AMERICAN CAMPUS COMMUNITIES, INC. Our Company and Our Business
Overview
We are the one of the largest owners, managers, and developers of high quality student housing properties inthe United States . We are 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. Refer to Item 1 contained herein for additional information regarding our business objectives, investment strategies, and operating segments.
Property Portfolio
We believe that the ownership and operation of student housing communities in close proximity to selected colleges and universities presents an attractive long-term investment opportunity for our investors. We intend to continue to execute our strategy of identifying existing differentiated, typically highly amenitized, student housing communities or development opportunities in close proximity to university campuses with high barriers to entry which are projected to experience substantial increases in enrollment and/or are under-serviced in terms of existing on and/or off-campus student housing.
Below is a summary of our property portfolio as of
Properties Beds
Owned operating properties
Off-campus properties 127 71,124
On-campus ACE (1) (2) 31 25,131
Subtotal - operating properties 158 96,255
Owned properties under development
On-campus ACE (2) 3 11,296
Subtotal - properties under development 3 11,296
Total owned properties 161 107,551
On-campus participating properties 6 5,230
Total owned property portfolio 167 112,781
Managed properties 36 26,497
Total property portfolio 203 139,278
(1) Includes two properties at
converted to the on-campus participating property ("OCCP") structure.
(2) Includes 33 properties operated under ground/facility leases with 16
university systems and one property operated under a ground/facility lease
with Walt Disney World® Resort.
Leasing Results
Our financial results for the year endedDecember 31, 2019 are impacted by the results of our annual leasing process for the 2018/2019 and 2019/2020 academic years. As ofSeptember 30, 2018 , the beginning of the 2018/2019 academic year, occupancy at our 2019 same store properties was 97.0% with a rental rate increase of 2.0% compared to the prior academic year, and occupancy at our total owned property portfolio was also 97.0%. As ofSeptember 30, 2019 , the beginning of the 2019/2020 academic year, occupancy at our 2020 same store properties was 97.4% with a rental rate increase of 1.4% compared to the prior academic year, and occupancy at our total owned property portfolio (including 2019 development deliveries) was also 97.4%. 28
--------------------------------------------------------------------------------
Development
Owned Development Projects Recently Completed:
During the year endedDecember 31, 2019 , the final stages of construction were completed on two on-campus ACE properties and one owned off-campus property. These properties are summarized in the following table: Primary Opened UniversityTotal Project for Project Location Served Project Type Beds Cost Occupancy 191 College Auburn, AL Auburn Off-campus 495$ 61,900 August University 2019 LightView Boston, MA Northeastern ACE 825 150,700 August University 2019 University of University of August Arizona Honors Tucson, AZ Arizona ACE 1,056 84,500 2019 College TOTAL - 2019 DELIVERIES 2,376$ 297,100
At
Primary
University Estimated Total Costs Scheduled
Project Location Served Project Type Beds Project Cost Incurred Completion
Disney College
Program Phases I-II Orlando, Walt Disney May & Aug
(1) FL World® Resort ACE 1,627 $ 108,500 $ 81,517 2020
Los Univ. of
Angeles, Southern August
Currie Hall Phase II CA California ACE 272 42,000 22,837 2020
San
Francisco, San Francisco August
Holloway Residences CA State Univ. ACE 584 129,200 89,983 2020
SUBTOTAL - 2020 DELIVERIES 2,483 $ 279,700 $ 194,337
Disney College
Program Phases III-V Orlando, Walt Disney Jan, May &
(1) FL World® Resort ACE 3,369 $ 190,400 $ 102,366 Aug 2021
SUBTOTAL - 2021 DELIVERIES 3,369 $ 190,400 $ 102,366
Disney College
Program Phases VI - Orlando, Walt Disney Jan, May &
VIII (1) FL World® Resort ACE 3,235 $ 193,000 $ 27,448 Aug 2022
SUBTOTAL - 2022 DELIVERIES 3,235 $ 193,000 $ 27,448
Disney College
Program Phases IX-X Orlando, Walt Disney Jan & May
(1) FL World® Resort ACE 2,209 $ 122,700 $ 15,298 2023
SUBTOTAL - 2023 DELIVERIES 2,209 $ 122,700 $ 15,298 (1) The Disney College Program project will be delivered in multiple phases over
several years with initial deliveries expected to occur in 2020 and full
development completion in 2023. All phases are counted as one property.
Presale Development Projects Recently Completed:
The following two properties subject to presale arrangements were acquired by
the Company during the year ended
Primary
University Purchase Opened for
Project Location Served Project Type Beds Price Occupancy
The Flex at Florida State
Stadium Tallahassee, FL University Off-campus 340 $ 36,400 August 2019
Centre
959 Franklin Eugene, OR University of Off-campus 443 73,800 September
(1) Oregon 2019
783 $ 110,200 (1) The Company executed the presale agreement with the developer in
at which time it provided $15.6 million of mezzanine financing to the
project. The Company purchased the remaining ownership interest from the
developer in the fourth quarter of 2019.
29--------------------------------------------------------------------------------
As ofDecember 31, 2019 , we were under contract on three third-party development projects that are currently under construction and whose fees total$14.2 million . As ofDecember 31, 2019 , fees of approximately$5.1 million remained to be earned by the Company with respect to these projects, which have scheduled completion dates in 2020 and 2021. During the year endedDecember 31, 2019 , we closed on bond financing and commenced construction on our second project at theUniversity of California, Riverside , which contributed approximately$3.8 million in revenues for the year. The project has an anticipated completion ofSeptember 2021 and total fees of$6.7 million . We also closed on our ninth phase atPrairie View A&M University this year, which contributed approximately$1.7 million in revenues for the year. This project has an anticipated completion ofAugust 2020 and total fees of$2.5 million .
During the year ended
Primary
Project Location University Served Beds Total Fees Completed
University of Arizona
2,400 July 2019
Honors College (1) Arizona (1)
The Academic &
5,100 July 2019
Residential Complex Illinois, Chicago
University of 5,900 August 2019
Plaza Verde Irvine, CA California, 1,441
Irvine
Tubman Laws Hall Dover, DE Delaware State 620 2,500 August 2019
University
Calhoun Hall (2) Philadelphia, PA Drexel University 406
1,750 Sept 2019 & Apr 2020
3,015 $ 17,650 (1)
of a parking garage, academic center and a student recreation and wellness
center as part of the overall development project. These components are
owned, managed and funded by the University, and the company earned
third-party development fees for its role in providing development services
for those components of the project.
(2) Includes the construction of a student residence hall and honors college.
