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EX-32.4 - EXHIBIT 32.4 - AMERICAN CAMPUS COMMUNITIES INCexhibit3246302017.htm
EX-32.3 - EXHIBIT 32.3 - AMERICAN CAMPUS COMMUNITIES INCexhibit3236302017.htm
EX-32.2 - EXHIBIT 32.2 - AMERICAN CAMPUS COMMUNITIES INCexhibit3226302017.htm
EX-32.1 - EXHIBIT 32.1 - AMERICAN CAMPUS COMMUNITIES INCexhibit3216302017.htm
EX-31.4 - EXHIBIT 31.4 - AMERICAN CAMPUS COMMUNITIES INCexhibit3146302017.htm
EX-31.3 - EXHIBIT 31.3 - AMERICAN CAMPUS COMMUNITIES INCexhibit3136302017.htm
EX-31.2 - EXHIBIT 31.2 - AMERICAN CAMPUS COMMUNITIES INCexhibit3126302017.htm
EX-31.1 - EXHIBIT 31.1 - AMERICAN CAMPUS COMMUNITIES INCexhibit3116302017.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended June 30, 2017.   
 
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From ______________________ to _________________________
  
Commission file number 001-32265 (American Campus Communities, Inc.)
Commission file number 333-181102-01 (American Campus Communities Operating Partnership, L.P.)
 
AMERICAN CAMPUS COMMUNITIES, INC.
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
 
 Maryland (American Campus Communities, Inc.)
Maryland (American Campus Communities Operating
Partnership, L.P.)
 
 76-0753089 (American Campus Communities, Inc.)
56-2473181 (American Campus Communities Operating
Partnership, L.P.)
 (State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer Identification No.)
 
12700 Hill Country Blvd., Suite T-200
Austin, TX
(Address of Principal Executive Offices)
 
 
78738
(Zip Code)
 
(512) 732-1000
Registrant’s telephone number, including area code
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
American Campus Communities, Inc.
Yes x  No o
American Campus Communities Operating Partnership, L.P.
Yes x  No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
American Campus Communities, Inc.
Yes x  No o
American Campus Communities Operating Partnership, L.P.
Yes x  No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
American Campus Communities, Inc.                                                                                                                                    
Large accelerated filer x  
Accelerated Filer o



Non-accelerated filer   o     (Do not check if a smaller reporting company) 
Smaller reporting company o
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

American Campus Communities Operating Partnership, L.P.
Large accelerated filer o
Accelerated Filer o
Non-accelerated filer   x     (Do not check if a smaller reporting company) 
Smaller reporting company o
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
American Campus Communities, Inc.
Yes o  No x
American Campus Communities Operating Partnership, L.P
Yes o  No x
                                                                                           
There were 136,426,506 shares of the American Campus Communities, Inc.’s common stock with a par value of $0.01 per share outstanding as of the close of business on July 28, 2017.
 



EXPLANATORY NOTE
 
This report combines the reports on Form 10-Q for the quarterly period ended June 30, 2017 of American Campus Communities, Inc. and American Campus Communities Operating Partnership, L.P.  Unless stated otherwise or the context otherwise requires, references to “ACC” mean American Campus Communities, Inc., a Maryland corporation that has elected to be treated as a real estate investment trust (“REIT”) under the Internal Revenue Code, and references to “ACCOP” mean American Campus Communities Operating Partnership, L.P., a Maryland limited partnership.  References to the “Company,” “we,” “us” or “our” mean collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP.  References to the “Operating Partnership” mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP. The following chart illustrates the Company’s and the Operating Partnership’s corporate structure:
companyflowchart3312017a02.jpg 
The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC. As of June 30, 2017, ACC Holdings held an ownership interest in ACCOP of less than 1%. The limited partners of ACCOP are ACC and other limited partners consisting of current and former members of management and nonaffiliated third parties.  As of June 30, 2017, ACC owned an approximate 99.2% limited partnership interest in ACCOP.  As the sole member of the general partner of ACCOP, ACC has exclusive control of ACCOP’s day-to-day management.  Management operates the Company and the Operating Partnership as one business. The management of ACC consists of the same members as the management of ACCOP. The Company is structured as an umbrella partnership REIT (“UPREIT”) and ACC contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, ACC receives a number of units of the Operating Partnership (“OP Units,” see definition below) equal to the number of common shares it has issued in the equity offering. Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of OP Units in the Operating Partnership. Based on the terms of ACCOP’s partnership agreement, OP Units can be exchanged for ACC’s common shares on a one-for-one basis. The Company maintains a one-for-one relationship between the OP Units of the Operating Partnership issued to ACC and ACC Holdings and the common shares issued to the public. The Company believes that combining the reports on Form 10-Q of ACC and ACCOP into this single report provides the following benefits:
 
(1)
enhances investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
(2)
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and
(3)
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.




ACC consolidates ACCOP for financial reporting purposes, and ACC essentially has no assets or liabilities other than its investment in ACCOP. Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements. However, the Company believes it is important to understand the few differences between the Company and the Operating Partnership in the context of how the entities operate as a consolidated company. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership. ACC also issues public equity from time to time and guarantees certain debt of ACCOP, as disclosed in this report. ACC does not have any indebtedness, as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.  Except for the net proceeds from ACC’s equity offerings, which are contributed to the capital of ACCOP in exchange for OP Units on a one-for-one common share per OP Unit basis, the Operating Partnership generates all remaining capital required by the Company’s business. These sources include, but are not limited to, the Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its credit facility, the issuance of unsecured notes, and proceeds received from the disposition of certain properties.  Noncontrolling interests, stockholders’ equity, and partners’ capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The noncontrolling interests in the Operating Partnership’s financial statements consist of the interests of unaffiliated partners in various consolidated joint ventures. The noncontrolling interests in the Company’s financial statements include the same noncontrolling interests at the Operating Partnership level and OP Unit holders of the Operating Partnership. The differences between stockholders’ equity and partners’ capital result from differences in the equity issued at the Company and Operating Partnership levels.

