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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2021

OR

 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.
(Exact name of registrant as specified in its charter)
Maryland 76-0753089
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
12700 Hill Country Blvd.
 Suite T-200
 Austin, TX
78738
(Address of Principal Executive Offices) (Zip Code)
(512) 732-1000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, par value $.01 per shareACCNew York Stock Exchange

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.
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
YesNo
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.
Large accelerated filerAccelerated Filer
Non-accelerated filer Smaller reporting company
Emerging growth company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YesNo
There were 137,865,792 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 April 23, 2021.



FORM 10-Q
FOR THE QUARTER ENDED March 31, 2021
 TABLE OF CONTENTS
 
 PAGE NO.
  
PART I. 
Item 1.Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries 
 
Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020
 
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020 (all unaudited)
 
Consolidated Statements of Changes in Equity for the three months ended March 31, 2021 and 2020 (all unaudited)
Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (all unaudited)
 Notes to Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosure about Market Risk
Item 4.Controls and Procedures
PART II. 
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
SIGNATURES
 


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


 March 31, 2021December 31, 2020
 (Unaudited) 
Assets  
Investments in real estate  
Owned properties, net$6,713,529 $6,721,744 
On-campus participating properties, net67,445 69,281 
Investments in real estate, net6,780,974 6,791,025 
Cash and cash equivalents41,111 54,017 
Restricted cash24,118 19,955 
Student contracts receivable, net13,642 11,090 
Operating lease right of use assets456,860 457,573 
Other assets202,003 197,500 
Total assets$7,518,708 $7,531,160 
Liabilities and equity  
Liabilities  
Secured mortgage and bond debt, net$634,406 $646,827 
Unsecured notes, net2,376,527 2,375,603 
Unsecured term loan, net199,560 199,473 
Unsecured revolving credit facility462,500 371,100 
Accounts payable and accrued expenses58,232 85,070 
Operating lease liabilities490,582 486,631 
Other liabilities163,408 185,352 
Total liabilities4,385,215 4,350,056 
Commitments and contingencies (Note 12)
Redeemable noncontrolling interests24,754 24,567 
Equity  
American Campus Communities, Inc. and Subsidiaries stockholders’ equity  
Common stock, $0.01 par value, 800,000,000 shares authorized, 137,763,931 and 137,540,345 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
1,378 1,375 
Additional paid in capital4,472,867 4,472,170 
Common stock held in rabbi trust, 101,861 and 91,746 shares at March 31, 2021 and December 31, 2020, respectively
(4,326)(3,951)
Accumulated earnings and dividends(1,382,492)(1,332,689)
Accumulated other comprehensive loss(20,259)(22,777)
Total American Campus Communities, Inc. and Subsidiaries stockholders’ equity3,067,168 3,114,128 
Noncontrolling interests – partially owned properties41,571 42,409 
Total equity3,108,739 3,156,537 
Total liabilities and equity$7,518,708 $7,531,160 
Consolidated variable interest entities’ assets and liabilities included in the above balances
Investments in real estate, net$586,217 $592,787 
Cash, cash equivalents, and restricted cash$31,021 $41,248 
Other assets$15,604 $13,078 
Secured mortgage debt, net$411,205 $410,837 
Accounts payable, accrued expenses, and other liabilities$32,486 $46,645 
See accompanying notes to consolidated financial statements.

1

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands, except share and per share data)
 Three Months Ended
March 31,
 20212020
Revenues  
Owned properties$218,444 $232,811 
On-campus participating properties8,958 10,709 
Third-party development services1,959 2,055 
Third-party management services3,361 3,829 
Total revenues232,722 249,404 
Operating expenses (income)  
Owned properties93,991 92,474 
On-campus participating properties3,290 3,366 
Third-party development and management services5,387 6,207 
General and administrative12,328 10,158 
Depreciation and amortization68,117 66,169 
Ground/facility leases3,208 4,069 
Gain from disposition of real estate— (48,525)
Total operating expenses186,321 133,918 
Operating income46,401 115,486 
Nonoperating income (expenses)  
Interest income220 851 
Interest expense(28,977)(27,783)
Amortization of deferred financing costs(1,319)(1,287)
Loss from extinguishment of debt (4,827)
Total nonoperating expenses(30,076)(33,046)
Income before income taxes16,325 82,440 
Income tax provision(340)(379)
Net income15,985 82,061 
Net income attributable to noncontrolling interests(367)(1,206)
Net income attributable to ACC, Inc. and Subsidiaries common stockholders
$15,618 $80,855 
Other comprehensive income (loss)  
Change in fair value of interest rate swaps and other2,518 (9,801)
Comprehensive income$18,136 $71,054 
Net income per share attributable to ACC, Inc. and Subsidiaries common stockholders  
Basic and diluted$0.11 $0.58 
Weighted-average common shares outstanding  
Basic137,711,965 137,477,169 
Diluted139,008,642 138,587,513 

See accompanying notes to consolidated financial statements.