The residence hall was delivered in Fall 2019, and the honors college will
be delivered in Spring 2020. At
As of
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted inthe United States ("GAAP") requires management to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated financial statements and related notes. In preparing these financial statements, management has utilized all available information, including its past history, industry standards, and the current economic environment, among other factors, in forming its estimates and judgments of certain amounts included in the consolidated financial statements, giving due consideration to materiality. It is possible that the ultimate outcome anticipated by management in formulating its estimates may not be realized. Application of the critical accounting policies below involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. In addition, other companies in similar businesses may utilize different estimation policies and methodologies, which may impact the comparability of our results of operations and financial condition to those companies.
Allocation of Fair Value to
We generally account for an acquisition of a single property or portfolio of
properties as an asset acquisition. The price that we pay to acquire a property
is impacted by many factors, including the condition of the buildings and
improvements, the occupancy of the building, favorable or unfavorable financing,
and numerous other factors. Accordingly, we are required to make subjective
assessments to allocate the purchase price paid to acquire investments in real
estate among the assets acquired and liabilities assumed based on our estimate
of the fair values of such assets and liabilities. This includes, among other
items, determining the value of the buildings and improvements, land, in-place
tenant leases, tax incentive arrangements, and any debt assumed from the seller.
Certain of these estimates requires a great deal of judgment and some of the
estimates involve complex calculations. Our calculation methodology is
summarized in Note 2 to our consolidated financial statements contained in Item
8. These allocation assessments have a direct impact on our results of
operations because if we were to allocate more value to land there would be no
depreciation with respect to such amount, or if we were to allocate more value
to the buildings, as opposed to allocating to the value of in-place tenant
leases, this amount would be recognized as an expense over a much longer period
of time, since the
30
--------------------------------------------------------------------------------
amounts allocated to buildings are depreciated over the estimated lives of the
buildings whereas amounts allocated to in-place tenant leases are amortized over
the remaining terms of the leases (generally less than one year).
Capital Expenditures
We capitalize costs during the development of assets. Capitalization begins when we determine that development of a future asset is probable and continues until the asset, or a portion of the asset, is delivered and is ready for its intended use. As such, our judgment of the date the project is substantially complete has a direct impact on our operating expenses for the period. We also capitalize pre-development costs incurred in pursuit of development of a property. These costs include legal fees, design fees, regulatory fees, and other related costs. Future development of these pursuits is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs and availability of capital. Pre-development costs incurred for pursuits for which future development is not yet considered probable are expensed as incurred. The determination of whether a project is probable requires judgment. If we determine that a project is probable, operating expenses could be materially different than if we determine the project is not probable. In addition, we capitalize non-recurring expenditures for additions and betterments to buildings and land improvements. In addition, we generally capitalize expenditures for exterior painting, roofing, and other major maintenance projects that substantially extend the useful life of the existing assets. The cost of ordinary repairs and maintenance that do not improve the value of an asset or extend its useful life are charged to expense when incurred. For all predevelopment and development projects, as well as additions and betterments, the Company uses its professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred.
Impairment of Long-Lived Assets
Management assesses on a property-by-property basis whether there are any indicators that the value of our real estate assets held for use may be impaired. This analysis is performed at least annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. A property's value is considered impaired if management's estimate of the aggregate future undiscounted cash flows to be generated by the property is less than the carrying value of the property. The estimation of expected future net cash flows uses estimates, including capitalization rates and growth rates, which are inherently uncertain and rely on assumptions regarding current and future economics and market conditions. While we believe our estimates of future cash flows are reasonable, different assumptions regarding these factors could significantly affect these estimates. To the extent an impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the property, thereby reducing our net income. Management also performs a periodic assessment to determine which of our properties are likely to be sold prior to the end of their estimated useful lives. For those probable sales, an impairment charge is recorded for any excess of the carrying amount of the property over the estimated fair value less estimated selling costs, thereby reducing our net income.
Operating Lease Liabilities and Right of Use Assets
We have ground and office operating lease agreements in which we are the lessee. In accordance with new lease accounting guidance adopted onJanuary 1, 2019 , we are required to recognize a liability to account for our future obligations under these operating leases, and a corresponding right-of-use asset. The lease liability is measured based on the present value of the future minimum lease payments. The right-of-use asset is measured based on the corresponding lease liability, adjusted for initial direct leasing costs and any other consideration exchanged with the lessor prior to the commencement of the lease. The right-of-use asset is included in the impairment of long-lived assets analysis discussed above. The present value of the future minimum lease payments is calculated for each operating lease using the remaining lease term and a corresponding estimated incremental borrowing rate, which is the interest rate that we estimate we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments. Determining the appropriate incremental borrowing rate requires judgment. In determining this rate, we analyze company-specific factors, such as credit risk, lease-specific factors such as lease term, lease payments, and collateral, as well as overall economic conditions. If an inaccurate incremental borrowing rate is used, it could result in a misstatement of our lease liabilities and corresponding right-of-use assets. 31 --------------------------------------------------------------------------------
Results of Operations
Comparison of the Years Ended
The following table presents our results of operations for the years ended
Year Ended December 31,
2019 2018 Change ($) Change (%)
Revenues:
Owned properties $ 877,565 $ 825,959 $ 51,606 6.2 %On-campus participating properties 36,346 34,596
1,750 5.1 % Third-party development services 13,051 7,281 5,770 79.2 % Third-party management services 12,936 9,814 3,122 31.8 % Resident services 3,144 3,160 (16 ) (0.5 )% Total revenues 943,042 880,810 62,232 7.1 % Operating expenses (income): Owned properties 390,664 373,521 17,143 4.6 %
On-campus participating properties 15,028 14,602
426 2.9 % Third-party development and management services 19,915 15,459 4,456 28.8 % General and administrative 31,081 34,537 (3,456 ) (10.0 )% Depreciation and amortization 275,046 263,203 11,843 4.5 % Ground/facility leases 14,151 11,855 2,296 19.4 % Loss (gain) from disposition of real estate, net 53 (42,314 ) 42,367 (100.1 )% Provision for real estate impairment 17,214 - 17,214 100.0 % Other operating income - (2,648 ) 2,648 (100.0 )% Total operating expenses 763,152 668,215 94,937 14.2 % Operating income 179,890 212,595 (32,705 ) (15.4 )% Nonoperating income (expenses): Interest income 3,686 4,834 (1,148 ) (23.7 )% Interest expense (111,287 ) (99,228 ) (12,059 ) 12.2 % Amortization of deferred financing costs (5,012 ) (5,816 ) 804 (13.8 )% Gain from extinguishment of debt, net 20,992 7,867 13,125 166.8 % Other nonoperating income - 1,301 (1,301 ) (100.0 )% Total nonoperating expenses (91,621 ) (91,042 ) (579 ) 0.6 % Income before income taxes 88,269 121,553 (33,284 ) (27.4 )% Income tax provision (1,507 ) (2,429 ) 922 (38.0 )% Net income 86,762 119,124 (32,362 ) (27.2 )% Net income attributable to noncontrolling interests (1,793 ) (2,029 ) 236 (11.6 )% Net income attributable to ACC, Inc. and
Subsidiaries common stockholders
Same Store and New Property Operations
We define our same store property portfolio as owned properties that were owned and operating for both of the full years endedDecember 31, 2019 andDecember 31, 2018 , which are not conducting or planning to conduct substantial development, redevelopment, or repositioning activities, and are not classified as held for sale as ofDecember 31, 2019 . It also includes the full operating results of properties owned through joint ventures in which the company has a controlling financial interest and which are consolidated for financial reporting purposes.
