AMERICAN CAMPUS COMMUNITIES INC - FORM 10-Q

Attached files

file	filename
EX-32.4 - EXHIBIT 32.4 - AMERICAN CAMPUS COMMUNITIES INC	exhibit3249302017.htm
EX-32.3 - EXHIBIT 32.3 - AMERICAN CAMPUS COMMUNITIES INC	exhibit3239302017.htm
EX-32.2 - EXHIBIT 32.2 - AMERICAN CAMPUS COMMUNITIES INC	exhibit3229302017.htm
EX-32.1 - EXHIBIT 32.1 - AMERICAN CAMPUS COMMUNITIES INC	exhibit3219302017.htm
EX-31.4 - EXHIBIT 31.4 - AMERICAN CAMPUS COMMUNITIES INC	exhibit3149302017.htm
EX-31.3 - EXHIBIT 31.3 - AMERICAN CAMPUS COMMUNITIES INC	exhibit3139302017.htm
EX-31.2 - EXHIBIT 31.2 - AMERICAN CAMPUS COMMUNITIES INC	exhibit3129302017.htm
EX-31.1 - EXHIBIT 31.1 - AMERICAN CAMPUS COMMUNITIES INC	exhibit3119302017.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 September 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

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 October 27, 2017.

EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended September 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:

The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC. As of September 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 September 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 September 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 September 30, 2017 (unaudited) and December 31, 2016	1

	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016 (all unaudited)	2

	Consolidated Statement of Changes in Equity for the nine months ended September 30, 2017 (unaudited)	3

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (all unaudited)	4

	Consolidated Financial Statements of American Campus Communities Operating Partnership, L.P. and Subsidiaries:

	Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016	5

	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016 (all unaudited)	6

	Consolidated Statement of Changes in Capital for the nine months ended September 30, 2017 (unaudited)	7

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (all unaudited)	8

	Notes to Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries and American Campus Communities Operating Partnership, L.P. and Subsidiaries (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	48

Item 4.	Controls and Procedures	48

PART II.

Item 1.	Legal Proceedings	49

Item 1A.	Risk Factors	49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

Item 3.	Defaults Upon Senior Securities	49

Item 4.	Mine Safety Disclosures	49

Item 5.	Other Information	49

Item 6.	Exhibits	50

SIGNATURES		51

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



	September 30, 2017			December 31, 2016
	(Unaudited)
Assets

Investments in real estate:
Wholly-owned properties, net	$	6,262,077		$	5,427,014
Wholly-owned properties held for sale	—			25,350
On-campus participating properties, net	83,095			85,797
Investments in real estate, net	6,345,172			5,538,161

Cash and cash equivalents	16,341			22,140
Restricted cash	25,824			24,817
Student contracts receivable, net	15,531			8,428
Other assets	284,023			272,367

Total assets	$	6,686,891		$	5,865,913

Liabilities and equity

Liabilities:
Secured mortgage, construction and bond debt, net	$	662,874		$	688,195
Unsecured notes, net	1,190,296			1,188,737
Unsecured term loans, net	646,675			149,065
Unsecured revolving credit facility	266,440			99,300
Accounts payable and accrued expenses	79,612			76,614
Other liabilities	214,918			158,437
Total liabilities	3,060,815			2,360,348

Commitments and contingencies (Note 13)

Redeemable noncontrolling interests	112,270			55,078

Equity:
American Campus Communities, Inc. and Subsidiaries stockholders' equity:
Common stock, $0.01 par value, 800,000,000 shares authorized, 136,362,728 and 132,225,488 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	1,364			1,322
Additional paid in capital	4,321,228			4,118,842
Common stock held in rabbi trust, 63,778 and 20,181 shares at September 30, 2017 and December 31, 2016, respectively	(2,944		)	(975		)
Accumulated earnings and dividends	(816,360		)	(670,137		)
Accumulated other comprehensive loss	(3,195		)	(4,067		)
Total American Campus Communities, Inc. and Subsidiaries stockholders' equity	3,500,093			3,444,985
Noncontrolling interests - partially owned properties	13,713			5,502
Total equity	3,513,806			3,450,487