2

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS 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 TrustCommon Shares Held in Rabbi Trust at CostAccumulated
Earnings and
Dividends
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests –
Partially Owned
Properties
Total
Equity, December 31, 2020137,540,345 $1,375 $4,472,170 91,746 $(3,951)$(1,332,689)$(22,777)$42,409 $3,156,537 
Adjustments to reflect redeemable noncontrolling interests at fair value— — (354)— — — — — (354)
Amortization of restricted stock awards and vesting of restricted stock units9,054 — 5,148 — — — — — 5,148 
Vesting of restricted stock awards224,647 3 (4,472)— — — — — (4,469)
Distributions to common and restricted stockholders and other ($0.47 per common share)
— — — — — (65,421)— — (65,421)
Distributions to noncontrolling interests - partially owned properties— — — — — — — (1,138)(1,138)
Change in fair value of interest rate swaps and other— — — — — — 2,518 — 2,518 
Deposits to deferred compensation plan, net of withdrawals(10,115)— 375 10,115 (375)— — — — 
Net income— — — — — 15,618 — 300 15,918 
Equity, March 31, 2021137,763,931 $1,378 $4,472,867 101,861 $(4,326)$(1,382,492)$(20,259)$41,571 $3,108,739 

 Common
Shares
Par Value of
Common
Shares
Additional Paid
in Capital
Common Shares Held in Rabbi TrustCommon Shares Held in Rabbi Trust at CostAccumulated
Earnings and
Dividends
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests –
Partially Owned
Properties
Total
Equity, December 31, 2019137,326,824 $1,373 $4,458,456 77,928 $(3,486)$(1,144,721)$(16,946)$43,998 $3,338,674 
Adjustments to reflect redeemable noncontrolling interests at fair value— — 9,490 — — — — — 9,490 
Amortization of restricted stock awards— — 3,988 — — — — — 3,988 
Vesting of restricted stock awards199,695 2 (4,157)— — — — — (4,155)
Distributions to common and restricted stockholders and other ($0.47 per common share)
— — — — — (65,242)— — (65,242)
Distributions to noncontrolling interests - partially owned properties— — — — — — — (2,566)(2,566)
Change in fair value of interest rate swaps and other— — — — — — (9,801)— (9,801)
Deposits to deferred compensation plan, net of withdrawals(3,488)— 129 3,488 (129)— — — — 
Net income— — — — — 80,855 — 895 81,750 
Equity, March 31, 2020137,523,031 $1,375 $4,467,906 81,416 $(3,615)$(1,129,108)$(26,747)$42,327 $3,352,138 
See accompanying notes to consolidated financial statements.