Same store revenues are defined as revenues generated from our same store portfolio and consist of rental revenue earned from student leases as well as other income items such as utility income, damages, parking income, summer conference rent, application
32
--------------------------------------------------------------------------------and administration fees, income from retail tenants, the provision for uncollectible accounts, and income earned by our taxable REIT subsidiaries ("TRS") from ancillary activities such as the provision of food services.
Same store operating expenses are defined as operating expenses generated from our same store portfolio and include usual and customary expenses incurred to operate a property such as payroll, maintenance, utilities, marketing, general and administrative costs, insurance, and property taxes. Same store operating expenses also include an allocation of payroll and other administrative costs related to corporate management and oversight.
A reconciliation of our same store, new property, and sold/other property operations to our consolidated statements of comprehensive income is set forth below:
Same Store Properties New Properties Sold/Other Properties(1) Total - All Properties
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
2019 2018 2019 2018 2019 (2) 2018 (3) 2019 2018
Number of
properties 143 143 15 10 4 8 162 161
Number of
beds 86,111 86,111 10,144 6,985 2,010 3,492 98,265 96,588
Revenues (4) $ 791,480 $ 770,510 $ 78,290 $ 28,360 $ 10,939 $ 23,100 $ 880,709 $ 821,970 (5)
Operating
expenses 353,944 344,509 30,557 10,250 6,163 11,613 390,664 366,372 (5)
(1) Does not include the allocation of payroll and other administrative costs
related to corporate management and oversight.
(2) Includes one property that was sold in
to the lender in settlement of the property's mortgage loan in
and one property consisting of two phases that was sold in
includes recurring professional fees related to the operation of the ACC /
Allianz Joint Venture.
(3) Includes the properties described in note 2 as well as three properties sold
in 2018, and one property at
to the OCPP structure in January 2019 . Also includes transaction costs and
recurring professional fees related to the formation and operation of the
ACC / Allianz Joint Venture.
(4) Includes revenues which are reflected as resident services revenue on the
accompanying consolidated statements of comprehensive income.
(5) The Company adopted new lease accounting guidance on
required the reclassification of the provision for uncollectible accounts
from operating expenses to revenue. For purposes of calculating same store
and new property results of operations, the reclassification is reflected
for all periods presented to ensure comparability between periods. The
provision for uncollectible accounts for all owned properties was
million and
2018, respectively.
Same Store Properties : The increase in revenue from our same store properties
was due to an increase in average rental rates for the 2018/2019 and 2019/2020
academic years, coupled with an increase in our weighted average occupancy from
92.6% during the year ended December 31, 2018 , to 94.0% for the year ended
December 31, 2019 . Future revenues will be dependent on our ability to maintain
our current leases in effect for the 2019/2020 academic year and our ability to
obtain appropriate rental rates and desired occupancy for the 2020/2021 academic
year at our various properties.
The increase in operating expenses for our same store properties was primarily
due to general increases in payroll expenses and healthcare benefit costs, as
well as increased property tax expense resulting from higher property tax
assessments in various markets. We anticipate that operating expenses for our
same store portfolio for 2020 will increase at inflationary levels as compared
to 2019, with the exception of payroll expenses which are anticipated to
increase due to regulatory changes and statutory minimum wage increases in
numerous states as well as anticipated increases in insurance due to current
market conditions.
33-------------------------------------------------------------------------------- New Property Operations: Our new properties for the year endedDecember 31, 2019 include development properties that completed construction and opened for operations in Fall 2018 and 2019. These properties are summarized in the table below: Primary University Property Location Served Beds Acquisition/Opening Date Gladding Residence Virginia Commonwealth Center (ACE) Richmond, VA University 1,524 August 2018 Irvington House (ACE) Indianapolis, IN Butler University 648 August 2018Greek Leadership Village (ACE) Tempe, AZ Arizona State University 957 August 2018 David Blackwell Hall University of (ACE) Berkeley, CA California, Berkeley 780 August 2018 Northern Arizona NAU Honors College (ACE) Flagstaff, AZ University 636 August 2018 U Club Townhomes at University of Oxford Oxford, MS Mississippi 528 August 2018 The Edge - Stadium Centre Tallahassee, FL Florida State University 413 August 2018 Hub Ann Arbor Ann Arbor, MI University of Michigan 310 August 2018 Northern Arizona Hub Flagstaff Flagstaff, AZ University 591 August 2018
Campus Edge on Pierce
598 August 2018 191 College Auburn, AL Auburn University 495 August 2019 LightView (ACE) Boston, MA Northeastern University 825 August 2019University of Arizona Honors College (ACE) Tucson, AZ University of Arizona 1,056 August 2019 The Flex at Stadium Centre Tallahassee, FL Florida State University 340 August 2019 959 Franklin Eugene, OR University of Oregon 443 September 2019 Total - New Properties 10,144
Same Store OCPP Properties : As ofDecember 31, 2019 , we had six on-campus participating properties containing 5,230 beds. InJanuary 2019 , one owned property located atPrairie View A&M University was converted to the OCPP structure and is now included in our OCPP portfolio, contributing to the increase in both revenues and expenses for the year endedDecember 31, 2019 as compared to the year endedDecember 31, 2018 . In addition, the Company adopted new lease accounting guidance onJanuary 1, 2019 , which required the reclassification of the provision for uncollectible accounts from operating expenses to revenue. The reclassification is reflected on a prospective basis in the Consolidated Statements of Comprehensive Income contained in Item 8. The amount reclassified from operating expenses to revenue was a$0.5 million benefit and a$0.3 million expense for the years endedDecember 31, 2019 and 2018, respectively. Revenues from these properties increased by$1.7 million , from$34.6 million for the year endedDecember 31, 2018 , to$36.3 million for the year endedDecember 31, 2019 . This increase was primarily due to an increase in average rental rates coupled with an increase in average occupancy from 75.7% for the year endedDecember 31, 2018 , to 76.3% for the year endedDecember 31, 2019 . Operating expenses at these properties increased by$0.4 million , from$14.6 million for the year endedDecember 31, 2018 , to$15.0 million for the year endedDecember 31, 2019 , primarily as a result of general inflation. We anticipate that revenues and expenses from these properties will remain relatively flat for 2020 as compared to 2019. Future revenues will be dependent on our ability to maintain our current leases in effect for the 2019/2020 academic year and our ability to obtain appropriate rental rates and desired occupancy for the 2020/2021 academic year.