To help investors understand the significant differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership. A single set of consolidated notes to such financial statements is presented that includes separate discussions for the Company and the Operating Partnership when applicable (for example, noncontrolling interests, stockholders’ equity or partners’ capital, earnings per share or unit, etc.).  A combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section is also included that presents discrete information related to each entity, as applicable. This report also includes separate Part I, Item 4 Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.
 
In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company operates its business through the Operating Partnership. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
 



FORM 10-Q
FOR THE QUARTER ENDED June 30, 2017
 TABLE OF CONTENTS
 
 
PAGE NO.
 
 
PART I.
 
 
 
 
Item 1.
Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries:
 
 
 
 
 
Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016
 
 
 
 
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2017 and 2016 (all unaudited)
 
 
 
 
Consolidated Statement of Changes in Equity for the six months ended June 30, 2017 (unaudited)
 
 
 
 
Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 (all unaudited)
 
 
 
 
Consolidated Financial Statements of American Campus Communities Operating Partnership, L.P. and Subsidiaries:
 
 
 
 
 
Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016
 
 
 
 
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2017 and 2016 (all unaudited)
 
 
 
 
Consolidated Statement of Changes in Capital for the six months ended June 30, 2017 (unaudited)
 
 
 
 
Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 (all unaudited)
 
 
 
 
Notes to Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries and American Campus Communities Operating Partnership, L.P. and Subsidiaries (unaudited)
 
 
 
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
PART II.
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
SIGNATURES
 


AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)



 
 
June 30, 2017
 
December 31, 2016
 
 
(Unaudited)
 
 
Assets
 
 
 
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
Wholly-owned properties, net
 
$
5,805,403

 
$
5,427,014

Wholly-owned properties held for sale
 

 
25,350

On-campus participating properties, net
 
82,940

 
85,797

Investments in real estate, net
 
5,888,343

 
5,538,161

 
 
 
 
 
Cash and cash equivalents
 
25,476

 
22,140

Restricted cash
 
28,319

 
24,817

Student contracts receivable, net
 
7,447

 
8,428

Other assets
 
275,388

 
272,367

 
 
 
 
 
Total assets
 
$
6,224,973

 
$
5,865,913

 
 
 
 
 
Liabilities and equity
 
 

 
 

 
 
 
 
 
Liabilities:
 
 

 
 

Secured mortgage, construction and bond debt, net
 
$
680,556

 
$
688,195

Unsecured notes, net
 
1,189,775

 
1,188,737

Unsecured term loans, net
 
347,417

 
149,065

Unsecured revolving credit facility
 
142,286

 
99,300

Accounts payable and accrued expenses
 
62,547

 
76,614

Other liabilities
 
179,342

 
158,437

Total liabilities
 
2,601,923

 
2,360,348

 
 
 
 
 
Commitments and contingencies (Note 13)
 


 


 
 
 
 
 
Redeemable noncontrolling interests
 
55,344

 
55,078

 
 
 
 
 
Equity:
 
 

 
 

American Campus Communities, Inc. and Subsidiaries stockholders’ equity:
 
 

 
 

Common stock, $0.01 par value, 800,000,000 shares authorized, 136,316,192 and 132,225,488 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
 
1,363

 
1,322

Additional paid in capital
 
4,312,413

 
4,118,842

Common stock held in rabbi trust, 63,354 and 20,181 shares at June 30, 2017 and December 31, 2016, respectively
 
(1,688
)
 
(975
)
Accumulated earnings and dividends
 
(754,660
)
 
(670,137
)
Accumulated other comprehensive loss
 
(3,428
)
 
(4,067
)
Total American Campus Communities, Inc. and Subsidiaries stockholders’ equity
 
3,554,000

 
3,444,985

Noncontrolling interests - partially owned properties
 
13,706

 
5,502

Total equity
 
3,567,706

 
3,450,487

 
 
 
 
 
Total liabilities and equity
 
$
6,224,973

 
$
5,865,913

 


See accompanying notes to consolidated financial statements.

1

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands, except share and per share data)



 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2017
 
2016
 
2017

2016
Revenues:
 
 
 
 
 
 
 
 
Wholly-owned properties
 
$
169,156

 
$
174,682

 
$
347,987

 
$
360,384

On-campus participating properties
 
6,171

 
6,214

 
16,329

 
16,260

Third-party development services
 
675

 
2,121

 
1,131

 
3,156

Third-party management services
 
2,288

 
2,253

 
4,902

 
4,663

Resident services
 
718

 
713

 
1,597

 
1,515

Total revenues
 
179,008

 
185,983

 
371,946

 
385,978

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 

 
 

 
 

 
 

Wholly-owned properties
 
75,172

 
77,722

 
150,129

 
156,573

On-campus participating properties
 
3,892

 
3,299

 
7,157

 
6,341

Third-party development and management services
 
3,827

 
3,560

 
7,910

 
7,298

General and administrative
 
9,782

 
6,126

 
16,516

 
11,435

Depreciation and amortization
 
55,943

 
53,703

 
108,266

 
107,419

Ground/facility leases
 
2,465

 
2,467

 
4,822

 
4,771

Provision for real estate impairment
 
15,317

 

 
15,317

 

Total operating expenses
 
166,398

 
146,877

 
310,117

 
293,837

 
 
 
 
 
 
 
 
 
Operating income
 
12,610

 
39,106

 
61,829

 
92,141

 
 
 
 
 
 
 
 
 
Nonoperating income and (expenses):
 
 

 
 

 
 

 
 

Interest income
 
1,232

 
1,475

 
2,464

 
2,754

Interest expense
 
(14,573
)
 
(20,119
)
 
(29,290
)
 
(42,746
)
Amortization of deferred financing costs
 
(1,023
)
 
(1,352
)
 
(2,051
)
 
(3,894
)
(Loss) gain from disposition of real estate
 
(632
)
 

 
(632
)
 
17,409

Total nonoperating expense
 
(14,996
)
 
(19,996
)
 
(29,509
)
 
(26,477
)
 
 
 
 
 
 
 
 
 
(Loss) income before income taxes
 
(2,386
)
 
19,110

 
32,320

 
65,664

Income tax provision
 
(267
)
 