3

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

 Three Months Ended March 31,
 20212020
Operating activities  
   Net income$15,985 $82,061 
   Adjustments to reconcile net income to net cash provided by operating activities:  
Gain from disposition of real estate (48,525)
   Loss from extinguishment of debt 4,827 
   Depreciation and amortization68,117 66,169 
   Amortization of deferred financing costs and debt premiums/discounts1,107 (3)
   Share-based compensation5,148 3,988 
   Income tax provision340 379 
   Amortization of interest rate swap terminations426 428 
   Changes in operating assets and liabilities:
   Student contracts receivable, net(2,552)1,143 
   Other assets(3,479)6,990 
   Accounts payable and accrued expenses(27,178)(36,172)
   Other liabilities(8,100)9,499 
Net cash provided by operating activities49,814 90,784 
Investing activities  
   Proceeds from disposition of properties 146,144 
   Capital expenditures for owned properties(9,329)(11,852)
   Investments in owned properties under development(57,565)(84,359)
   Other investing activities319 (1,912)
Net cash (used in) provided by investing activities(66,575)48,021 
Financing activities  
   Proceeds from unsecured notes 399,240 
   Pay-off of mortgage loans(10,295)(34,219)
   Defeasance costs related to early extinguishment of debt (4,156)
   Pay-off of unsecured notes (400,000)
   Proceeds from revolving credit facility205,300 1,295,700 
   Paydowns of revolving credit facility(113,900)(1,111,700)
   Scheduled principal payments on debt(1,588)(2,040)
   Debt issuance costs(237)(4,693)
   Increase in ownership of consolidated subsidiary (77,200)
   Taxes paid on net-share settlements(4,469)(4,155)
   Distributions paid to common and restricted stockholders(65,421)(65,242)
   Distributions paid to noncontrolling interests(1,372)(2,800)
Net cash provided (used in) financing activities8,018 (11,265)
Net change in cash, cash equivalents, and restricted cash(8,743)127,540 
Cash, cash equivalents, and restricted cash at beginning of period73,972 81,348 
Cash, cash equivalents, and restricted cash at end of period$65,229 $208,888 
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents$41,111 $176,758 
Restricted cash24,118 32,130 
Total cash, cash equivalents, and restricted cash at end of period$65,229 $208,888 
Supplemental disclosure of non-cash investing and financing activities  
Accrued development costs and capital expenditures$18,131 $27,056 
Change in fair value of redeemable noncontrolling interest$(354)$9,490 
Supplemental disclosure of cash flow information  
Interest paid, net of amounts capitalized$38,437 $31,959 
 
See accompanying notes to consolidated financial statements.

4

AMERICAN CAMPUS COMMUNITIES, INC. 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, and 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 is structured as an umbrella partnership REIT (“UPREIT”) and contributes all net proceeds from its various equity offerings to American Campus Communities Operating Partnership LP (“ACCOP” or “the Operating Partnership”). In return for those contributions, ACC receives a number of units of the Operating Partnership (“OP Units”) 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 American Campus Communities Holdings, LLC (“ACC Holdings”), the general partner of ACCOP, and the common shares issued to the public.

As used in this report, unless stated otherwise or the context otherwise requires, references to the “ACC,” “the Company,” “we,” “us,” or “our” mean American Campus Communities, Inc., a Maryland corporation that has elected to be treated as a REIT under the Internal Revenue Code, and its consolidated subsidiaries, including ACCOP.
 
As of March 31, 2021, the Company’s property portfolio contained 166 properties with approximately 111,900 beds.  The Company’s property portfolio consisted of 126 owned off-campus student housing properties that are in close proximity to colleges and universities, 34 American Campus Equity (“ACE®”) properties operated under ground/facility leases, and six on-campus participating properties (“OCPPs”) operated under ground/facility leases with the related university systems.  Of the 166 properties, seven of 10 phases at one property were under development as of March 31, 2021, and when completed will consist of a total of approximately 7,800 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 March 31, 2021, also through one of ACC’s TRSs, the Company provided third-party management and leasing services for 41 properties that represented approximately 30,500 beds.  Third-party management and leasing services are typically provided pursuant to management contracts that have initial terms that range from one year to five years.  As of March 31, 2021, the Company’s total owned and third-party managed portfolio included 207 properties with approximately 142,400 beds.

2. Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

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 and per share amounts, are stated in thousands unless otherwise indicated.

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.
5

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


Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04 “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. In March 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In August 2020, the FASB issued ASU 2020-06 “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity" which simplifies the accounting for convertible instruments and accounting for contracts in an entity’s own equity. Under the new guidance, entities will only analyze whether cash settlements are explicitly required when registered shares are unavailable. As a result, such contracts may be classified in permanent equity rather than mezzanine equity, which may affect the way OP Units are presented on the Company's consolidated balance sheets. The update is effective for the Company beginning on January 1, 2022. The Company is in the process of evaluating the impact of adopting the new standard on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In March 2020, the U.S. Securities and Exchange Commission (“SEC”) adopted rules that amended the financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities in Rule 3-10 of Regulation S-X. Subsequently, in November 2020, the FASB issued ASU 2020-09 “Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762” which revises SEC paragraphs of the codification to reflect, as appropriate, the amended disclosure requirements mentioned above. The amended rules permit subsidiary issuers of obligations guaranteed by the parent to omit separate financial statements if the consolidated financial statements of the parent company have been filed, the subsidiary obligor is a consolidated subsidiary of the parent company, the guaranteed security is debt or debt-like, and the security is guaranteed fully and unconditionally by the parent. The amendments include requirements related to narrative and summarized financial information disclosures, as well as guidance on when the summarized financial information can be excluded by a filer. The Company adopted both rules on their effective date of January 4, 2021. Accordingly, separate consolidated financial statements of the Operating Partnership have not been presented. Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for the Operating Partnership as the assets, liabilities, and results of operations of the Company and the Operating Partnership are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors. The Company has addressed the required disclosures herein within Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In addition, on January 1, 2021, the Company adopted the following accounting pronouncement which did not have a material effect on the Company’s consolidated financial statements:

ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes"

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 SEC.  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 the interim period 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, 2020.

6

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

Prior Year Reclassifications

The resident services revenues financial statement line item on the statements of comprehensive income has been reclassified for all periods presented to be included in the owned properties revenues financial statement line item.

Restricted Cash
 
Restricted cash consists of funds held in trust that are invested in low risk investments, generally consisting of government backed securities, as permitted by the indentures of trusts, which were established in connection with three bond issues for the Company’s OCPPs.  Additionally, restricted cash includes escrow accounts held by lenders and residents’ security deposits, as required by law in certain states.  Restricted cash also consists of escrow deposits made in connection with potential property acquisitions and development opportunities.  These escrow deposits are invested in interest-bearing accounts at federally insured banks.  Realized and unrealized gains and losses are not material for the periods presented.

Leases

As Lessee

The Company, as lessee, has entered into lease agreements with university systems and other third parties for the purpose of financing, constructing, and operating student housing properties. Under the terms of the ground/facility leases, the lessor may receive annual minimum rent, variable rent based upon the operating performance of the property, or a combination thereof.

In the accompanying consolidated statements of comprehensive income, rent expense for ACE properties and OCPPs is included in ground/facility leases expense, and rent expense for owned off-campus properties is included in owned properties operating expenses. During the three months ended March 31, 2021, the Company received rent concessions at one ACE property of $1.1 million related to the effects of the novel coronavirus disease pandemic (“COVID-19”). These concessions were recorded as a reduction to ground/facility leases expense, in accordance with the FASB Staff Question & Answer “Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic,” issued in 2020.

As Lessor

The Company’s primary business involves leasing properties to students under agreements that are classified as operating leases and have terms of 12 months or less. These student leases do not provide for variable rent payments. The Company is also a lessor under commercial leases at certain owned properties, some of which provide for variable lease payments based upon tenant performance such as a percentage of sales.

The Company recognizes the base lease payments provided for under the leases on a straight-line basis over the lease term, and variable payments are recognized in the period in which the changes in facts and circumstances, on which the variable payments are based, occur. Lease income under both student and commercial leases is included in owned properties revenues in the accompanying consolidated statements of comprehensive income and is presented in the following table:
Three Months Ended March 31,
20212020
Student lease income$213,854 $231,357 
Commercial lease income$2,945 $3,198 
During the three months ended March 31, 2021, through its Resident Hardship Program, the Company provided $0.8 million in rent abatements to its tenants experiencing financial hardship due to COVID-19. In addition, the Company provided $1.3 million in net rent refunds to tenants at our on-campus ACE properties during the three months ended March 31, 2021, which was offset by $1.3 million of reimbursements from university partners to assist in the financial impacts of dedensification requirements. The abatements and rent refunds were recorded as reductions to owned properties revenue, in accordance with the FASB Staff Question & Answer “Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic,” issued in 2020.

7

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

Consolidated VIEs

The Company has investments in various entities that qualify as VIEs for accounting purposes and for which the Company is the primary beneficiary and therefore includes the entities in its consolidated financial statements.  These VIEs include ACCOP, six joint ventures that own a total of 10 operating properties and two land parcels, and six properties owned under the on-campus participating property structure (“OCPP”).  The VIE assets and liabilities consolidated within the Company's assets and liabilities are disclosed at the bottom of the accompanying consolidated balance sheets.   

Impairment of Long-Lived Assets

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. As of March 31, 2021, the Company concluded the global economic disruption caused by COVID-19, which was characterized on March 11, 2020 by the World Health Organization as a pandemic, was a potential impairment indicator. The Company examined a number of factors including the overall market and economic environment, economic and operating conditions of the Company’s properties, as well as the demand, creditworthiness, and performance from the properties’ tenants, and concluded that there were no impairments of the carrying values of the Company’s investments in real estate as of March 31, 2021.

