American Campus Communities, Inc.

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American Campus Communities, Inc.

805 Las Cimas Parkway, Suite 400
Austin, Texas 78746
U.S.A.
Telephone: (512) 732-1000
Fax: (512) 732-2450
Web site: http://www.studenthousing.com

Public Company
Incorporated: 1993 as American Campus Lifestyles Companies
Employees: 828
Sales: $87.47 million (2005)
Stock Exchanges: New York
Ticker Symbol: ACC
NAIC: 525930 Real Estate Investment Trusts; 531110 Lessors of Residential Buildings and Dwellings; 531311 Residential Property Managers

American Campus Communities, Inc., owns, develops, and manages apartment complexes and other student housing near colleges in more than a dozen states. The firm's focus is on modern, amenity-laden facilities for a generation of students who find cramped dormitory rooms and ramshackle "student ghetto" housing unacceptable. Its rental sites are located close to campus, are furnished, and generally offer pools, fitness rooms, free Internet and cable TV, live-in staff, and plenty of parking. The company owns and manages about 40 communities with over 23,000 beds and provides management and leasing services for more than 50 others with nearly 33,000 beds, some of which are operated in partnership with educational institutions.

BEGINNINGS

American Campus Communities was founded in Austin, Texas, in 1993 as American Campus Lifestyles Companies (ACLC) by Bill Bayless, who had been a resident dormitory adviser at West Virginia University; Joseph Domberger, a student housing owner; and Wayne Senecal, an entrepreneur. The new firm's initial assignment was renovating and managing an outdated dormitory called the Dobie Center at the University of Texas–Austin, receiving an equity stake in the building as part of its compensation. The 27-story, 947-bed structure would include a cafeteria, pool, fitness center, parking garage, and two-level shopping mall when completed.

ACLC was subsequently hired to manage dorms at Langston University in Oklahoma and at Florida State University, and in 1995 the firm began developing its first original project, a $10 million, 672-bed housing complex at Prairie View A&M University in Texas, which would be located on land the school owned. Prairie View had traditionally housed about half of its 5,000 students in dorms, and their poor quality was thought by administrators to be hampering recruitment.

Rather than designing a single large building with small rooms like the 1950s-vintage dorms then in use, the new facility would consist of nine three-story residence halls with four-bedroom, two-bathroom apartment units that also included a living room and a small kitchen. The rental rate would be 50 percent higher than the college's existing dorms, or about $1,200 per student per semester, but when it opened in the fall of 1996 University Village was an immediate hit, filling up and generating a waiting list of more than 400. Soon afterward, the company began drawing up plans for additional housing at the school. Late 1996 also saw ACLC win a contract to manage student housing at the new Texas A&M International University in Laredo.

In the summer of 1997 the firm sold a 76 percent ownership stake for $15 million to Reckson Opportunity Partners, L.P., an affiliate of Reckson Associates Realty Corp. The company was subsequently renamed American Campus Communities, Inc. (ACC). It was headed by President and CEO Thomas Trubiana.

In 1998 ACC won contracts worth $52.5 million to build three new housing projects at Texas A&M, Iona College, and Prairie View, and began construction of an $18 million, 620-bed apartment complex at the State University of New York at Buffalo. It also opened a third complex at Prairie View, which would house nearly 1,000 freshmen. ACC managed all of the student housing there, with the last of the school's dismal older dorms closed for good.

Student housing rentals were operated much differently than standard apartments. Most move-ins and move-outs took place on the same weekend, rather than incrementally throughout the year, and because few students attended class in the summer, leases were sometimes offered in nine- or ten-month lengths at a higher rate. The firm rented its units furnished, and as 18- to 22-year-olds were typically less concerned with housekeeping and maintenance, onsite staff were employed as resident advisers, and maid service was sometimes also offered. The market had some advantages including dependable business year-to-year compared to family housing, and fewer defaults because most tenants cosigned leases with their parents.

ACC followed a carefully developed strategy that included offering such popular amenities as pools, hot tubs, and free cable TV, while also selecting locations less than a mile from campus in mature markets that gave little opportunity for competitors. At the same time many colleges, especially publicly funded ones, were struggling to improve or replace outdated, cramped dorms, and they welcomed the addition of high quality housing near campus to attract prospective students. The firm's apartments were sometimes even depicted in brochures schools mailed to parents, and these de facto endorsements were a valuable marketing tool. Not all students could afford to live in ACC housing, however, and the company's clientele generally consisted of those from prosperous families.

In the spring of 1999 the firm acquired a 444-bed complex at Arizona State University in Tempe, and in the summer it added townhouses and apartments at the University of Georgia in Athens, which could accommodate more than 1,100. It also began a partnership with a private developer to build an apartment complex with more than 500 beds called The Callaway House in College Station, Texas. ACC would initially own a 20 percent stake, but this was boosted to 80 percent two years later. During the year an ACC affiliate, American Campus Properties Student Housing Financing, sold $40 million in bonds to fund the firm's construction and acquisition programs.