(345
)
 
(524
)
 
(690
)
Net (loss) income
 
(2,653
)
 
18,765

 
31,796

 
64,974

Net income attributable to noncontrolling interests
 
 

 
 

 
 

 
 

Redeemable noncontrolling interests
 
(12
)
 
(223
)
 
(306
)
 
(741
)
Partially owned properties
 
(97
)
 
(104
)
 
(202
)
 
(208
)
Net income attributable to noncontrolling interests
 
(109
)
 
(327
)
 
(508
)
 
(949
)
Net (loss) income attributable to ACC, Inc. and Subsidiaries common stockholders
 
$
(2,762
)
 
$
18,438

 
$
31,288

 
$
64,025

 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)
 
 

 
 

 
 

 
 

Change in fair value of interest rate swaps and other
 
155

 
(23
)
 
639

 
(1,433
)
Comprehensive (loss) income
 
$
(2,607
)
 
$
18,415

 
$
31,927

 
$
62,592

 
 
 
 
 
 
 
 
 
Net (loss) income per share attributable to ACC, Inc. and Subsidiaries common stockholders
 
 

 
 

 
 

 
 

Basic and diluted
 
$
(0.02
)
 
$
0.14

 
$
0.23

 
$
0.50

 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
 
 

 
 

 
 

 
 

Basic
 
134,614,418

 
130,456,923

 
133,837,748

 
126,951,454

Diluted
 
134,614,418

 
131,240,667

 
134,745,192

 
127,753,492

 
 
 
 
 
 
 
 
 
Distributions declared per common share
 
$
0.44

 
$
0.42

 
$
0.86

 
$
0.82

 

See accompanying notes to consolidated financial statements.

2

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited, in thousands, except share data)



 
 
Common
Shares
 
Par Value of
Common
Shares
 
Additional Paid
in Capital
 
Common Stock Held in Rabbi Trust
 
Common Stock Held in Rabbi Trust at Cost
 
Accumulated
Earnings and
Dividends
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests –
Partially Owned
Properties
 
Total
Equity, December 31, 2016
 
132,225,488

 
$
1,322

 
$
4,118,842

 
20,181

 
$
(975
)
 
$
(670,137
)
 
$
(4,067
)
 
$
5,502

 
$
3,450,487

Adjustments to reflect redeemable noncontrolling interests at fair value
 

 

 
2,092

 

 

 

 

 

 
2,092

Amortization of restricted stock awards
 

 

 
8,191

 

 

 

 

 

 
8,191

Vesting of restricted stock awards and restricted stock units
 
165,248

 
2

 
(3,498
)
 
43,173

 
(713
)
 

 

 

 
(4,209
)
Distributions to common and restricted stockholders
 

 

 

 

 

 
(115,811
)
 

 

 
(115,811
)
Distributions to noncontrolling interests - partially owned properties
 

 

 

 

 

 

 

 
(156
)
 
(156
)
Net proceeds from sale of common stock
 
3,925,456

 
39

 
186,786

 

 

 

 

 

 
186,825

Change in fair value of interest rate swaps and other
 

 

 

 

 

 

 
435

 

 
435

Amortization of interest rate swap terminations
 

 

 

 

 

 

 
204

 

 
204

Contributions by noncontrolling interest
 

 

 

 

 

 

 

 
8,158

 
8,158

Net income
 

 

 

 

 

 
31,288

 

 
202

 
31,490

Equity, June 30, 2017
 
136,316,192


$
1,363


$
4,312,413

 
63,354

 
$
(1,688
)

$
(754,660
)

$
(3,428
)

$
13,706


$
3,567,706

 


See accompanying notes to consolidated financial statements.

3

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands) 


 
 
Six Months Ended June 30,
 
 
2017
 
2016
Operating activities
 
 
 
 
Net income
 
$
31,796

 
$
64,974

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Loss (gain) from disposition of real estate
 
632

 
(17,409
)
Provision for real estate impairment
 
15,317

 

Depreciation and amortization
 
108,266

 
107,419

Amortization of deferred financing costs and debt premiums/discounts
 
(1,806
)
 
(2,372
)
Share-based compensation
 
8,902

 
5,492

Income tax provision
 
524

 
690

Amortization of interest rate swap terminations and other
 
204

 
205

Changes in operating assets and liabilities:
 
 

 
 

Restricted cash
 
(2,189
)
 
(4,238
)
Student contracts receivable, net
 
1,239

 
11,283

Other assets
 
(13,814
)
 
5,830

Accounts payable and accrued expenses
 
(16,020
)
 
(11,849
)
Other liabilities
 
(4,413
)
 
(8,730
)
Net cash provided by operating activities
 
128,638

 
151,295

 
 
 
 
 
Investing activities
 
 

 
 

Proceeds from disposition of properties
 
24,462

 
72,640

Cash paid for acquisition of operating and under development properties
 
(157,967
)
 
(57,132
)
Cash paid for land acquisitions
 
(16,955
)
 
(856
)
Capital expenditures for wholly-owned properties
 
(36,026
)
 
(23,185
)
Investments in wholly-owned properties under development
 
(240,702
)
 
(187,158
)
Capital expenditures for on-campus participating properties
 
(870
)
 
(1,064
)
Change in escrow deposits for real estate investments
 
225

 
5,450

Change in restricted cash related to capital reserves
 
41

 
(928
)
Purchase of corporate furniture, fixtures and equipment
 
(3,562
)
 
(3,377
)
Net cash used in investing activities
 
(431,354
)
 
(195,610
)
 
 
 
 
 
Financing activities
 
 

 
 

Proceeds from sale of common stock
 
189,757

 
740,025

Offering costs
 
(2,354
)
 
(31,972
)
Pay-off of mortgage and construction loans
 

 
(34,226
)
Pay-off of unsecured term loans
 

 
(400,000
)
Proceeds from unsecured term loan
 
200,000

 
150,000

Proceeds from revolving credit facility
 
478,600

 
67,700

Paydowns of revolving credit facility
 
(435,614
)
 
(136,600
)
Proceeds from construction loans
 
1,037

 