3. Earnings Per Share
 
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 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 months ended March 31, 2021 and 2020, 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
March 31,
 20212020
Common OP Units (Note 8)468,475 468,475 
Preferred OP Units (Note 8)35,242 35,242 
Total potentially dilutive securities503,717 503,717 

The following is a summary of the elements used in calculating basic and diluted earnings per share:
 Three Months Ended
March 31,
 20212020
Numerator – basic and diluted earnings per share  
Net income$15,985 $82,061 
Net income attributable to noncontrolling interests(367)(1,206)
Net income attributable to ACC, Inc. and Subsidiaries common stockholders
15,618 80,855 
Amount allocated to participating securities(734)(662)
Net income attributable to ACC, Inc. and Subsidiaries common stockholders$14,884 $80,193 
Denominator  
Basic weighted average common shares outstanding137,711,965 137,477,169 
Unvested restricted stock awards (Note 9)1,296,677 1,110,344 
Diluted weighted average common shares outstanding139,008,642 138,587,513 
Earnings per share  
Net income attributable to common stockholders - basic and diluted$0.11 $0.58 

8

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

4. Property Dispositions

Property Dispositions

In March 2020, the Company sold The Varsity, an owned property located near University of Maryland in College Park, Maryland, containing 901 beds for $148.0 million, resulting in net cash proceeds of approximately $146.1 million. The net gain on this disposition totaled approximately $48.5 million.

5. Investments in Real Estate

Owned Properties

Owned properties, both wholly-owned and those owned through investments in VIEs, consisted of the following: 
 March 31, 2021December 31, 2020
Land
$665,035 $664,879 
Buildings and improvements
7,011,961 6,949,781 
Furniture, fixtures, and equipment409,793 405,843 
Construction in progress
352,143 361,893 
 8,438,932 8,382,396 
Less accumulated depreciation
(1,725,403)(1,660,652)
Owned properties, net
$6,713,529 $6,721,744 

Project costs directly associated with the development and construction of an owned real estate project, which include interest, property taxes, and amortization of deferred financing 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 $2.5 million and $3.2 million was capitalized during the three months ended March 31, 2021 and 2020, respectively.

On-Campus Participating Properties (OCPPs)

Our OCPP segment includes six on-campus properties that are operated under long-term ground/facility leases with three university systems. Under our ground/facility leases, we receive an annual distribution representing 50% of these properties’ net cash flows, as defined in the ground/facility lease agreements.  We also manage these properties under long-term management agreements and are paid management fees equal to a percentage of defined gross receipts.

OCPPs consisted of the following:
 March 31, 2021December 31, 2020
Buildings and improvements
$157,315 $157,218 
Furniture, fixtures, and equipment14,433 14,389 
Construction in progress
65  
 171,813 171,607 
Less accumulated depreciation
(104,368)(102,326)
On-campus participating properties, net
$67,445 $69,281 

9

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

6. Debt

A summary of the Company’s outstanding consolidated indebtedness, including unamortized debt premiums and discounts, is as follows:
 March 31, 2021December 31, 2020
Debt secured by owned properties  
Mortgage loans payable  
Unpaid principal balance$552,279 $563,506 
Unamortized deferred financing costs(776)(848)
Unamortized debt premiums1,412 1,819 
Unamortized debt discounts(139)(151)
552,776 564,326 
Debt secured by OCPPs  
Mortgage loans payable (1)
63,058 63,714 
Bonds payable (1)
19,110 19,110 
Unamortized deferred financing costs(538)(323)
81,630 82,501 
Total secured mortgage and bond debt, net634,406 646,827 
Unsecured notes, net of unamortized OID and deferred financing costs (2)
2,376,527 2,375,603 
Unsecured term loan, net of unamortized deferred financing costs (3)
199,560 199,473 
Unsecured revolving credit facility462,500 371,100 
Total debt, net$3,672,993 $3,593,003 
(1)The creditors of mortgage loans payable and bonds payable related to OCPPs do not have recourse to the assets of the Company.
(2)Includes net unamortized original issue discount (“OID”) of $5.6 million and $5.8 million at March 31, 2021 and December 31, 2020, respectively, and net unamortized deferred financing costs of $17.9 million and $18.6 million at March 31, 2021 and December 31, 2020, respectively.
(3)Includes net unamortized deferred financing costs of $0.4 million and $0.5 million at March 31, 2021 and December 31, 2020, respectively.