Total liabilities and equity	$	6,686,891		$	5,865,913

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands, except share and per share data)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Wholly-owned properties	$	183,569		$	185,694		$	531,556		$	546,078
On-campus participating properties	6,799			6,758			23,128			23,018
Third-party development services	3,566			773			4,697			3,929
Third-party management services	2,291			2,376			7,193			7,039
Resident services	713			810			2,310			2,325
Total revenues	196,938			196,411			568,884			582,389

Operating expenses:
Wholly-owned properties	99,423			100,602			249,552			257,175
On-campus participating properties	3,923			3,784			11,080			10,125
Third-party development and management services	3,879			3,340			11,789			10,638
General and administrative	8,684			5,375			25,200			16,810
Depreciation and amortization	61,125			52,067			169,391			159,486
Ground/facility leases	2,329			1,965			7,151			6,736
Provision for real estate impairment	—			—			15,317			—
Total operating expenses	179,363			167,133			489,480			460,970

Operating income	17,575			29,278			79,404			121,419

Nonoperating income and (expenses):
Interest income	1,259			1,272			3,723			4,026
Interest expense	(18,654		)	(19,016		)	(47,944		)	(61,762		)
Amortization of deferred financing costs	(1,146		)	(1,344		)	(3,197		)	(5,238		)
(Loss) gain from disposition of real estate	—			—			(632		)	17,409
Total nonoperating expense	(18,541		)	(19,088		)	(48,050		)	(45,565		)

(Loss) income before income taxes	(966		)	10,190			31,354			75,854
Income tax provision	(267		)	(345		)	(791		)	(1,035		)
Net (loss) income	(1,233		)	9,845			30,563			74,819
Net income attributable to noncontrolling interests	(79		)	(201		)	(587		)	(1,150		)
Net (loss) income attributable to ACC, Inc. and Subsidiaries common stockholders	$	(1,312	)	$	9,644		$	29,976		$	73,669

Other comprehensive income (loss)
Change in fair value of interest rate swaps and other	233			1,271			872			(162		)
Comprehensive (loss) income	$	(1,079	)	$	10,915		$	30,848		$	73,507

Net (loss) income per share attributable to ACC, Inc. and Subsidiaries common stockholders
Basic	$	(0.01	)	$	0.07		$	0.21		$	0.57
Diluted	$	(0.01	)	$	0.07		$	0.21		$	0.56

Weighted-average common shares outstanding
Basic	136,421,198			130,786,985			134,708,361			128,239,294
Diluted	136,421,198			131,568,371			135,585,850			129,034,401

Distributions declared per common share	$	0.44		$	0.42		$	1.30		$	1.24

See accompanying notes to consolidated financial statements.

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 Shares Held in Rabbi Trust	Common Shares 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	—	—		5,943			—	—			—			—			—			5,943
Amortization of restricted stock awards	—	—		10,641			—	—			—			—			—			10,641
Vesting of restricted stock awards and restricted stock units	165,884	2		(2,193		)	43,597	(1,969		)	—			—			—			(4,160		)
Distributions to common and restricted stockholders	—	—		—			—	—			(176,199		)	—			—			(176,199		)
Distributions to noncontrolling interests - partially owned properties	—	—		—			—	—			—			—			(212		)	(212		)
Conversion of common and preferred operating partnership units to common stock	22,000	—		154			—	—			—			—			—			154
Net proceeds from sale of common stock	3,949,356	40		187,841			—	—			—			—			—			187,881
Change in fair value of interest rate swaps and other	—	—		—			—	—			—			564			—			564
Amortization of interest rate swap terminations	—	—		—			—	—			—			308			—			308
Contributions by noncontrolling interest	—	—		—			—	—			—			—			8,158			8,158
Net income	—	—		—			—	—			29,976			—			265			30,241
Equity, September 30, 2017	136,362,728	$	1,364	$	4,321,228		63,778	$	(2,944	)	$	(816,360	)	$	(3,195	)	$	13,713		$	3,513,806