Scheduled principal payments on debt
 
(6,494
)
 
(7,771
)
Debt issuance and assumption costs
 
(5,840
)
 
(744
)
Contributions by noncontrolling interest
 
8,158

 

Taxes paid on net-share settlements
 
(4,283
)
 
(2,977
)
Distributions to common and restricted stockholders
 
(115,811
)
 
(107,639
)
Distributions to noncontrolling interests
 
(1,104
)
 
(1,402
)
Net cash provided by financing activities
 
306,052

 
234,394

 
 
 
 
 
Net change in cash and cash equivalents
 
3,336

 
190,079

Cash and cash equivalents at beginning of period
 
22,140

 
16,659

Cash and cash equivalents at end of period
 
$
25,476

 
$
206,738

 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of non-cash investing and financing activities
 
 

 
 

Loans assumed in connection with property acquisitions
 
$

 
$
(10,012
)
Conversion of common and preferred operating partnership units to common stock
 
$

 
$
259

Non-cash contribution from noncontrolling interest
 
$
3,000

 
$

Non-cash consideration exchanged in purchase of land parcel
 
$
(3,071
)
 
$

Change in accrued construction in progress
 
$
25,214

 
$
27,472

Change in fair value of derivative instruments, net
 
$
435

 
$
(1,638
)
Change in fair value of redeemable noncontrolling interests
 
$
2,092

 
$
(14,879
)
 
 
 
 
 
Supplemental disclosure of cash flow information
 
 

 
 

Cash paid for interest, net of amounts capitalized
 
$
32,925

 
$
49,621

 

See accompanying notes to consolidated financial statements.

4

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)



 
 
June 30, 2017
 
December 31, 2016
 
 
(Unaudited)
 
 
Assets
 
 
 
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
Wholly-owned properties, net
 
$
5,805,403

 
$
5,427,014

Wholly-owned properties held for sale
 

 
25,350

On-campus participating properties, net
 
82,940

 
85,797

Investments in real estate, net
 
5,888,343

 
5,538,161

 
 
 
 
 
Cash and cash equivalents
 
25,476

 
22,140

Restricted cash
 
28,319

 
24,817

Student contracts receivable, net
 
7,447

 
8,428

Other assets
 
275,388

 
272,367

 
 
 
 
 
Total assets
 
$
6,224,973

 
$
5,865,913

 
 
 
 
 
Liabilities and capital
 
 

 
 

 
 
 
 
 
Liabilities:
 
 

 
 

Secured mortgage, construction and bond debt, net
 
$
680,556

 
$
688,195

Unsecured notes, net
 
1,189,775

 
1,188,737

Unsecured term loans, net
 
347,417

 
149,065

Unsecured revolving credit facility
 
142,286

 
99,300

Accounts payable and accrued expenses
 
62,547

 
76,614

Other liabilities
 
179,342

 
158,437

Total liabilities
 
2,601,923

 
2,360,348

 
 
 
 
 
Commitments and contingencies (Note 13)
 


 


 
 
 
 
 
Redeemable limited partners
 
55,344

 
55,078

 
 
 
 
 
Capital:
 
 

 
 

Partners’ capital:
 
 

 
 

General partner - 12,222 OP units outstanding at both June 30, 2017 and December 31, 2016
 
74

 
82

Limited partner - 136,367,324 and 132,233,447 OP units outstanding at June 30, 2017 and December 31, 2016, respectively
 
3,557,354

 
3,448,970

Accumulated other comprehensive loss
 
(3,428
)
 
(4,067
)
Total partners’ capital
 
3,554,000

 
3,444,985

Noncontrolling interests - partially owned properties
 
13,706

 
5,502

Total capital
 
3,567,706

 
3,450,487

 
 
 
 
 
Total liabilities and capital
 
$
6,224,973

 
$
5,865,913

 


See accompanying notes to consolidated financial statements.

5

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands, except unit and per unit data)



 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
 
Wholly-owned properties
 
$
169,156

 
$
174,682

 
$
347,987

 
$
360,384

On-campus participating properties
 
6,171

 
6,214

 
16,329

 
16,260

Third-party development services
 
675

 
2,121

 
1,131

 
3,156

Third-party management services
 
2,288

 
2,253

 
4,902

 
4,663

Resident services
 
718

 
713

 
1,597

 
1,515

Total revenues
 
179,008

 
185,983

 
371,946

 
385,978

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 

 
 

 
 

 
 

Wholly-owned properties
 
75,172

 
77,722

 
150,129

 
156,573

On-campus participating properties
 
3,892

 
3,299

 
7,157

 
6,341

Third-party development and management services
 
3,827

 
3,560

 
7,910

 
7,298

General and administrative
 
9,782

 
6,126

 
16,516

 
11,435

Depreciation and amortization
 
55,943

 
53,703

 
108,266

 
107,419

Ground/facility leases
 
2,465

 
2,467

 
4,822

 
4,771

Provision for real estate impairment
 
15,317

 

 
15,317

 

Total operating expenses
 
166,398

 
146,877

 
310,117

 
293,837

 
 
 
 
 
 
 
 
 
Operating income
 
12,610

 
39,106

 
61,829

 
92,141

 
 
 
 
 
 
 
 
 
Nonoperating income and (expenses):
 
 

 
 

 
 

 
 

Interest income
 
1,232

 
1,475

 
2,464

 
2,754

Interest expense
 
(14,573
)
 
(20,119
)
 
(29,290
)
 
(42,746
)
Amortization of deferred financing costs
 
(1,023
)
 
(1,352
)
 
(2,051
)
 
(3,894
)
(Loss) gain from disposition of real estate
 
(632
)
 

 
(632
)
 
17,409

Total nonoperating expense
 
(14,996
)
 
(19,996
)
 
(29,509
)
 
(26,477
)
(Loss) income before income taxes
 
(2,386
)
 
19,110

 
32,320

 
65,664

Income tax provision
 
(267
)
 
(345
)
 
(524
)
 
(690
)
Net (loss) income
 
(2,653
)
 
18,765

 
31,796

 
64,974

Net income attributable to noncontrolling interests – partially owned properties
 
(97
)
 
(104
)
 
(202
)
 
(208
)
Net (loss) income attributable to American Campus Communities Operating Partnership, L.P.
 