Third-Party Development Services Revenue
Third-party development services revenue increased by approximately$5.8 million , from$7.3 million during the year endedDecember 31, 2018 , to$13.1 million for the year endedDecember 31, 2019 . The increase was primarily due to increased activity in our third party development segment in 2019, with 8 projects in progress during the year endedDecember 31, 2019 at an average contractual fee of$4.1 million , as compared to 5 projects in progress during the year endedDecember 31, 2018 at an average contractual fee of$4.3 million . Development services revenues are dependent on our ability to successfully be awarded such projects, the amount of the contractual fee related to the project and the timing and completion of the development and construction of the project. In addition, to the extent projects are completed under budget, we may be entitled to a portion of such savings, which are recognized as revenue when performance has been agreed upon by all parties, or when performance has been verified by an independent third-party. It is possible that projects for which we have deferred pre-development costs will not close and that we will not be reimbursed for such costs. The pre-development costs associated therewith will ordinarily be charged against income for the then-current period. We anticipate that third-party development services revenue will decrease in 2020 as compared to 2019 due to a decrease in the volume and timing of third-party development projects anticipated to close and commence construction in 2020. 34 --------------------------------------------------------------------------------
Third-Party Management Services Revenue
Third-party management services revenue increased by approximately$3.1 million , from$9.8 million during the year endedDecember 31, 2018 , to$12.9 million for the year endedDecember 31, 2019 . The increase is primarily due to reimbursed payroll and other operating costs from the Disney College Program management contract which began inApril 2019 . As the project's facilities manager, the Company is responsible for the operations and maintenance of the project. Because of the Company's role in funding payroll costs for on-site personnel and certain other operating costs at the properties, accounting guidance requires the management fee for this project to be recorded on a gross basis in the Company's consolidated financial statements. Accordingly, both management services revenue and third-party management services expenses for the year endedDecember 31, 2019 , include approximately$3.3 million in reimbursed payroll and other operating costs. We anticipate third-party management services revenue will increase in 2020 as compared to 2019 due to the recognition of a full year of reimbursed payroll and other operating costs for the Disney College Program management contract, as discussed above, new management contracts obtained in 2020 and general inflation.
Third-Party Management Services Expenses
Third-party development and management services expenses increased by approximately$4.4 million , from$15.5 million during the year endedDecember 31, 2018 , to$19.9 million for the year endedDecember 31, 2019 . The increase is primarily due to$3.3 million of payroll and other operating costs from the Disney College Program management contract described above in addition to an overall increase in pursuit activity for third-party development projects during 2019. We anticipate this expense item will increase in 2020 as compared to 2019 due to a full year of reimbursed payroll and other operating costs for the Disney College Program management contract, as well as an overall increase in pursuit activity for third-party development projects and general inflation.
General and Administrative
General and administrative expenses decreased by approximately$3.4 million , from$34.5 million during the year endedDecember 31, 2018 , to$31.1 million for the year endedDecember 31, 2019 . Excluding$5.8 million in transaction costs incurred in connection with the closing of the ACC / Allianz Joint Venture Transaction inMay 2018 , general and administrative expense increased$2.4 million . This increase was primarily due to additional expenses incurred in connection with enhancements to our operating systems platform, and other general inflationary factors. We anticipate general and administrative expenses will increase in 2020 as compared to 2019 due to an increase in expenses incurred in connection with enhancements to our operating systems platform, anticipated increases in payroll costs, and other general inflationary factors.
Depreciation and Amortization
Depreciation and amortization increased by approximately$11.8 million , from$263.2 million during the year endedDecember 31, 2018 , to$275.0 million for the year endedDecember 31, 2019 . This increase was primarily due to an$18.9 million increase related to the completion of construction and opening of ten development properties in Fall 2018, three owned development properties and two presale development properties in Fall 2019, as well as a$0.6 million increase in depreciation expense at our on-campus participating properties due to the conversion of one property to the OCPP structure. This increase was partially offset by a$3.6 million decrease in depreciation and amortization expense related to properties sold in 2018 and 2019, in addition to a$4.1 million decrease in depreciation and amortization expense at our same store properties due to assets that became fully amortized or depreciated during the year endedDecember 31, 2018 . We anticipate depreciation and amortization expense will decrease in 2020 as compared to 2019 due to dispositions in 2019 and one property anticipated to be sold in 2020.
Ground/Facility Leases
Ground/facility leases expense increased by approximately$2.3 million from$11.9 million during the year endedDecember 31, 2018 , to$14.2 million for the year endedDecember 31, 2019 . This increase was primarily due to ACE development projects that completed construction and opened for operations in Fall 2018 and Fall 2019 and increased variable payments at various ACE same store properties. We anticipate ground/facility leases expense to increase in 2020 as compared to 2019, primarily as a result of the timing of new ACE projects being placed into service. 35
--------------------------------------------------------------------------------
Loss (Gain) from Disposition of Real Estate, Net
During the year endedDecember 31, 2019 , we sold two owned properties containing 1,150 beds, resulting in a net loss from disposition of real estate of approximately$0.1 million . During the year endedDecember 31, 2018 , we sold three owned properties containing 1,338 beds, resulting in a net gain from disposition of real estate of approximately$42.3 million . Refer to Note 6 in the accompanying Notes to Consolidated Financial Statements contained in Item 8 for additional details regarding our recent disposition transactions.
Provision for Impairment
During the year endedDecember 31, 2019 , we recorded an impairment charge of approximately$3.2 million for one owned property serving students attendingFlorida A&M University , which was classified as held for sale as ofMarch 31, 2019 and was sold inMay 2019 . During the year endedDecember 31, 2019 we also recorded a$14.0 million impairment charge associated with a tax incentive arrangement that was recorded upon the acquisition of one owned property in 2015 due to recent facts and circumstances indicating that the originally assumed property tax savings will not materialize.