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



	Nine Months Ended September 30,
	2017			2016
Operating activities
Net income	$	30,563		$	74,819
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	169,391			159,486
Amortization of deferred financing costs and debt premiums/discounts	(2,691		)	(4,053		)
Share-based compensation	11,401			7,820
Income tax provision	791			1,035
Amortization of interest rate swap terminations and other	308			309
Changes in operating assets and liabilities:
Restricted cash	(566		)	(734		)
Student contracts receivable, net	(6,775		)	1,750
Other assets	(2,536		)	(5,112		)
Accounts payable and accrued expenses	(293		)	2,769
Other liabilities	29,581			22,157
Net cash provided by operating activities	245,123			242,837

Investing activities
Proceeds from disposition of properties	24,462			72,640
Cash paid for acquisition of operating and under development properties	(302,318		)	(96,604		)
Cash paid for land acquisitions	(8,886		)	(856		)
Capital expenditures for wholly-owned properties	(64,464		)	(45,155		)
Investments in wholly-owned properties under development	(409,174		)	(284,777		)
Capital expenditures for on-campus participating properties	(2,909		)	(2,510		)
Investment in direct financing lease	(759		)	(7,837		)
Change in escrow deposits for real estate investments	(727		)	5,141
Change in restricted cash related to capital reserves	(578		)	(1,099		)
Purchase of corporate furniture, fixtures and equipment	(4,997		)	(4,681		)
Net cash used in investing activities	(770,350		)	(365,738		)

Financing activities
Proceeds from sale of common stock	190,912			803,189
Offering costs	(2,374		)	(32,912		)
Pay-off of mortgage and construction loans	(99,185		)	(152,597		)
Pay-off of unsecured term loans	—			(400,000		)
Proceeds from unsecured term loan	500,000			150,000
Proceeds from revolving credit facility	974,300			123,400
Paydowns of revolving credit facility	(807,160		)	(172,300		)
Proceeds from construction loans	10,812			—
Scheduled principal payments on debt	(9,718		)	(11,514		)
Debt issuance and assumption costs	(7,335		)	(744		)
Contributions by noncontrolling interests	11,526			—
Taxes paid on net-share settlements	(4,920		)	(2,977		)
Distributions to common and restricted stockholders	(176,199		)	(162,866		)
Distributions to noncontrolling interests	(61,231		)	(2,044		)
Net cash provided by financing activities	519,428			138,635

Net change in cash and cash equivalents	(5,799		)	15,734
Cash and cash equivalents at beginning of period	22,140			16,659
Cash and cash equivalents at end of period	$	16,341		$	32,393

Supplemental disclosure of non-cash investing and financing activities
Loans assumed in connection with property acquisitions	$	(80,296	)	$	(10,012	)
Conversion of common and preferred operating partnership units to common stock	$	154		$	5,441
Non-cash contribution from noncontrolling interest	$	120,618		$	—
Non-cash consideration exchanged in purchase of land parcel	$	(3,071	)	$	—
Change in accrued construction in progress	$	24,753		$	32,941
Change in fair value of derivative instruments, net	$	564		$	(471	)
Change in fair value of redeemable noncontrolling interests	$	5,943		$	(10,481	)

Supplemental disclosure of cash flow information
Cash paid for interest, net of amounts capitalized	$	49,562		$	69,884

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)



	September 30, 2017			December 31, 2016
	(Unaudited)
Assets

Investments in real estate:
Wholly-owned properties, net	$	6,262,077		$	5,427,014
Wholly-owned properties held for sale	—			25,350
On-campus participating properties, net	83,095			85,797
Investments in real estate, net	6,345,172			5,538,161

Cash and cash equivalents	16,341			22,140
Restricted cash	25,824			24,817
Student contracts receivable, net	15,531			8,428
Other assets	284,023			272,367

Total assets	$	6,686,891		$	5,865,913

Liabilities and capital

Liabilities:
Secured mortgage, construction and bond debt, net	$	662,874		$	688,195
Unsecured notes, net	1,190,296			1,188,737
Unsecured term loans, net	646,675			149,065
Unsecured revolving credit facility	266,440			99,300
Accounts payable and accrued expenses	79,612			76,614
Other liabilities	214,918			158,437
Total liabilities	3,060,815			2,360,348

Commitments and contingencies (Note 13)

Redeemable limited partners	112,270			55,078

Capital:
Partners' capital:
General partner - 12,222 OP units outstanding at both September 30, 2017 and December 31, 2016	69			82
Limited partner - 136,414,284 and 132,233,447 OP units outstanding at September 30, 2017 and December 31, 2016, respectively	3,503,219			3,448,970
Accumulated other comprehensive loss	(3,195		)	(4,067		)
Total partners' capital	3,500,093			3,444,985
Noncontrolling interests - partially owned properties	13,713			5,502
Total capital	3,513,806			3,450,487

Total liabilities and capital	$	6,686,891		$	5,865,913

See accompanying notes to consolidated financial statements.