Mortgage Loans Payable

In March 2021, the Company paid off approximately $10.3 million of fixed rate mortgage debt secured by one owned property.

In February 2021, the Company refinanced $24.0 million of OCPP mortgage debt that was scheduled to mature in 2021, which extended the maturity to February 2028. Additionally, in February 2021, the Company entered into two interest rate swap agreements to convert the refinanced mortgage loan to a fixed rate of 2.8%. Refer to Note 10 for information related to derivatives.

In February 2020, the Company paid off approximately $34.2 million of fixed rate mortgage debt secured by one owned property.

Unsecured Notes

In January 2020, the Operating 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 on February 1 and August 1, with the first payment due and payable on August 1, 2020. The notes will mature on February 1, 2030. Net proceeds from the sale of the senior unsecured notes totaled approximately $394.5 million, after deducting the underwriting discount and offering expenses which will be amortized over the term of the unsecured notes. The Company used the proceeds to fund the early redemption of its $400 million 3.35% Senior Notes due October 2020. The prepayment resulted in a loss from early extinguishment of debt of approximately $4.8 million, which is included in the accompanying statements of comprehensive income for the three months ended March 31, 2020.

10

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

The following senior unsecured notes issued by the Operating Partnership were outstanding as of March 31, 2021:
Date IssuedAmount% of Par ValueCouponYieldOriginal Issue DiscountTerm (Years)
April 2013$400,000 99.659 3.750 %3.791 %$1,364 10
June 2014400,000 99.861 4.125 %4.269 %
(1)
556 10
October 2017400,000 99.912 3.625 %3.635 %352 10
June 2019400,000 99.704 3.300 %3.680 %
(1)
1,184 7
January 2020400,000 99.810 2.850 %2.872 %760 10
June 2020400,000 99.142 3.875 %3.974 %3,432 10
$2,400,000 $7,648 
(1)The yield includes the effect of the amortization of interest rate swap terminations (see Note 10).

The notes are fully and unconditionally guaranteed by the Company.  Interest on the notes is payable semi-annually. The terms of the unsecured notes include certain financial covenants that require the Operating Partnership to limit the amount of total debt and secured debt as a percentage of total asset value, as defined.  In addition, the Operating Partnership must maintain a minimum ratio of unencumbered asset value to unsecured debt, as well as a minimum interest coverage level. As of March 31, 2021, the Company was in compliance with all such covenants.

Unsecured Revolving Credit Facility

The Company has an unsecured revolving credit facility with capacity of $1.0 billion, which may be expanded by up to an additional $200 million upon the satisfaction of certain conditions. The maturity date of the revolving credit facility is March 2022.

The unsecured revolving credit facility bears interest at a variable rate, at the Company’s option, based upon a base rate of one-, two-, three- or six-month LIBOR, plus, in each case, a spread based upon the Company’s investment grade rating from either Moody’s Investor Services, Inc. or Standard & Poor’s Rating Group. Additionally, the Company is required to pay a facility fee of 0.20% per annum on the $1.0 billion revolving credit facility.  As of March 31, 2021, the revolving credit facility bore interest at a weighted average annual rate of 1.31% (0.11% + 1.00% spread + 0.20% facility fee), and availability under the revolving credit facility totaled $537.5 million.

The terms of the unsecured credit facility include certain restrictions and covenants, which limit, among other items, the incurrence of additional indebtedness and liens.  The facility contains customary affirmative and negative covenants and also contains financial covenants that, among other things, require the Company to maintain certain maximum leverage ratios and minimum ratios of “EBITDA” (earnings before interest, taxes, depreciation and amortization) to fixed charges.  The financial covenants also include a minimum asset value requirement, a maximum secured debt ratio, and a minimum unsecured debt service coverage ratio.  As of March 31, 2021, the Company was in compliance with all such covenants.