Other Operating Income
During the year ended
Interest Income
Interest income decreased by approximately$1.1 million , from$4.8 million during the year endedDecember 31, 2018 , to$3.7 million for the year endedDecember 31, 2019 . The decrease was primarily due to the planned forgiveness of loans receivable resulting from the unwinding of a New Market Tax Credit ("NMTC") structure at one of the Company's owned properties in 2018. We anticipate interest income to decrease in 2020 as compared to 2019, primarily as a result of the anticipated repayment of a loan receivable.
Interest Expense
Interest expense increased by approximately$12.1 million , from$99.2 million during the year endedDecember 31, 2018 , to$111.3 million for the year endedDecember 31, 2019 . Interest expense increased as a result of the following: (i) a$7.0 million increase related to increased borrowings on our revolving credit facility; (ii) a$7.7 million increase related to our$400 million offering of unsecured notes inJune 2019 ; (iii) a$5.5 million increase due to the issuance of$330 million in mortgage debt as part of the ACC / Allianz Joint Venture Transaction inMay 2018 ; and (iv) a$0.6 million increase due to the modification of the term of a mortgage loan at an owned property, which resulted in a higher interest rate. These increases were partially offset by (i) a$4.7 million decrease in term loan interest expense due to the pay-off of$450 million of term loans in 2018; (ii) a$1.3 million decrease related to the unwinding of an NMTC structure at one of the Company's owned properties; and (iii) a$1.5 million decrease related to accrued default interest at one of our properties that was transferred to the lender inJuly 2019 in settlement of the property's$27.4 million mortgage loan. We anticipate interest expense will decrease in 2020 as compared to 2019 due to the anticipated pay-off of secured mortgage debt, the conversion of the$200 million unsecured term loan from variable rate to fixed rate through the execution of an interest rate swap contract in 2019, as well as an increase in capitalized interest. These decreases will be partially offset by a higher anticipated average outstanding balance under the Company's revolving credit facility throughout 2020 and additional interest incurred from unsecured debt issued in 2019 and 2020.
Amortization of Deferred Financing Costs
Amortization of deferred financing costs decreased by approximately$0.8 million , from$5.8 million during the year endedDecember 31, 2018 , to$5.0 million for the year endedDecember 31, 2019 . This increase was primarily due to$0.9 million of accelerated amortization recorded in the prior year related to the pay-off of$450 million of term loan debt inMay 2018 . We anticipate amortization of deferred finance costs will decrease slightly in 2020, as increases related to offerings of unsecured debt during 2019 and 2020 will be more than offset by decreases related to debt maturing in 2020.
Gain from Extinguishment of Debt, Net
During the year endedDecember 31, 2019 we recognized a$21.0 million gain on the extinguishment of debt associated with a property that was transferred to the lender in settlement of the property's mortgage loan inJuly 2019 . During the year endedDecember 31, 2018 , we recorded a net gain of$7.9 million due to the extinguishment of debt. This amount was comprised of an 36 --------------------------------------------------------------------------------$8.7 million gain resulting from the planned unwinding of an NMTC structure, and$0.8 million of losses associated with the early pay-off of mortgage loans in connection with the sale of one owned property and one owned property contributed to the ACC / Allianz Joint Venture Transaction. Refer to Note 6 and Note 9 in the accompanying Notes to Consolidated Financial Statements for additional details.
Other Nonoperating Income
During the year ended
Income Tax Provision
Income tax provision expense decreased by approximately$0.9 million , from$2.4 million in expense during the year endedDecember 31, 2018 to$1.5 million for the year endedDecember 31, 2019 . The decrease was primarily due to an estimated taxable gain recorded in the prior year as a result of the ACC / Allianz Joint Venture Transaction.
Net Income Attributable to Noncontrolling Interests
Noncontrolling interests represent holders of common and preferred units in ourOperating Partnership not held by ACC orACC Holdings as well as certain third-party partners in joint ventures consolidated by us for financial reporting purposes. Accordingly, these external partners are allocated their share of income/loss during the respective reporting periods. Refer to Note 8 in the accompanying Notes to Consolidated Financial Statements contained in Item 8 for additional details. We anticipate net income attributable to noncontrolling interests to decrease in 2020 as compared to 2019, primarily as a result of decreased operating performance anticipated at our properties held in joint ventures. 37 --------------------------------------------------------------------------------
Comparison of the Years Ended
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 32 through 37 of the Form 10-K for the fiscal year
ended
Liquidity and Capital Resources
Cash Balances and Cash Flows
As ofDecember 31, 2019 , we had$81.3 million in cash, cash equivalents, and restricted cash as compared to$106.5 million in cash, cash equivalents, and restricted cash as ofDecember 31, 2018 . Restricted cash primarily consists of escrow accounts held by lenders and resident security deposits, as required by law in certain states, and funds held in escrow in connection with potential acquisition and development opportunities. The following discussion relates to changes in cash due to operating, investing and financing activities, which are presented in our consolidated statements of cash flows included in Item 8 herein. Operating Activities: For the year endedDecember 31, 2019 , net cash provided by operating activities was approximately$370.4 million , as compared to approximately$376.6 million for the year endedDecember 31, 2018 , a decrease of approximately$6.2 million . The decrease in cash flows was primarily due to the timing of property tax payments for owned properties, the sale of two properties in 2019 and three properties in 2018, and a$13.2 million interest rate swap termination payment made inJune 2019 . This decrease was partially offset by operating cash flows from the completion of construction of owned development properties and presale development properties in Fall 2018 and 2019. Investing Activities: Investing activities utilized approximately$416.1 million and$335.8 million for the years endedDecember 31, 2019 and 2018, respectively. The$80.3 million increase in cash utilized in investing activities was primarily a result of a$133.7 million decrease in proceeds from the disposition of a three property portfolio in 2018 as compared to two properties in 2019 which was partially offset by: (i) a$31.0 million decrease in cash used to fund the construction of our owned development properties, related to the timing of construction commencement and completion of our owned development pipeline; (ii) an$18.1 million decrease in cash paid to acquire properties and land parcels; and (iii) a$5.3 million increase in principal payments from loans receivable. Financing Activities: Cash provided by financing activities totaled approximately$20.6 million for the year endedDecember 31, 2019 , and$0.9 million for the year endedDecember 31, 2018 . The$19.7 million increase was primarily a result of the following: (i) a$450.0 million decrease in the pay-off of unsecured term loans; (ii)$398.8 million in proceeds from the issuance of unsecured notes inJune 2019 ; (iii) a$144.4 million decrease in distributions to noncontrolling interests as a result of the closing of the mortgage loans associated with the Allianz Joint Venture inMay 2018 ; and (iv) a$135.3 million decrease in cash used to pay-off mortgage and construction debt including defeasance costs. These increases were partially offset by the following: (i) a$378.2 million decrease in contributions from noncontrolling interests as a result of ACC / Allianz Joint Venture inMay 2018 ; (ii) a$330.0 million decrease in proceeds from mortgage loans; (iii) a$221.3 million decrease in net proceeds on our revolving credit facility; (iv) a$94.6 million increase in funds paid to increase our ownership of consolidated subsidiaries; (v) a$69.3 million decrease in proceeds from construction loans; (vi) an$8.1 million increase in distributions paid to common and restricted stockholders; (vii) a$5.8 million increase in payments of debt issuance costs; and (viii) a$1.2 million increase in taxes paid on net share settlements.