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 September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Wholly-owned properties	$	183,569		$	185,694		$	531,556		$	546,078
On-campus participating properties	6,799			6,758			23,128			23,018
Third-party development services	3,566			773			4,697			3,929
Third-party management services	2,291			2,376			7,193			7,039
Resident services	713			810			2,310			2,325
Total revenues	196,938			196,411			568,884			582,389

Operating expenses:
Wholly-owned properties	99,423			100,602			249,552			257,175
On-campus participating properties	3,923			3,784			11,080			10,125
Third-party development and management services	3,879			3,340			11,789			10,638
General and administrative	8,684			5,375			25,200			16,810
Depreciation and amortization	61,125			52,067			169,391			159,486
Ground/facility leases	2,329			1,965			7,151			6,736
Provision for real estate impairment	—			—			15,317			—
Total operating expenses	179,363			167,133			489,480			460,970

Operating income	17,575			29,278			79,404			121,419

Nonoperating income and (expenses):
Interest income	1,259			1,272			3,723			4,026
Interest expense	(18,654		)	(19,016		)	(47,944		)	(61,762		)
Amortization of deferred financing costs	(1,146		)	(1,344		)	(3,197		)	(5,238		)
(Loss) gain from disposition of real estate	—			—			(632		)	17,409
Total nonoperating expense	(18,541		)	(19,088		)	(48,050		)	(45,565		)
(Loss) income before income taxes	(966		)	10,190			31,354			75,854
Income tax provision	(267		)	(345		)	(791		)	(1,035		)
Net (loss) income	(1,233		)	9,845			30,563			74,819
Net income attributable to noncontrolling interests – partially owned properties	(57		)	(77		)	(259		)	(285		)
Net (loss) income attributable to American Campus Communities Operating Partnership, L.P.	(1,290		)	9,768			30,304			74,534
Series A preferred unit distributions	(31		)	(36		)	(93		)	(115		)
Net (loss) income attributable to common unitholders	$	(1,321	)	$	9,732		$	30,211		$	74,419

Other comprehensive income (loss)
Change in fair value of interest rate swaps and other	233			1,271			872			(162		)
Comprehensive (loss) income	$	(1,088	)	$	11,003		$	31,083		$	74,257

Net (loss) income per unit attributable to common unitholders
Basic	$	(0.01	)	$	0.07		$	0.21		$	0.57
Diluted	$	(0.01	)	$	0.07		$	0.21		$	0.56

Weighted-average common units outstanding
Basic	137,432,872			132,008,227			135,731,609			129,517,442
Diluted	137,432,872			132,789,613			136,609,098			130,312,549

Distributions declared per Common Unit	$	0.44		$	0.42		$	1.30		$	1.24

See accompanying notes to consolidated financial statements.

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	—	—			—	5,943			—			—			5,943
Amortization of restricted stock awards	—	—			—	10,641			—			—			10,641
Vesting of restricted stock awards and restricted stock units	—	—			209,481	(4,160		)	—			—			(4,160		)
Distributions	—	(16		)	—	(176,183		)	—			—			(176,199		)
Distributions to noncontrolling interests - partially owned properties	—	—			—	—			—			(212		)	(212		)
Conversion of common and preferred operating partnership units to common stock	—	—			22,000	154			—			—			154
Issuance of units in exchange for contributions of equity offering proceeds	—	—			3,949,356	187,881			—			—			187,881
Change in fair value of interest rate swaps and other	—	—			—	—			564			—			564
Amortization of interest rate swap terminations	—	—			—	—			308			—			308
Contributions by noncontrolling interest	—	—			—	—			—			8,158			8,158
Net income	—	3			—	29,973			—			265			30,241
Capital as of September 30, 2017	12,222	$	69		136,414,284	$	3,503,219		$	(3,195	)	$	13,713		$	3,513,806