Unsecured Term Loan

The Company is currently party to an Unsecured Term Loan Credit Agreement (the “Term Loan Facility”) totaling $200 million which matures in June 2022. The agreement has an accordion feature that allows the Company to expand the amount by up to an additional $100 million, subject to the satisfaction of certain conditions. The Company is also currently party to two interest rate swap contracts to hedge the variable rate cash flows associated with the LIBOR-based interest payments on the Term Loan Facility. The weighted average annual rate on the Term Loan Facility was 2.54% (1.44% + 1.10% spread) at March 31, 2021. The terms of the Term Loan Facility include certain restrictions and covenants consistent with those of the unsecured revolving credit facility discussed above. As of March 31, 2021, the Company was in compliance with all such covenants.

11

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

7. Stockholders’ Equity

The Company has an at-the-market share offering program (the “ATM Equity Program”) through which the Company may issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $500 million.  Actual sales under the program will depend on a variety of factors including, but not limited to, market conditions, the trading price of the Company’s common stock, and determinations of the appropriate sources of funding for the Company.

There was no activity under the Company’s ATM Equity Program during the three months ended March 31, 2021 and 2020. As of March 31, 2021, the Company had approximately $500.0 million available for issuance under its ATM Equity Program.

The Company has a Non-Qualified Deferred Compensation Plan (“Deferred Compensation Plan”) for the benefit of certain employees and members of the Company’s Board of Directors in which vested share awards (see Note 9), salary, and other cash amounts earned may be deposited. Deferred Compensation Plan assets are held in a rabbi trust, which is subject to the claims of the Company’s creditors in the event of bankruptcy or insolvency. The shares held in the Deferred Compensation Plan are classified within stockholders’ equity in a manner similar to the manner in which treasury stock is classified. Subsequent changes in the fair value of the shares are not recognized. During the three months ended March 31, 2021, 15,993 and 5,878 shares of vested stock were deposited into and withdrawn from the Deferred Compensation Plan, respectively. As of March 31, 2021, 101,861 shares of ACC’s common stock were held in the Deferred Compensation Plan.

8. Noncontrolling Interests

Noncontrolling interests - partially owned properties: As of March 31, 2021, the Company consolidates five joint ventures that own and operate 10 owned off-campus properties and one land parcel. The portion of net assets attributable to the third-party partners in these arrangements is classified as “noncontrolling interests - partially owned properties” within equity on the accompanying consolidated balance sheets.

Redeemable noncontrolling interests - OP Units: Included in redeemable noncontrolling interests on the accompanying consolidated balance sheets are OP Units for which ACCOP is required, either by contract or securities law, to deliver registered shares of ACC’s common stock to the exchanging OP unitholder, or for which ACCOP has the intent or history of exchanging such units for cash. The units 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.

Below is a table summarizing the activity of redeemable noncontrolling interests for the three months ended March 31, 2021 and 2020:
Balance, December 31, 2020$24,567 
Net income67 
Distributions(234)
Adjustments to reflect redeemable noncontrolling interests at fair value354 
Balance, March 31, 2021$24,754 
Balance, December 31, 2019$104,381 
Net income311 
Distributions(234)
Purchase of noncontrolling interests(77,200)
Adjustments to reflect redeemable noncontrolling interests at fair value(9,490)
Balance, March 31, 2020$17,768 


12

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

9. Incentive Award Plan

The Company has an Incentive Award Plan (the “Plan”) that provides for the grant of various stock-based incentive awards to selected employees and directors of the Company and the Company’s affiliates.  The types of awards that may be granted under the Plan include incentive stock options, nonqualified stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), profits interest units (“PIUs”), and other stock-based awards.  The Company has reserved a total 3.5 million shares of the Company’s common stock for issuance pursuant to the Plan, subject to certain adjustments for changes in the Company’s capital structure, as defined in the Plan.

Restricted Stock Awards

A summary of RSAs as of March 31, 2021 and activity during the three months then ended is presented below:
 Number of RSAs
Nonvested balance as of December 31, 2020
1,092,596 
Granted468,771 
Vested (1)
(334,341)
Forfeited (11,352)
Nonvested balance as of March 31, 2021
1,215,674 
(1) Includes shares withheld to satisfy tax obligations upon vesting.

The fair value of RSAs is calculated based on the closing market value of ACC’s common stock on the date of grant.  The fair value of these awards is amortized to expense over the vesting periods. Amortization expense for the three months ended March 31, 2021 and 2020 was approximately $4.7 million and $4.0 million, respectively.