Liquidity Needs, Sources and Uses of Capital
As ofDecember 31, 2019 , our short-term liquidity needs included, but were not limited to, the following: (i) anticipated distribution payments to our common and restricted stockholders totaling approximately$260.1 million based on an assumed annual cash distribution of$1.88 per share and based on the number of our shares outstanding as ofDecember 31, 2019 ; (ii) anticipated distribution payments to ourOperating Partnership unitholders totaling approximately$0.9 million based on an assumed annual distribution of$1.88 per common unit and a cumulative preferential per annum cash distribution rate of 5.99% on our Preferred OP Units based on the number of units outstanding as ofDecember 31, 2019 ; (iii) estimated development costs over the next 12 months totaling approximately$317.0 million for our owned properties currently under construction; (iv) an obligation to increase our investment in one joint venture, resulting in a funding commitment of approximately$76.8 million (see Note 8, Note 15, and Note 18 in the accompanying Notes to Consolidated Financial Statements contained in Item 8); (v) the pay-off of approximately$34.4 million of outstanding fixed rate mortgage debt and$400 million of unsecured debt scheduled to mature during the next 12 months as well as approximately$12.2 million of scheduled debt principal payments; (vi) funds for other development projects scheduled to commence construction during the next 12 months; (vii) potential future property or land acquisitions, including mezzanine financed developments; and (viii) recurring capital expenditures. 38 -------------------------------------------------------------------------------- We expect to meet our short-term liquidity requirements by (i) borrowing under our existing revolving credit facility; (ii) accessing the unsecured bond market or entering into other unsecured debt arrangements; (iii) exercising debt extension options to the extent they are available; (iv) issuing securities, including common stock, under our ATM Equity Program discussed more fully in Note 10 in the accompanying Notes to Consolidated Financial Statements contained in Item 8, or otherwise; (v) potentially disposing of properties and/or entering into joint venture arrangements, depending on market conditions; and (vi) utilizing current cash on hand and net cash provided by operations. Our ability to obtain additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to the real estate industry, our credit ratings and credit capacity, and the perception of lenders regarding our long or short-term financial prospects. As discussed in Note 18 in the accompanying Notes to Consolidated Financial Statements contained in Item 8, inJanuary 2020 , theOperating Partnership closed a$400 million offering of senior unsecured notes under its existing shelf registration. These 10-year notes were issued at 99.81% of par value with a coupon of 2.85% and are fully and unconditionally guaranteed by the Company. Interest on the notes is payable semi-annually onFebruary 1 andAugust 1 , with the first payment due and payable onAugust 1, 2020 . The notes will mature onFebruary 1, 2030 . Net proceeds from the sale of the senior unsecured notes totaled approximately$394.3 million . The Company used the proceeds to fund the early redemption of its$400 million 3.35% Senior Notes dueOctober 2020 . The prepayment resulted in approximately$4.8 million in debt extinguishment costs incurred during the first quarter of 2020. We may seek additional funds to undertake initiatives not contemplated by our business plan or obtain additional cushion against possible shortfalls. We also may pursue additional financing as opportunities arise. Future financings may include a range of different sizes or types of financing, including the incurrence of additional secured debt and the sale of additional debt or equity securities. These funds may not be available on favorable terms or at all. Our ability to obtain additional financing depends on several factors, including future market conditions, our success or lack of success in penetrating our markets, our future creditworthiness, and restrictions contained in agreements with our investors or lenders, including the restrictions contained in the agreements governing our unsecured credit facility and unsecured notes. These financings could increase our level of indebtedness or result in dilution to our equity holders. 39
--------------------------------------------------------------------------------
Indebtedness
A summary of our consolidated indebtedness as ofDecember 31, 2019 is as follows. Refer to Note 9 in the accompanying Notes to Consolidated Financial Statements contained in Item 8 for a detailed discussion of our indebtedness. Weighted Weighted Average Average Amount % of Total Rates (1) Maturities Secured$ 782,741 23.0 % 4.5 % 6.2 Years Unsecured 2,625,700 77.0 % 3.4 % 4.0 Years Total consolidated debt$ 3,408,441 100.0 % 3.7 % 4.5 Years Fixed rate debt Secured Project-based taxable bonds$ 23,215 0.7 % 7.6 % 4.9 years Mortgage 756,397 22.2 % 4.4 % 6.2 years Unsecured April 2013 Notes 400,000 11.7 % 3.8 % 3.3 years June 2014 Notes 400,000 11.7 % 4.1 % 4.5 years September 2015 Notes (2) 400,000 11.7 % 3.4 % 0.8 years October 2017 Notes 400,000 11.7 % 3.6 % 7.9 years June 2019 Notes 400,000 11.7 % 3.3 % 6.5 years Term loans 200,000 6.0 % 2.5 % 2.5 years Total - fixed rate debt 2,979,612 87.4 % 3.6 % 4.4 years Variable rate debt: Secured Mortgage 3,129 0.1 % 4.2 % 25.6 years Unsecured Unsecured revolving credit facility 425,700 12.5 % 3.0 % 2.2 years Total - variable rate debt 428,829 12.6 % 3.0 % 2.4 years Total consolidated debt$ 3,408,441 100.0 % 3.7 % 4.5 years (1) Represents stated interest rate and does not include the effect of the
amortization of deferred financing costs, debt premiums and discounts, OIDs,
and interest rate swap terminations.
(2) In
at a yield of 2.872% that mature in 2030. Proceeds from the issuance were
used to prepay the
Financial Statements contained in Item 8 for further discussion.