In July 2000 an apartment complex called The Village at Alafaya Club, in Orlando, Florida, was acquired. The 840-bed facility served students from the University of Central Florida and Valencia Community College. That December a 408-bedroom apartment complex, the Village at Riverside, was also purchased in Austin.

In 2001 ACC bought a 288-unit facility in Blacksburg, Virginia, for $25.7 million, as well as a 732-bed one in Orlando, Florida. New developments included the 521-bed Cardinal Village at Lamar University in Beaumont, Texas, and the 525-bed Cullen Oaks near the University of Houston. Both opened in the fall, as did the first phase of a new 384-bed apartment complex at Daemen College near Buffalo, New York, which was completed a year later.

COMPANY PERSPECTIVES

Our mission is to be the premier provider of quality student housing communities and services through a unique understanding and unrelenting commitment to students, parents, educational institutions and investors. Our people are our strength, achieving success through a dedication to excellence and integrity.

INCREASING PARTNERSHIPS WITH SCHOOLS: 2001

In late 2001 ACC signed a deal with Winston-Salem State University in North Carolina to build and manage a $17.6 million complex there on 3.5 acres of school-owned land. A similar deal was soon reached with Indiana University–Purdue University in Fort Wayne for a new $25 million, 568-bed facility, which would be that school's first housing project. A downturn in the bond market was making financing difficult to obtain, however, and the opening date was pushed back, first to the fall of 2003, and then to the fall of 2004. Funding was also affected by the bankruptcy of one of the firm's primary sources of capital, Reckson affiliate FrontLine.

Other projects continued to go forward, including a new 419-bedroom complex in Texas, and in the fall of 2002 the firm's Winston-Salem apartments opened, as did the $23.9 million University Village near Towson University in Maryland, with 615 beds. ACC was also building a housing complex near the University of Colorado in Boulder, which would open in the fall of 2003 with 495 beds and add 499 more a year later. For 2002 the firm recorded revenues of $55 million and a loss of $2.1 million.

In March 2003 a $16.2 million project near California State University in Fresno was torched by vandals as it neared completion, but construction was restarted that August with the opening pushed back to the fall of 2004. Another 480-bed complex was under construction near California State University at San Bernardino, which had retained the option of buying it when completed, as well as a 750-bed, $41.5 million project near Temple University in Philadelphia. At the latter, Temple had the right to lease up to 400 of the beds for distribution in an annual housing lottery. ACC sites were continuing to add amenities, and typically featured high-speed Internet, cable television, and telephone connections in each bedroom.

In early 2003 construction began on a $105.9 million project at the University of California–Irvine, which was a partnership between ACC and the school that would be financed by a bond issue. The 42-building complex was the largest of its type in the United States, and included a lounge, mini-theater, computer center, academic center, pool, fitness center, basketball and volleyball courts, and more. The first phase would open in September 2004, with a 1,488-bed addition to be added two years later.

In the fall of 2003 ACC opened a gated apartment complex at the University of Houston, whose tenants would include several fraternities and sororities. It was owned by the school, which paid ACC a $20 million development fee plus 5 percent of revenue to manage it. Working out the details of such agreements was complicated, and it had reportedly taken 16 lawyers half a year to finalize. Also during the fall, cofounder, Executive Vice-President and COO Bill Bayless was named president and CEO of the firm, replacing Tom Trubiana, who would move up to the offices of owner Reckson in New York.

In early 2004 ACC won approval to build an 828-bed apartment complex near the University of Buffalo, New York. The company's Flint Village and Hadley Village apartment complexes had also opened on that school's Amherst, New York campus. The firm's occupancy rate was 96.9 percent, up from 88.2 percent a year earlier. It used a proprietary software program to track occupancy and rental rates near each of its properties, and adjusted prices on an ongoing basis to keep them as full as possible.

INITIAL PUBLIC OFFERING: 2004

In April 2004 ACC filed papers for an initial public offering on the New York Stock Exchange, making it the first student housing company to go public. The firm was structured as a real estate investment trust (REIT), which allowed it to avoid taxes on profits if it distributed a minimum of 90 percent of net income to shareholders. By this time, ACC owned 16 properties, partly owned four with schools, and managed a dozen others, which were located in 11 states. Its owned properties had 3,800 units with 11,800 beds, and its managed properties a similar amount. The firm had 570 employees.

The 12.1 million-share offering was completed in August for $220.8 million, somewhat less than originally projected. The proceeds were used to buy out the stake owned by Reckson for $85.9 million and repay debt of $105.5 million, with the remainder dedicated to operating and construction costs.

KEY DATES

1993:: American Campus Lifestyles Companies is founded in Austin, Texas.
1995:: Firm begins developing its first new housing complex.
1997:: Reckson Opportunity Partners buys control of company for $15 million; firm is renamed American Campus Communities.
2000s:: Company boosts number of housing partnerships with schools.
2004:: Initial public offering nets $221 million; Reckson sells stake.
2006:: Royal Properties' student housing is acquired for $244 million; first Canadian contract is signed; company forms joint military housing venture with Hunt ELP.