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



	Nine Months Ended September 30,
	2017			2016
Operating activities
Net income	$	30,563		$	74,819
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	169,391			159,486
Amortization of deferred financing costs and debt premiums/discounts	(2,691		)	(4,053		)
Share-based compensation	11,401			7,820
Income tax provision	791			1,035
Amortization of interest rate swap terminations and other	308			309
Changes in operating assets and liabilities:
Restricted cash	(566		)	(734		)
Student contracts receivable, net	(6,775		)	1,750
Other assets	(2,536		)	(5,112		)
Accounts payable and accrued expenses	(293		)	2,769
Other liabilities	29,581			22,157
Net cash provided by operating activities	245,123			242,837

Investing activities
Proceeds from disposition of properties	24,462			72,640
Cash paid for acquisition of operating and under development properties	(302,318		)	(96,604		)
Cash paid for land acquisitions	(8,886		)	(856		)
Capital expenditures for wholly-owned properties	(64,464		)	(45,155		)
Investments in wholly-owned properties under development	(409,174		)	(284,777		)
Capital expenditures for on-campus participating properties	(2,909		)	(2,510		)
Investment in direct financing lease	(759		)	(7,837		)
Change in escrow deposits for real estate investments	(727		)	5,141
Change in restricted cash related to capital reserves	(578		)	(1,099		)
Purchase of corporate furniture, fixtures and equipment	(4,997		)	(4,681		)
Net cash used in investing activities	(770,350		)	(365,738		)

Financing activities
Proceeds from issuance of common units in exchange for contributions, net	188,538			770,277
Pay-off of mortgage and construction loans	(99,185		)	(152,597		)
Pay-off of unsecured term loan	—			(400,000		)
Proceeds from unsecured term loan	500,000			150,000
Proceeds from revolving credit facility	974,300			123,400
Paydowns of revolving credit facility	(807,160		)	(172,300		)
Proceeds from construction loans	10,812			—
Scheduled principal payments on debt	(9,718		)	(11,514		)
Debt issuance and assumption costs	(7,335		)	(744		)
Contributions by noncontrolling interests	11,526			—
Taxes paid on net-share settlements	(4,920		)	(2,977		)
Distributions paid to common and preferred unitholders	(176,404		)	(163,493		)
Distributions paid on unvested restricted stock awards	(1,217		)	(1,051		)
Distributions paid to noncontrolling interests - partially owned properties	(59,809		)	(366		)
Net cash provided by financing activities	519,428			138,635

Net change in cash and cash equivalents	(5,799		)	15,734
Cash and cash equivalents at beginning of period	22,140			16,659
Cash and cash equivalents at end of period	$	16,341		$	32,393

Supplemental disclosure of non-cash investing and financing activities
Loans assumed in connection with property acquisitions	$	(80,296	)	$	(10,012	)
Conversion of common and preferred operating partnership units to common stock	$	154		$	5,441
Non-cash contribution from noncontrolling interest	$	120,618		$	—
Non-cash consideration exchanged in purchase of land parcel	$	(3,071	)	$	—
Change in accrued construction in progress	$	24,753		$	32,941
Change in fair value of derivative instruments, net	$	564		$	(471	)
Change in fair value of redeemable noncontrolling interests	$	5,943		$	(10,481	)

Supplemental disclosure of cash flow information
Cash paid for interest, net of amounts capitalized	$	49,562		$	69,884

See accompanying notes to consolidated financial statements.

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 September 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 September 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 September 30, 2017, the Company’s property portfolio contained 166 properties with approximately 102,500 beds. The Company’s property portfolio consisted of 130 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 166 properties, 12 were under development as of September 30, 2017, and when completed will consist of a total of approximately 8,300 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 September 30, 2017, also through one of ACC’s TRSs, the Company provided third-party management and leasing services for 38 properties that represented approximately 28,800 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 September 30, 2017, the Company’s total owned and third-party managed portfolio included 204 properties with approximately 131,300 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.