Restricted Stock Units

Upon initial appointment to the Board of Directors and reelection to the Board of Directors at each annual stockholders’ meeting, each independent member of the Board of Directors is granted RSUs. On the settlement date, the Company will deliver to the recipients a number of shares of common stock or cash, as determined by the Compensation Committee of the Board of Directors, equal to the number of RSUs granted to the recipients. In addition, recipients of RSUs are entitled to dividend equivalents equal to the cash distributions paid by the Company on one share of common stock for each RSU issued, payable currently, or on the settlement date, as determined by the Compensation Committee of the Board of Directors.

In January 2021, the Company appointed three new members to the Board of Directors who were each granted RSUs valued at $122,500. A compensation charge of approximately $0.4 million was recorded related to these awards.

A summary of RSUs as of March 31, 2021 and activity during the three months then ended is presented below:
 Number of RSUs
Outstanding as of December 31, 2020
 
Granted9,054 
Settled in common shares(9,054)
Outstanding as of March 31, 2021
 

10. Derivative Instruments and Hedging Activities

The Company is exposed to certain risks arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities.  The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments.  Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

13

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

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.  To accomplish this objective, the Company primarily uses interest rate swaps and forward starting swaps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  Forward starting swaps are used to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a forecasted issuance of debt. These agreements contain provisions such that if the Company defaults on any of its indebtedness, regardless of whether the repayment of the indebtedness has been accelerated by the lender or not, then the Company could also be declared in default on its derivative obligations. As of March 31, 2021, the Company was not in default on any of its indebtedness or derivative instruments.

The following table summarizes the Company’s outstanding interest rate swap contracts as of March 31, 2021, all of which have been designated as cash flow hedges and qualify for hedge accounting:
Hedged Debt InstrumentEffective DateMaturity DatePay Fixed RateReceive Floating
Rate Index
Current Notional AmountFair Value
Park Point mortgage loanFeb 1, 2019Jan 16, 20242.7475%LIBOR - 1 month$70,000 $(4,655)
College Park mortgage loanOct 16, 2019Oct 16, 20221.2570%LIBOR - 1 month37,500 (636)
Unsecured term loanNov 4, 2019Jun 27, 20221.4685%LIBOR - 1 month100,000 (1,652)
Unsecured term loanDec 2, 2019Jun 27, 20221.4203%LIBOR - 1 month100,000 (1,592)
Cullen Oaks mortgage loanFeb 16, 2021Feb 15, 20280.7850%LIBOR - 1 month11,821 208 
Cullen Oaks mortgage loanFeb 16, 2021Feb 15, 20280.7850%LIBOR - 1 month11,943 210 
   Total$331,264 $(8,117)

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2021 and December 31, 2020:
Asset DerivativesLiability Derivatives
Balance Sheet LocationFair Value as ofBalance Sheet LocationFair Value as of
Description3/31/202112/31/20203/31/202112/31/2020
Interest rate swap contractsOther assets$418 $ Other liabilities$8,535 $10,211 

The table below presents the effect of the Company’s derivative financial instruments on the accompanying consolidated statements of comprehensive income for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31,
Description20212020
Change in fair value of derivatives and other recognized in other comprehensive income ("OCI")$786 $(10,320)
Swap interest accruals reclassified to interest expense1,306 91 
Amortization of interest rate swap terminations (1)
426 428 
Total change in OCI due to derivative financial instruments$2,518 $(9,801)
Interest expense presented in the consolidated statements of comprehensive income in which the effects of cash flow hedges are recorded$28,977 $27,783 
(1)Represents amortization from OCI into interest expense.

As of March 31, 2021, the Company estimates that $6.8 million will be reclassified from OCI to interest expense over the next twelve months.

14

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

11.  Fair Value Disclosures

There have been no significant changes in the Company’s policies and valuation techniques utilized to determine fair value from what was disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020.

Financial Instruments Carried at Fair Value

The following table presents information about the Company’s financial instruments measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. There were no Level 1 measurements for the periods presented, and the Company had no transfers between Levels 1, 2, or 3 during the periods presented.
  Fair Value Measurements as of
 March 31, 2021December 31, 2020
Level 2Level 3TotalLevel 2Level 3Total
Assets      
Derivative financial instruments$418 
(1)
$ $418 $ $ $ 
Liabilities      
Derivative financial instruments$8,535 
(1)
$ $8,535 $10,211 
(1)
 $10,211 
Mezzanine      
Redeemable noncontrolling interests$21,754 
(2)
$3,000 $24,754 $