Soon afterward ACC obtained a $75 million line of credit from a group of lenders including Deutsche Bank and Citigroup, and in September its three newest properties opened in Philadelphia, Fresno, and San Bernardino, California, with a total of over 1,600 beds. The firm also began construction of an 826-bed apartment complex in Buffalo, New York, located less than a mile from the State University of New York, and signed a deal to buy five properties with more than 1,650 beds near three universities in Florida for $53.5 million. Four additional projects were completed for third-party investors and two others were begun, while another four were on the drawing board.

In November California State University–San Bernardino notified the firm that it would exercise its contractual option to buy the 480-bed apartment complex ACC had built there for $28.3 million, giving the firm a profit of just under $5 million. Soon afterward the company began construction on a second phase of apartments at the University of California–Irvine, which would add 1,309 beds to the 488 already there by the fall of 2006, as well as starting work on a $17 million, 354-bed expansion to Cullen Oaks in Houston.

In February 2005 the firm's acquisitions in Florida closed and ACC announced a separate $47.5 million deal to purchase a 1,044-bed complex in Gainesville, Florida, as well as a $19.2 million, 418-bed facility in Denton, Texas. Management contracts were also signed at Central Michigan University and Florida State University. Two other student housing REITs had gone public, and the prices of existing apartment complexes were beginning to rise as the competition for prime sites heated up.

In March 2005 the firm began a $38.4 million renovation of Cleveland State University's Fenn Tower, a 21-story building that dated to 1930. ACC would subsequently manage the facility, which was slated to open in the fall of 2006. The company now managed 42 properties with 25,900 beds, of which it owned slightly more than half. Rents typically ranged from the low $500s per month for a space in a four-bedroom apartment, to more than $725 for a single.

The spring of 2005 also saw ACC named to develop on-campus student housing for the University of Arizona in Tempe and for Hope International University in Fullerton, California. In April the company's Vista del Campo project at UC-Irvine was voted the best student housing complex in the United States by the National Association of Home Builders.

Needing more cash for its ongoing expansion, in June ACC boosted its credit line to $100 million and a few weeks later sold 4.6 million shares of stock to net $96 million. The firm also began building a 704-bed project in College Station, Texas, and was selected by the University of Hawaii to renovate three dorms there. Other third-party development projects were in the works for the University of New Orleans (which was later delayed by Hurricane Katrina) and Blinn College in Texas, while the company took over management and pre-development of a site in Denver, Colorado, and in September began work on a $72.9 million, 812-bed project in Newark, New Jersey. More projects included a 345-bed complex at West Virginia University and a 320-bed third-party development at Saint Leo University in Florida. For 2005 the company reported revenues of $87.5 million and net income of $9.7 million.

ROYAL PROPERTIES PURCHASE: 2006

At the end of 2005 the firm signed an agreement to acquire 13 apartment complexes in Texas, Arizona, Florida, Tennessee, and Kentucky with 5,710 beds from Royal Properties of Illinois, along with another that was under construction in Texas. The $244 million deal was completed the following March.

In early 2006 an agreement was reached with the University of Arizona to build and manage three housing projects on university-owned land with 4,850 beds for a cost of $345 million, while a third-party management contract was signed for a property at the Southern Alberta Institute of Technology in Canada, and a joint venture was formed with Hunt ELP to develop and manage a housing project at Hampton Roads for the U.S. Navy. In August the firm boosted its credit line to $115 million and began construction of the delayed $38.5 million New Orleans housing project, and then in September it sold another 5.7 million shares of stock for $133 million. ACC had offers out to purchase more than a dozen properties, with a similar number under consideration.

In January 2007 construction began on a $138 million, 1,866-bed complex at Arizona State University, which was the first part of a three-phase project that would eventually encompass 5,100 beds and a student center, classrooms, faculty offices, and a dining hall. The firm was providing 100 percent of the development costs and had an 85-year lease on the land. Slated to open in the fall of 2008, it was the most ambitious partnership between a college and ACC to date.

In just under 15 years, American Campus Communities, Inc., had become one of the top student housing real estate investment firms in the United States, with a portfolio of more than three dozen owned properties and 50 managed ones. The company continued to seek opportunities around the country, and was also beginning to pursue new avenues including joint ventures and other types of rental housing.

Frank Uhle

PRINCIPAL SUBSIDIARIES

Campus Communities, Inc.; American Campus Communities Operating Partnership, LP; RAP Student Housing Properties, LLC; American Campus Communities Services, Inc.; ACT-Village at Fresno State, LLC; 1772 Sweet Home Road, LLC; SHP–The Village at Alafaya Club, LLC; SHP–The Village at Science Drive, LLC; SHP–The Village on University, LLC; ACC OP (Cityparc) LP.

PRINCIPAL COMPETITORS

GMH Communities Trust; Education Realty Trust, Inc.; JPI; Camden Property Trust; Alliance Residential Company; Fairfield Residential LLC; Place Properties LLC.