(2,750
)
 
18,661

 
31,594

 
64,766

Series A preferred unit distributions
 
(31
)
 
(37
)
 
(62
)
 
(79
)
Net (loss) income attributable to common unitholders
 
$
(2,781
)
 
$
18,624

 
$
31,532

 
$
64,687

 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)
 
 

 
 

 
 

 
 

Change in fair value of interest rate swaps and other
 
155

 
(23
)
 
639

 
(1,433
)
Comprehensive (loss) income
 
$
(2,626
)
 
$
18,601

 
$
32,171

 
$
63,254

 
 
 
 
 
 
 
 
 
Net (loss) income per unit attributable to common unitholders
 
 

 
 

 
 

 
 

Basic and diluted
 
$
(0.02
)
 
$
0.14

 
$
0.23

 
$
0.50

 
 
 
 
 
 
 
 
 
Weighted-average common units outstanding
 
 

 
 

 
 

 
 

Basic
 
135,643,549

 
131,760,705

 
134,866,879

 
128,258,368

Diluted
 
135,643,549

 
132,544,449

 
135,774,323

 
129,060,406

 
 
 
 
 
 
 
 
 
Distributions declared per Common Unit
 
$
0.44

 
$
0.42

 
$
0.86

 
$
0.82

 

See accompanying notes to consolidated financial statements.

6

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL
(unaudited, in thousands, except unit data)



 
 
 
 
 
 
 
 
 
 
Accumulated
 
Noncontrolling
 
 
 
 
 
 
 
 
Other
 
Interests -
 
 

 
 
General Partner
 
Limited Partner
 
Comprehensive
 
Partially Owned
 
 

 
 
Units
 
Amount
 
Units
 
Amount
 
Loss
 
Properties
 
Total
Capital, December 31, 2016
 
12,222

 
$
82

 
132,233,447

 
$
3,448,970

 
$
(4,067
)
 
$
5,502

 
$
3,450,487

Adjustments to reflect redeemable limited partners’ interest at fair value
 

 

 

 
2,092

 

 

 
2,092

Amortization of restricted stock awards
 

 

 

 
8,191

 

 

 
8,191

Vesting of restricted stock awards and restricted stock units
 

 

 
208,421

 
(4,209
)
 

 

 
(4,209
)
Distributions
 

 
(11
)
 

 
(115,800
)
 

 

 
(115,811
)
Distributions to noncontrolling interests - partially owned properties
 

 

 

 

 

 
(156
)
 
(156
)
Issuance of units in exchange for contributions of equity offering proceeds
 

 

 
3,925,456

 
186,825

 

 

 
186,825

Change in fair value of interest rate swaps and other
 

 

 

 

 
435

 

 
435

Amortization of interest rate swap terminations
 

 

 

 

 
204

 

 
204

Contributions by noncontrolling interest
 

 

 

 

 

 
8,158

 
8,158

Net income
 

 
3

 

 
31,285

 

 
202

 
31,490

Capital as of June 30, 2017
 
12,222

 
$
74

 
136,367,324

 
$
3,557,354

 
$
(3,428
)
 
$
13,706

 
$
3,567,706

 
 

See accompanying notes to consolidated financial statements.

7

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands) 


 
 
Six Months Ended June 30,
 
 
2017
 
2016
Operating activities
 
 
 
 
Net income
 
$
31,796

 
$
64,974

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Loss (gain) from disposition of real estate
 
632

 
(17,409
)
Provision for real estate impairment
 
15,317

 

Depreciation and amortization
 
108,266

 
107,419

Amortization of deferred financing costs and debt premiums/discounts
 
(1,806
)
 
(2,372
)
Share-based compensation
 
8,902

 
5,492

Income tax provision
 
524

 
690

Amortization of interest rate swap terminations and other
 
204

 
205

Changes in operating assets and liabilities:
 
 

 
 

Restricted cash
 
(2,189
)
 
(4,238
)
Student contracts receivable, net
 
1,239

 
11,283

Other assets
 
(13,814
)
 
5,830

Accounts payable and accrued expenses
 
(16,020
)
 
(11,849
)
Other liabilities
 
(4,413
)
 
(8,730
)
Net cash provided by operating activities
 
128,638

 
151,295

 
 
 
 
 
Investing activities
 
 

 
 

Proceeds from disposition of properties
 
24,462

 
72,640

Cash paid for acquisition of operating and under development properties
 
(157,967
)
 
(57,132
)
Cash paid for land acquisitions
 
(16,955
)
 
(856
)
Capital expenditures for wholly-owned properties
 
(36,026
)
 
(23,185
)
Investments in wholly-owned properties under development
 
(240,702
)
 
(187,158
)
Capital expenditures for on-campus participating properties
 
(870
)
 
(1,064
)
Change in escrow deposits for real estate investments
 
225

 
5,450

Change in restricted cash related to capital reserves
 
41

 
(928
)
Purchase of corporate furniture, fixtures and equipment
 
(3,562
)
 
(3,377
)
Net cash used in investing activities
 
(431,354
)
 
(195,610
)
 
 
 
 
 
Financing activities
 
 

 
 

Proceeds from issuance of common units in exchange for contributions, net
 
187,403

 
708,053

Pay-off of mortgage and construction loans
 

 
(34,226
)
Pay-off of unsecured term loan
 

 
(400,000
)
Proceeds from unsecured term loan
 
200,000

 
150,000

Proceeds from revolving credit facility
 
478,600

 
67,700

Paydowns of revolving credit facility
 
(435,614
)
 
(136,600
)
Proceeds from construction loans
 
1,037

 

Scheduled principal payments on debt
 
(6,494
)
 
(7,771
)
Debt issuance and assumption costs
 
(5,840
)
 
(744
)
Contributions by noncontrolling interest
 
8,158

 

Taxes paid on net-share settlements
 
(4,283
)
 
(2,977
)
Distributions paid to common and preferred unitholders
 
(115,902
)
 
