results for the three months ending June 30, 2021 may be affected by, among other factors:

• national and regional economic trends and events;
• the level of lease terminations, rent refunds, and/or abatements granted to student and commercial tenants;
• economic hardship experienced by student and commercial tenants and its ultimate effect on rent collections and thus the provision for uncollectible accounts;
• canceled or delayed third-party development projects;
• reduced revenues at our third-party managed properties resulting in reduced third-party management fee income;
• the impact of any stimulus payments that may be received by the company, our tenants, and/or our University partners under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and any future similar governmental actions;
• any increase in, or reduction to, operating expenses as a result of COVID-19;
• the amount of summer camps and conference revenue earned, if any;
• the amount of leasing and related fees earned for the 2021-2022 academic year, which are affected by the timing and velocity of the company’s leasing process;
• the timing and amount of any acquisitions, dispositions or joint venture activity;
• interest rate risk;
• the timing of commencement and completion of construction for owned development projects;
• university enrollment, funding and policy trends;
• the amount of income recognized by the taxable REIT subsidiaries and any corresponding income tax expense;
• the outcome of legal proceedings arising in the normal course of business; and
• the finalization of property tax rates and assessed values in certain jurisdictions.

Based upon these factors, management anticipates that second quarter 2021 FFO will be in the range of $0.33 to $0.37 per fully diluted share and FFOM will be in the range of $0.35 to $0.38 per fully diluted share, as compared to second quarter 2020 FFO and FFOM per fully diluted share of $0.36 and $0.37, respectively.

For earnings history and earnings-related data on American Campus Communities (ACC) click here.

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