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 August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2017-12 (“ASU 2017-12”), “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The purpose of this ASU is to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition to that main objective, the amendments in this update make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. 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 in any interim period after the issuance date of this update. All transition requirements and elections should be applied to hedging relationships existing on the date of adoption. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The Company is currently in the process of assessing the effects of this ASU, but does not anticipate a material impact on its consolidated financial statements.

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. Subsequent to the issuance of ASU 2016-02, the FASB issued an additional Accounting Standards Update clarifying aspects of the new lease accounting standard, which will be effective upon adoption of ASU 2016-02. 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.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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.

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.

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 $3.4 million and $3.3 million was capitalized during the three months ended September 30, 2017 and 2016, respectively, and interest totaling approximately $13.5 million and $9.0 million was capitalized during the nine months ended September 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 September 30, 2017, other than a $15.3 million impairment charge recorded during the second quarter 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 that matured 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.

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.

Redeemable noncontrolling interests

The Company follows guidance issued by the FASB regarding the classification and measurement of redeemable securities. Under this guidance, securities that are redeemable for cash or other assets, at the option of the holder and not solely within the control of the issuer, must be classified outside of permanent equity as redeemable noncontrolling interests. The Company makes this determination based on terms in the applicable agreements, specifically in relation to redemption provisions. The Company initially records the redeemable noncontrolling interests at fair value. The carrying amount of the redeemable noncontrolling interest is subsequently adjusted to the redemption value (assuming the noncontrolling interest is redeemable at the balance sheet date), with the corresponding offset for changes in fair value recorded in additional paid in capital. Reductions in fair value are recorded only to the extent that the Company has previously recorded increases in fair value above the redeemable noncontrolling interests’ initial basis. As the changes in redemption value are based on fair value, there is no effect on the Company’s earnings per share. Redeemable noncontrolling interests on the accompanying consolidated balance sheets of ACC are referred to as redeemable limited partners on the consolidated balance sheets of the Operating Partnership. Refer to Note 9 for a more detailed discussion of redeemable noncontrolling interests for both ACC and the Operating Partnership.

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, at which time the Company capitalizes the costs. 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 September 30, 2017, the Company has deferred approximately $5.6 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 nine months ended September 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 September 30,		Nine Months Ended September 30,
	2017	2016	2017	2016
Common OP Units (Note 9)	1,011,674	1,221,242	1,023,248	1,278,148
Preferred OP Units (Note 9)	77,513	87,767	77,513	95,212
Unvested restricted stock awards (Note10)	818,547	—	—	—
Total potentially dilutive securities	1,907,734	1,309,009	1,100,761	1,373,360

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 September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Numerator – basic and diluted earnings per share:
Net (loss) income	$	(1,233	)	$	9,845		$	30,563		$	74,819
Net income attributable to noncontrolling interests	(79		)	(201		)	(587		)	(1,150		)
Net (loss) income attributable to common stockholders	(1,312		)	9,644			29,976			73,669
Amount allocated to participating securities	(360		)	(329		)	(1,217		)	(1,051		)
Net (loss) income attributable to common stockholders	$	(1,672	)	$	9,315		$	28,759		$	72,618

Denominator:
Basic weighted average common shares outstanding	136,421,198			130,786,985			134,708,361			128,239,294
Unvested restricted stock awards (Note 10)	—			781,386			877,489			795,107
Diluted weighted average common shares outstanding	136,421,198			131,568,371			135,585,850			129,034,401

Earnings per share:
Net (loss) income attributable to common stockholders - basic	$	(0.01	)	$	0.07		$	0.21		$	0.57
Net (loss) income attributable to common stockholders - diluted	$	(0.01	)	$	0.07		$	0.21		$	0.56

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.

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 unit:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Numerator – basic and diluted earnings per unit:
Net (loss) income	$	(1,233	)	$	9,845		$	30,563		$	74,819
Net income attributable to noncontrolling interests – partially owned properties	(57		)	(77		)	(259		)	(285		)
Series A preferred unit distributions	(31		)	(36		)	(93		)	(115		)
Amount allocated to participating securities	(360		)	(329		)	(1,217		)	(1,051		)
Net (loss) income attributable to common unitholders	$	(1,681	)	$	9,403		$	28,994		$	73,368

Denominator:

AMERICAN CAMPUS COMMUNITIES INC - FORM 10-Q - November 3, 2017

Attached files