Distributions
We are required to distribute 90% of our REIT taxable income (excluding capital gains) on an annual basis in order to qualify as a REIT for federal income tax purposes. Distributions to common stockholders are at the discretion of the Board of Directors. We may use borrowings under our unsecured revolving credit facility to fund distributions. The Board of Directors considers a number of factors when determining distribution levels, including market factors and our Company's performance in addition to REIT requirements. OnJanuary 20, 2020 , our Board of Directors declared a distribution of$0.47 per share, which was paid onFebruary 14, 2020 , to all common stockholders of record as ofJanuary 30, 2020 . At the same time, theOperating Partnership paid an equivalent amount per unit to holders of Common Units, as well as the quarterly cumulative preferential distribution to holders of Series A Preferred Units.
Capital Expenditures
We distinguish between the following five categories of capital expenditures:
Recurring capital expenditures represent additions that are recurring in nature
to maintain a property's income, value, and competitive position within the
market. Recurring capital expenditures typically include, but are not limited
to, appliances,
40
--------------------------------------------------------------------------------
furnishings, carpeting and flooring, HVAC equipment, and kitchen/bath
cabinets. Maintenance and repair costs incurred throughout the year including
those incurred during our annual turn process due to normal wear and tear by
residents are expensed as incurred.
Acquisition-related capital expenditures represent additions identified upon
acquiring a property and are considered part of the initial investment. These
expenditures are intended to position the property to be consistent with our
physical standards and are usually incurred within the first two and
occasionally the third year after acquisition.
Renovations and strategic repositioning capital expenditures are incurred to
enhance the economic value and return of the property and undergo an investment
return underwrite prior to being incurred.
Non-recurring and other capital expenditures represent the addition of features
or amenities that did not exist at the property but were deemed necessary to
remain competitive within a specific market. This category also includes items
considered extraordinary in nature.
Disposition-related capital expenditures represent capital improvements at properties disposed of during all years presented.
Additionally, we are required by certain of our lenders to contribute amounts to reserves for capital repairs and improvements at our mortgaged properties, which may exceed the amount of capital expenditures actually incurred by us during those periods.
Capital expenditures at our owned properties are set forth below:
As of and for the Year
Ended
2019 2018 2017
Recurring capital expenditures $ 21,534 $ 19,922 $ 17,634
Acquisition-related 5,543 8,095 6,194
Renovations and strategic repositioning 20,045 24,665 26,588
Non-recurring and other 22,467 17,365 30,016
Disposition-related (1) 1,257 762 2,290
Total $ 70,846 $ 70,809 $ 82,722
Average beds (2) 94,244
87,985 79,389
Average recurring capital expenditures per bed $ 228
(1) Includes properties sold during 2019, 2018, and 2017, as well as one
property that converted to the on-campus participating property ("OCPP")
structure in
receivership until
settlement of the property's mortgage loan that matured in
Historical capital expenditures for these properties have been reclassified
for all periods presented.
(2) Does not include beds related to the disposed properties discussed above.
41
--------------------------------------------------------------------------------Contractual Obligations
The following table summarizes our contractual obligations for the next five
years and thereafter as of
Less than 1 More than 5
Total Year 1 - 3 Years 3 - 5 Years Years
Long-term debt (1) (2) (3) $ 3,408,441 $ 446,164 $ 855,849 $ 937,738 $ 1,168,690
Interest on long-term debt 561,850 120,714 189,306 123,759 128,071
Development projects (4) 458,652 316,974 131,526 10,152 -
Lease obligations (5) 1,772,022 11,814 40,413 58,147 1,661,648
Joint venture agreements (6) 76,754 76,754 - - -
$ 6,277,719 $ 972,420 $ 1,217,094 $ 1,129,796 $ 2,958,409
(1) Amounts include aggregate principal payments only and assumes we do not
exercise extension options available to us on our unsecured credit facility
or our unsecured term loans (see Note 9 in the accompanying Notes to
Consolidated Financial Statements contained in Item 8).
(2) Amounts include the current balance of the unsecured revolving credit
facility which is subject to change based on future borrowings and
repayments.
(3) In
at a yield of 2.872% that mature in 2030. Proceeds from the issuance were
used to prepay the
Financial Statements contained in Item 8 for further discussion.
(4) Consists of anticipated cash payments, including amounts accrued as of
construction as of
and are scheduled to be completed between
entered into contracts with general contractors for certain phases of the
construction of these projects. However, these contracts do not generally
cover all of the costs that are necessary to place these properties into
service, including the cost of furniture and marketing and leasing
costs. The unfunded commitments presented include all such costs, not only
those costs that we are obligated to fund under the construction contracts.
(5) Includes operating leases related to corporate office space and equipment
and minimum annual lease payments under ground/facility lease agreements
entered into with university systems and other third parties. Refer to Note
14 in the accompanying Notes to Consolidated Financial Statements contained
in Item 8 for a more detailed discussion of our leases.
(6) Includes the additional investment in a joint venture. See Note 5, Note 15,
and Note 18 in the accompanying Notes to Consolidated Financial Statements
contained in Item 8.
Funds From Operations ("FFO")
The National Association of Real Estate Investment Trusts ("NAREIT") currently
defines FFO as net income or loss attributable to common shares computed in
accordance with generally accepted accounting principles ("GAAP"), excluding
gains or losses from depreciable operating property sales, impairment charges
and real estate depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. We present FFO because we
consider it an important supplemental measure of our operating performance and
believe it is frequently used by securities analysts, investors and other
interested parties in the evaluation of REITs, many of which present FFO when
reporting their results. FFO excludes GAAP historical cost depreciation and
amortization of real estate and related assets, which assumes that the value of
real estate diminishes ratably over time. Historically, however, real estate
values have risen or fallen with market conditions. We therefore believe that
FFO provides a performance measure that, when compared year over year, reflects
the impact to operations from trends in occupancy rates, rental rates, operating
costs, and interest costs, among other items, providing perspective not
immediately apparent from net income. We compute FFO in accordance with
standards established by the Board of Governors of NAREIT in its December 2018
White Paper, which may differ from the methodology for calculating FFO utilized
by other equity REITs and, accordingly, may not be comparable to such other
REITs.
We also believe it is meaningful to present a measure we refer to as
FFO-Modified, or FFOM, which reflects certain adjustments related to the
economic performance of our on-campus participating properties, the elimination
of transaction costs, and other items, as we determine in good faith. Under our
participating ground leases, we and the participating university systems each
receive 50% of the properties' net cash available for distribution after payment
of operating expenses, debt service (which includes significant amounts towards
repayment of principal), and capital expenditures. A substantial portion of our
revenues attributable to these properties is reflective of cash that is required
to be used for capital expenditures and for the amortization of applicable
property indebtedness. These amounts do not increase our economic interest in
these properties or otherwise benefit us since our interest in the properties
terminates upon the repayment of the applicable property
indebtedness. Therefore, unlike the ownership of our owned properties, the
unique features of our ownership interest in our on-campus participating
properties cause the value of these properties to diminish over time. For
example, since the ground/facility leases under which we operate the
participating properties require the reinvestment from operations of specified
amounts for capital expenditures and for the repayment of debt while our
interest in these properties terminates upon the repayment of the debt, such
capital expenditures do not increase the value of the property to us and
mortgage debt amortization only increases the equity of the ground lessor.