(108,066
)
Distributions paid on unvested restricted stock awards
 
(857
)
 
(722
)
Distributions paid to noncontrolling interests - partially owned properties
 
(156
)
 
(253
)
Net cash provided by financing activities
 
306,052

 
234,394

 
 
 
 
 
Net change in cash and cash equivalents
 
3,336

 
190,079

Cash and cash equivalents at beginning of period
 
22,140

 
16,659

Cash and cash equivalents at end of period
 
$
25,476

 
$
206,738

 
 
 
 
 
Supplemental disclosure of non-cash investing and financing activities
 
 

 
 

Loans assumed in connection with property acquisitions
 
$

 
$
(10,012
)
Conversion of common and preferred operating partnership units to common stock
 
$

 
$
259

Non-cash contribution from noncontrolling interest
 
$
3,000

 
$

Non-cash consideration exchanged in purchase of land parcel
 
$
(3,071
)
 
$

Change in accrued construction in progress
 
$
25,214

 
$
27,472

Change in fair value of derivative instruments, net
 
$
435

 
$
(1,638
)
Change in fair value of redeemable noncontrolling interests
 
$
2,092

 
$
(14,879
)
 
 
 
 
 
Supplemental disclosure of cash flow information
 
 

 
 

Cash paid for interest, net of amounts capitalized
 
$
32,925

 
$
49,621

 

See accompanying notes to consolidated financial statements.

8

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



1. Organization and Description of Business
 
American Campus Communities, Inc. (“ACC”) is a real estate investment trust (“REIT”) that commenced operations effective with the completion of an initial public offering (“IPO”) on August 17, 2004.  Through ACC’s controlling interest in American Campus Communities Operating Partnership, L.P. (“ACCOP”), ACC is one of the largest owners, managers and developers of high quality student housing properties in the United States in terms of beds owned and under management.  ACC is a fully integrated, self-managed and self-administered equity REIT with expertise in the acquisition, design, financing, development, construction management, leasing and management of student housing properties.  ACC’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “ACC.”
 
The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC.  As of June 30, 2017, ACC Holdings held an ownership interest in ACCOP of less than 1%. The limited partners of ACCOP are ACC and other limited partners consisting of current and former members of management and nonaffiliated third parties.  As of June 30, 2017, ACC owned an approximate 99.2% limited partnership interest in ACCOP.  As the sole member of the general partner of ACCOP, ACC has exclusive control of ACCOP’s day-to-day management.  Management operates ACC and ACCOP as one business.  The management of ACC consists of the same members as the management of ACCOP.  ACC consolidates ACCOP for financial reporting purposes, and ACC does not have significant assets other than its investment in ACCOP.  Therefore, the assets and liabilities of ACC and ACCOP are the same on their respective financial statements.  References to the “Company” means collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP.  References to the “Operating Partnership” mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP.  Unless otherwise indicated, the accompanying Notes to the Consolidated Financial Statements apply to both the Company and the Operating Partnership.
 
As of June 30, 2017, the Company’s property portfolio contained 160 properties with approximately 99,000 beds.  The Company’s property portfolio consisted of 124 owned off-campus student housing properties that are in close proximity to colleges and universities, 31 American Campus Equity (“ACE®”) properties operated under ground/facility leases with 14 university systems and five on-campus participating properties operated under ground/facility leases with the related university systems.  Of the 160 properties, 19 were under development as of June 30, 2017, and when completed will consist of a total of approximately 14,300 beds.  The Company’s communities contain modern housing units and are supported by a resident assistant system and other student-oriented programming, with many offering resort-style amenities.
 
Through one of ACC’s taxable REIT subsidiaries (“TRSs”), the Company also provides construction management and development services, primarily for student housing properties owned by colleges and universities, charitable foundations, and others.  As of June 30, 2017, also through one of ACC’s TRSs, the Company provided third-party management and leasing services for 37 properties that represented approximately 29,700 beds.  Third-party management and leasing services are typically provided pursuant to management contracts that have initial terms that range from one to five years.  As of June 30, 2017, the Company’s total owned and third-party managed portfolio included 197 properties with approximately 128,700 beds.
 
2. Summary of Significant Accounting Policies
 
Basis of Presentation
 
The accompanying consolidated financial statements, presented in U.S. dollars, are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and revenue and expenses during the reporting periods. The Company’s actual results could differ from those estimates and assumptions. All material intercompany transactions among consolidated entities have been eliminated. All dollar amounts in the tables herein, except share, per share, unit and per unit amounts, are stated in thousands unless otherwise indicated.


9

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Principles of Consolidation

The Company’s consolidated financial statements include its accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which it has control. Investments acquired or created are evaluated based on the accounting guidance relating to variable interest entities (“VIEs”), which requires the consolidation of VIEs in which the Company is considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation using the voting interest model.

Recently Issued Accounting Pronouncements

In February 2017, the FASB issued Accounting Standards Update 2017-05 (“ASU 2017-05”), “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” The purpose of this ASU is to eliminate the diversity in practice in accounting for derecognition of a nonfinancial asset and in-substance nonfinancial assets (only when the asset or asset group does not meet the definition of a business or the transaction is not a sale to a customer). The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption for the fiscal years beginning after December 15, 2016 is permitted. This ASU is required to be adopted in conjunction with the Company’s adoption of ASU 2014-09, the new revenue recognition standard, which will be adopted as of January 1, 2018. Upon adoption of this ASU, application must be performed on a retrospective basis for each period presented in the Company’s financial statements or a retrospective basis with a cumulative-effect adjustment to retained earnings at the beginning of the fiscal year of adoption. The Company currently does not anticipate a material impact to its consolidated financial statements for property dispositions given the simplicity of the Company’s historical disposition transactions.

In February 2016, the FASB issued Accounting Standards Update 2016-02 (“ASU 2016-02”), “Leases (Topic 842): Amendments to the FASB Accounting Standards Codification.” ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The guidance is effective for public business entities for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Company plans to adopt ASU 2016-02 as of January 1, 2019. While the Company is still evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures, it expects to recognize right-of-use assets and related lease liabilities on its consolidated balance sheets related to ground leases under which it is the lessee.

