Noncontrolling Interests

12 Months Ended

Dec. 31, 2019

Interests in Consolidated Real Estate Joint Ventures and Presale Arrangements

Noncontrolling interests - partially owned properties: As of December 31, 2019, the Operating Partnership consolidates four joint ventures that own and operate ten owned off-campus properties. The portion of net assets attributable to the third-party partners in these arrangements is classified as “noncontrolling interests - partially owned properties” within equity and capital on the accompanying consolidated balance sheets of ACC and the Operating Partnership, respectively.

Redeemable noncontrolling interests (ACC) / redeemable limited partners (Operating Partnership): The noncontrolling interest holder in the Core Transaction has the option to redeem its noncontrolling interest in the entities through the exercise of put options. As the exercise of the options is outside of the Company’s control, the portion of net assets attributable to the third-party partner is classified as “redeemable noncontrolling interests” and “redeemable limited partners” in the mezzanine section of the accompanying consolidated balance sheets of ACC and the Operating Partnership, respectively. The redemption price is based on the fair value of the properties at the time of option exercise. These redeemable noncontrolling interests are marked to their redemption value at each balance sheet date. The redemption value is based on the fair value of the underlying properties held by the joint ventures. The Company’s fair value analysis is based on Level 3 inputs and incorporates information obtained from a number of sources, including the Company’s analysis of comparable properties in the Company’s portfolio, estimations of net operating results of the properties, capitalization rates, discount rates, and other market data. During the years ended December 31, 2019 and 2018, the redemption value of redeemable noncontrolling interests increased by $11.8 million and $68.7 million, respectively. The 2019 increase was due to a change in the fair value of the net assets held by the joint ventures primarily as a result of the completion of the leasing process for the 2019-2020 academic year, and the 2018 increase was primarily as a result of the underlying properties becoming operational during the third quarter and the leasing results for the 2018-2019 academic year. The corresponding offset for the adjustments to the redemption value was recorded in additional paid in capital. As the change in redemption value is based on fair value, there is no effect on the Company’s earnings per share. During the year ended December 31, 2019, the Company exercised its option to redeem the noncontrolling interests in one of the joint ventures, through which the Company purchased the remaining noncontrolling interests in three properties, which reduced the redeemable noncontrolling

interests by $88.3 million. The redemption options for the second joint venture are exercisable in the first quarter of 2020. For further discussion on accounting for changes in redemption value, refer to Note 2.

The third-party partners’ share of the income or loss of the joint ventures described above is calculated based on the partners’ economic interest in the joint ventures, is included in “net income attributable to noncontrolling interests” on the consolidated statements of comprehensive income of ACC and is reported as “net income attributable to noncontrolling interests - partially owned properties” on the consolidated statements of comprehensive income of the Operating Partnership.

Operating Partnership Ownership

Also included in redeemable noncontrolling interests (ACC) / redeemable limited partners (Operating Partnership) are OP Units for which the Operating Partnership is required, either by contract or securities law, to deliver registered common shares of ACC to the exchanging OP unit holder, or for which the Operating Partnership has the intent or history of exchanging such units for cash. The units classified as such include Series A Preferred Units (“Preferred OP Units”) and Common OP Units. The value of OP Units is reported at the greater of fair value, which is based on the closing market value of the Company’s common stock at period end, or historical cost at the end of each reporting period. The OP Unitholders’ share of the income or loss of the Company is included in “net income attributable to noncontrolling interests” on the consolidated statements of comprehensive income of ACC.

As of December 31, 2019 and 2018, respectively, approximately 0.4% and 0.5% of the equity interests of the Operating Partnership were held by owners of Common OP Units and Preferred OP Units not held by ACC or ACC Holdings. During the year ended December 31, 2019, 126,313 Common OP Units and 42,271 Preferred OP Units were converted into an equal number of shares of ACC’s common stock. During the year ended December 31, 2018, 412,343 Common OP Units were converted into an equal number of shares of ACC’s common stock.

Below is a table summarizing the activity of redeemable noncontrolling interests (ACC) / redeemable limited partners (Operating Partnership) for the years ended December 31, 2019 and 2018, which includes both the redeemable joint venture partners and OP Units discussed above:



Balance, December 31, 2016	$	55,078
Net income	654
Distributions	(77,031		)
Conversion of OP Units into shares of ACC common stock	(154		)
Contributions from noncontrolling interests	162,794
Adjustments to reflect redeemable noncontrolling interests at fair value	(9,172		)
Balance, December 31, 2017	$	132,169
Net income	936
Distributions	(1,516		)
Conversion of OP Units into shares of ACC common stock	(13,334		)
Contributions from noncontrolling interests	112
Adjustments to reflect redeemable noncontrolling interests at fair value	66,079
Balance, December 31, 2018	$	184,446
Net income	783
Distributions	(1,062		)
Conversion of OP Units into shares of ACC common stock	(6,082		)
Contributions from noncontrolling interests	250
Purchase of noncontrolling interests	(88,304		)
Adjustments to reflect redeemable noncontrolling interests at fair value	14,350
Balance, December 31, 2019	$	104,381