Accordingly, we believe
42
--------------------------------------------------------------------------------
it is meaningful to modify FFO to exclude the operations of our on-campus
participating properties and to consider their impact on our performance by
including only that portion of our revenues from those properties that are
reflective of our share of net cash flow and the management fees that we
receive, both of which increase and decrease with the operating performance of
the properties. This narrower measure of performance measures our profitability
for these properties in a manner that is similar to the measure of our
profitability from our third-party services business where we similarly incur no
initial or ongoing capital investment in a property and derive only
consequential benefits from capital expenditures and debt amortization. We
believe, however, that this narrower measure of performance is inappropriate in
traditional real estate ownership structures where debt amortization and capital
expenditures enhance the property owner's long-term profitability from its
investment.
Our FFOM may have limitations as an analytical tool because it reflects the
contractual calculation of net cash flow from our on-campus participating
properties, which is unique to us and is different from that of our owned
off-campus properties. Companies that are considered to be in our industry may
not have similar ownership structures; and therefore those companies may not
calculate FFOM in the same manner that we do, or at all, limiting its usefulness
as a comparative measure. We compensate for these limitations by relying
primarily on our GAAP and FFO results and using FFOM only
supplementally. Further, FFO and FFOM do not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations or other commitments and uncertainties. FFO
and FFOM should not be considered as alternatives to net income or loss computed
in accordance with GAAP as an indicator of our financial performance, or to cash
flow from operating activities computed in accordance with GAAP as an indicator
of our liquidity, nor are these measures indicative of funds available to fund
our cash needs, including our ability to pay dividends or make distributions.
During the year ended December 31, 2019 , the Company updated the presentation of
the calculation of FFO, as it relates to the presentation of consolidated joint
venture partners' share of FFO and the presentation of corporate depreciation.
Prior period amounts have been updated to conform to the current presentation.
There were no changes to the FFO calculated or the underlying financial
information used in the calculation.
43
--------------------------------------------------------------------------------The following table presents a reconciliation of our net income attributable to common shareholders to FFO and FFOM:
Year Ended
2019 2018 2017
Net income attributable to ACC, Inc. and
Subsidiaries common stockholders $ 84,969 $ 117,095 $ 69,038
Noncontrolling interests' share of net
income 1,793 2,029 1,083
JV ("Joint Venture") partners' share of net
income (1,398 ) (773 ) (7 )
JV partners' share of depreciation and
amortization (8,644 ) (5,135 ) (181 )
JV partners' share of FFO (10,042 ) (5,908 ) (188 )
Loss (gain) from disposition of real estate 53 (42,314 ) 632
Elimination of provision for real estate
impairment 3,201 - 15,317
Total depreciation and amortization 275,046 263,203 234,955
Corporate depreciation (1) (4,728 ) (4,669 ) (3,479 )
FFO attributable to common stockholders
and OP unitholders 350,292 329,436 317,358
Elimination of operations of on-campus
participating properties ("OCPPs")
Net income from OCPPs (6,587 ) (5,516 ) (5,133 )
Amortization of investment in OCPPs (8,380 )
(7,819 ) (7,536 )
335,325 316,101 304,689
Modifications to reflect operational
performance of OCPPs
Our share of net cash flow (2) 3,067 2,928 2,841
Management fees and other 2,249 1,564 1,534
Contribution from OCPPs 5,316 4,492 4,375
Transaction costs (3) 598 7,586 2,855
Elimination of gain from extinguishment of
debt (4) (20,992 ) (7,867 ) -
Elimination of provision for impairment of
intangible asset (5) 14,013 - -
Elimination of gain from litigation
settlement (6) - (3,323 ) -
Elimination of FFO from property in
receivership (7) 1,912 2,848 1,452
Contractual executive separation and
retirement charges (8) - - 4,515
Funds from operations-modified ("FFOM")
attributable to common stockholders and OP
unitholders $ 336,172 $ 319,837 $ 317,886
FFO per share - diluted $ 2.52 $ 2.38 $ 2.31
FFOM per share - diluted $ 2.42 $ 2.31 $ 2.32
Weighted-average common shares outstanding
- diluted 138,860,311 138,571,270 137,099,084
(1) Represents depreciation on corporate assets not added back for purposes of
calculating FFO.
(2) 50% of the properties' net cash available for distribution after payment of
operating expenses, debt service (including repayment of principal) and
capital expenditures which is included in ground/facility leases expense in
the consolidated statements of comprehensive income.
(3) The year ended December 31, 2019 amount represents transaction costsincurred in connection with the closing of presale development transactions.
The year ended
incurred in connection with the closing of a presale development transaction
and transaction costs incurred in connection with the closing of the ACC /
Allianz real estate joint venture transaction in
adjustment to estimated state income tax related to a tax gain resulting
from the ACC / Allianz joint venture transaction.
(4) The year ended
extinguishment of a mortgage loan due to the transfer of an owned property
to the lender in satisfaction of the property's mortgage loan. The year
ended
extinguishment of debt resulting from the unwinding of a New Market Tax
Credit ("NMTC") structure at one of the company's owned properties, offset
by losses associated with the early extinguishment of mortgage loans due to
real estate disposition transactions, including the sale of partial
ownership interests in properties. Such costs are excluded from gains from
dispositions of real estate reported, in accordance with GAAP.
(5) Represents a non-cash impairment charge for an intangible asset related to a
property tax incentive arrangement at on owned property.
(6) Represents a gain related to cash proceeds received from a litigation
settlement.
(7) Represents FFO for an owned property that was transferred to the lender in
(8) Represents contractual executive separation and retirement charges incurred
with regard to the retirement of the company's former Chief Financial
Officer.
44--------------------------------------------------------------------------------
Inflation
Our student leases do not typically provide for rent escalations. However, they typically do not have terms that extend beyond 12 months. Accordingly, although on a short term basis we would be required to bear the impact of rising costs resulting from inflation, we have the opportunity to raise rental rates at least annually to offset such rising costs. However, a weak economic environment or declining student enrollment at our principal universities may limit our ability to raise rental rates.
© Edgar Online, source