In May 2014, the FASB issued Accounting Standards Update 2014-09 (“ASU 2014-09”), “Revenue From Contracts With Customers (Topic 606)”.  ASU 2014-09 provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries.  ASU 2014-09 requires an entity to recognize revenue to reflect the transfer of goods or services to customers at an amount the entity expects to be paid in exchange for those goods and services and provide enhanced disclosures, all to provide more comprehensive guidance for transactions such as service revenue and contract modifications. Subsequent to the issuance of ASU 2014-09, the FASB has issued multiple Accounting Standards Updates clarifying multiple aspects of the new revenue recognition standard, which include the deferral of the effective date by one year.  ASU 2014-09, as amended by subsequent Accounting Standards Updates, is effective for public entities for interim and annual periods beginning after December 15, 2017 and may be applied using either a full retrospective or modified retrospective approach upon adoption.

The Company plans to adopt the new revenue standard using the modified retrospective approach as of January 1, 2018 and is currently evaluating each of its revenue streams to identify any differences in the timing, measurement or presentation of revenue recognition under the new standard. The Company does not expect the adoption of this standard to have a significant impact on its consolidated financial statements, as a substantial portion of its revenue consists of rental income from leasing arrangements, which is specifically excluded from ASU 2014-09, and will be evaluated with the adoption of the lease accounting standard, ASU 2016-02, discussed above. The Company anticipates the primary effects of the new standard will be associated with the Company’s non-leasing revenue streams, which represent less than 5% of consolidated total revenues.


10

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


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

ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.”
ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.”
ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.”
ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”

Recently Adopted Accounting Pronouncements

On January 1, 2017, the Company adopted Accounting Standards Update 2017-01 (“ASU 2017-01”), “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The amendments in this guidance clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years; early adoption is permitted. ASU 2017-01 will be applied prospectively to any transactions occurring subsequent to January 1, 2017. Under the new standard, the Company expects that most property acquisitions will be accounted for as asset acquisitions, and as a result, most transaction costs will be capitalized rather than expensed. The impact on the Company’s consolidated financial statements will depend on the size and volume of future acquisition activity.

In addition, on January 1, 2017, the Company adopted the following accounting pronouncements which did not have a material effect on the Company’s consolidated financial statements:

ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments — Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update).”
ASU 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.”

Interim Financial Statements

The accompanying interim financial statements are unaudited, but have been prepared in accordance with GAAP for interim financial information and in conjunction with the rules and regulations of the 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 of the Company for these interim periods have been included.  Because of the seasonal nature of the Company’s operations, the results of operations and cash flows for any interim period are not necessarily indicative of results for other interim periods or for the full year.  These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
 
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
 

11

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Investments in Real Estate
 
Investments in real estate are recorded at historical cost.  Major improvements that extend the life of an asset are capitalized and depreciated over the remaining useful life of the asset.  The cost of ordinary repairs and maintenance are charged to expense when incurred.  Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets as follows:
Buildings and improvements
 
7-40 years
Leasehold interest - on-campus
   participating properties
 
25-34 years (shorter of useful life or respective lease term)
Furniture, fixtures and equipment
 
3-7 years
 
Project costs directly associated with the development and construction of an owned real estate project, which include interest, property taxes, and amortization of deferred finance costs, are capitalized as construction in progress.  Upon completion of the project, costs are transferred into the applicable asset category and depreciation commences.  Interest totaling approximately $5.7 million and $3.6 million was capitalized during the three months ended June 30, 2017 and 2016, respectively, and interest totaling approximately $10.1 million and $5.7 million was capitalized during the six months ended June 30, 2017 and 2016, respectively.
 
Management assesses whether there has been an impairment in the value of the Company’s investments in real estate whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Impairment is recognized when estimated expected future undiscounted cash flows are less than the carrying value of the property, or when a property meets the criteria to be classified as held for sale, at which time an impairment charge is recognized for any excess of the carrying value of the property over the expected net proceeds from the disposal.  The estimation of expected future net cash flows is inherently uncertain and relies on assumptions regarding current and future economics and market conditions.  If such conditions change, then an adjustment to the carrying value of the Company’s long-lived assets could occur in the future period in which the conditions change.  To the extent that a property is impaired, the excess of the carrying amount of the property over its estimated fair value is charged to earnings. The Company believes that there were no impairment indicators of the carrying values of its investments in real estate as of June 30, 2017, other than a $15.3 million impairment charge recorded during the three months ended June 30, 2017 for one property that is in the process of being transferred to the lender in settlement of the property's $27.4 million mortgage loan due to mature in August 2017 (see Note 7).

The Company evaluates each acquisition to determine if the integrated set of assets and activities acquired meet the definition of a business under ASU 2017-01.  If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:

Substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets; or
The integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e. revenue generated before and after the transaction).

Property acquisitions deemed to qualify as a business are accounted for as business combinations, and the related acquisition costs are expensed as incurred. The Company allocates the purchase price of properties acquired in business combinations to net tangible and identified intangible assets based on their fair values.  Fair value estimates are based on information obtained from a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, the Company’s own analysis of recently acquired and existing comparable properties in the Company’s portfolio, and other market data.  Information obtained about each property as a result of due diligence, marketing and leasing activities is also considered.  The value allocated to land is generally based on the actual purchase price if acquired separately, or market research/comparables if acquired as part of an existing operating property.  The value allocated to building is based on the fair value determined on an “as-if vacant” basis, which is estimated using a replacement cost approach that relies upon assumptions that the Company believes are consistent with current market conditions for similar properties. The value allocated to furniture, fixtures, and equipment is based on an estimate of the fair value of the appliances and fixtures inside the units. The Company has determined these estimates are primarily based upon unobservable inputs and therefore are considered to be Level 3 inputs within the fair value hierarchy. 


12

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Acquisitions of properties that do not meet the definition of a business are accounted for as asset acquisitions.  The accounting model for asset acquisitions is similar to the accounting model for business combinations except that the acquisition consideration (including transaction costs) is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis.  The relative fair values used to allocate the cost of an asset acquisition are determined using the same methodologies and assumptions as those utilized to determine fair value in a business combination. 

Pre-development Expenditures

Pre-development expenditures such as architectural fees, permits and deposits associated with the pursuit of third-party and owned development projects are expensed as incurred, until such time that management believes it is probable that the contract will be executed and/or construction will commence.  Because the Company frequently incurs these pre-development expenditures before a financing commitment and/or required permits and authorizations have been obtained, the Company bears the risk of loss of these pre-development expenditures if financing cannot ultimately be arranged on acceptable terms or the Company is unable to successfully obtain the required permits and authorizations.  As such, management evaluates the status of third-party and owned projects that have not yet commenced construction on a periodic basis and expenses any deferred costs related to projects whose current status indicates the commencement of construction is unlikely and/or the costs may not provide future value to the Company in the form of revenues.  Such write-offs are included in third-party development and management services expenses (in the case of third-party development projects) or general and administrative expenses (in the case of owned development projects) on the accompanying consolidated statements of comprehensive income.  As of June 30, 2017, the Company has deferred approximately $6.1 million in pre-development costs related to third-party and owned development projects that have not yet commenced construction.  Such costs are included in other assets on the accompanying consolidated balance sheets.

Earnings per Share – Company
 
Basic earnings per share is computed using net income attributable to common stockholders and the weighted average number of shares of the Company’s common stock outstanding during the period.  Diluted earnings per share reflects common shares issuable from the assumed conversion of American Campus Communities Operating Partnership Units (“OP Units”) and common share awards granted.  Only those items having a dilutive impact on basic earnings per share are included in diluted earnings per share.
 
The following potentially dilutive securities were outstanding for the three and six months ended June 30, 2017 and 2016, but were not included in the computation of diluted earnings per share because the effects of their inclusion would be anti-dilutive. 
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
Common OP Units (Note 9)
 
1,029,131

 
1,303,782

 
1,029,131

 
1,306,914

Preferred OP Units (Note 9)
 
77,513

 
94,359

 
77,513

 
98,974

Unvested restricted stock awards (Note10)
 
881,306

 

 

 

Total potentially dilutive securities
 
1,987,950

 
1,398,141

 
1,106,644

 
1,405,888



13

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


 The following is a summary of the elements used in calculating basic and diluted earnings per share:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
Numerator – basic and diluted earnings per share:
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(2,653
)
 
$
18,765

 
$
31,796

 
$
64,974

Net income attributable to noncontrolling interests
 
(109
)
 
(327
)
 
(508
)
 
(949
)
Net (loss) income attributable to common stockholders
 
(2,762
)
 
18,438

 
31,288

 
64,025

Amount allocated to participating securities
 
(389
)
 
(329
)
 
(857
)
 
(722
)
Net (loss) income attributable to common stockholders
 
$
(3,151
)
 
$
18,109

 
$
30,431

 
$
63,303

 
 
 
 
 
 
 
 
 
Denominator:
 
 

 
 

 
 

 
 

Basic weighted average common shares outstanding
 
134,614,418

 
130,456,923

 
133,837,748

 
126,951,454

Unvested restricted stock awards (Note 10)
 

 
783,744

 
907,444

 
802,038

Diluted weighted average common shares outstanding
 
134,614,418

 
131,240,667

 
134,745,192

 
127,753,492

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Net (loss) income attributable to common stockholders - basic and diluted
 
$
(0.02
)
 
$
0.14

 
$
0.23

 
$
0.50

 
 
 
Earnings per Unit – Operating Partnership
 
Basic earnings per OP Unit is computed using net income attributable to common unitholders and the weighted average number of common units outstanding during the period.  Diluted earnings per OP Unit reflects the potential dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units or resulted in the issuance of OP Units and then shared in the earnings of the Operating Partnership.

The following is a summary of the elements used in calculating basic and diluted earnings per unit: 
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
Numerator – basic and diluted earnings per unit:
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(2,653
)
 
$
18,765

 
$
31,796

 
$
64,974

Net income attributable to noncontrolling interests – partially owned properties
 
(97
)
 
(104
)
 
(202
)
 
(208
)
Series A preferred unit distributions
 
(31
)
 
(37
)
 
(62
)
 
(79
)
Amount allocated to participating securities
 
(389
)
 
(329
)
 
(857
)
 
(722
)
Net (loss) income attributable to common unitholders
 
$
(3,170
)
 
$
18,295

 
$
30,675

 
$
63,965

 
 
 
 
 
 
 
 
 
Denominator:
 
 

 
 

 
 

 
 

Basic weighted average common units outstanding
 
135,643,549

 
131,760,705

 
134,866,879

 
128,258,368

Unvested restricted stock awards (Note 10)
 

 
783,744

 
907,444

 
802,038

Diluted weighted average common units outstanding
 
135,643,549

 
132,544,449

 
135,774,323

 
129,060,406

Earnings per unit:
 
 
 
 
 
 
 
 
Net (loss) income attributable to common unitholders - basic and diluted
 
$
(0.02
)
 
$
0.14

 
$
0.23

 
$
0.50



14

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



3. Acquisitions
   
Land Acquisitions

During the six months ended June 30, 2017, the Company purchased five land parcels with fair value of $23.1 million for total cash consideration of approximately $17.0 million. The difference between the fair value of the land and the cash consideration represents non-cash consideration and a non-cash contribution from a noncontrolling partner.

Property Acquisitions

During the six months ended June 30, 2017, the Company acquired the following wholly-owned properties for a total purchase price of approximately $158.5 million. Total cash consideration was approximately $158.0 million. The difference between the contracted purchase price and the cash consideration is due to other assets and liabilities that were not part of the contractual purchase price, but were acquired in the transactions, as well as transaction costs capitalized as part of the acquisitions.
Property
 
Location
 
Primary University Served
 
Acquisition Date
 
Beds
The Arlie
 
Arlington, TX
 
University of Texas Arlington
 
April 2017
 
598
TWELVE at U District
 
Seattle, WA
 
University of Washington
 
June 2017
 
384