t63431_10q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2008.   

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From ______________________ to _________________________.
  
 
Commission file number 001-32265
 
AMERICAN CAMPUS COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)

Maryland
76-0753089
(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer Identification No.)
   
805 Las Cimas Parkway, Suite 400
Austin, TX
(Address of Principal Executive Offices)
78746
(Zip Code)

(512) 732-1000
Registrant’s telephone number, including area code
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer x Accelerated Filer o Non-accelerated filer o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

There were 42,304,820 shares of American Campus Communities, Inc.'s common stock with a par value of $0.01 per share outstanding as of the close of business on July 31, 2008.
 

 
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2008

TABLE OF CONTENTS

 
 
PAGE NO.
   
PART I.    
 
     
Item 1.
Consolidated Financial Statements
 
     
 
Consolidated Balance Sheets as of June 30, 2008 (unaudited) and December 31, 2007
1
     
 
Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 (all unaudited)   
2
     
 
Consolidated Statements of Comprehensive Income for the six months ended June 30, 2008 and 2007 (all unaudited)   
3
     
 
Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007 (all unaudited)
4
     
 
Notes to Consolidated Financial Statements
5
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
     
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
40
     
Item 4.
Controls and Procedures
40
   
PART II.    
 
     
Item 4.
Submissions of Matters to a Vote of Security Holders
41
     
Item 6.
Exhibits
41
   
SIGNATURES
42
   
 

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

   
June 30, 2008
   
December 31, 2007
 
   
(Unaudited)
       
Assets
           
             
Investments in real estate:
           
  Wholly-owned properties, net
  $ 1,931,316     $ 947,062  
  Wholly-owned properties-held for sale
    68,641       -  
  On-campus participating properties, net
    70,959       72,905  
Investments in real estate, net
    2,070,916       1,019,967  
                 
Cash and cash equivalents
    63,470       12,073  
Restricted cash
    32,196       13,855  
Student contracts receivable, net
    3,298       3,657  
Other assets
    69,165       26,744  
                 
Total assets
  $ 2,239,045     $ 1,076,296  
                 
Liabilities and stockholders’ equity
               
                 
Liabilities:
               
  Secured debt
  $ 1,190,552     $ 533,430  
  Secured term loan
    100,000       -  
  Unsecured revolving credit facility
    -       9,600  
  Accounts payable and accrued expenses
    35,270       14,360  
  Other liabilities
    48,739       43,278  
Total liabilities
     1,374,561       600,668  
                 
Minority interests
    30,021       31,251  
                 
Commitments and contingencies (Note 14)
               
                 
Stockholders’ equity:
               
  Preferred stock
    131       -  
  Common shares, $.01 par value, 800,000,000 shares
authorized, 42,291,170 and 27,275,491 shares issued
and outstanding at June 30, 2008 and 
December 31, 2007, respectively
    422           273  
  Additional paid in capital
    902,273       494,160  
  Accumulated earnings and distributions
    (66,549 )     (48,181 )
  Accumulated other comprehensive loss
    (1,814 )     (1,875 )
Total stockholders’ equity
     834,463       444,377  
                 
Total liabilities and stockholders’ equity
  $ 2,239,045     $ 1,076,296  

 
 
See accompanying notes to consolidated financial statements.
 
1

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share data)

   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2008
   
2007
   
2008
   
2007
 
Revenues:
                       
  Wholly-owned properties
  $ 37,294     $ 28,007     $ 68,975     $ 55,152  
  On-campus participating properties
    3,948       3,740       10,692       10,077  
  Third party development services
    687       609       2,307       978  
  Third party development services – on-campus
    participating properties
    36       37       72       73  
  Third party management services
    1,222       650       2,144       1,372  
  Resident services
    361       323       799       664  
Total revenues
    43,548       33,366       84,989       68,316  
                                 
Operating expenses:
                               
  Wholly-owned properties
    16,738       13,046       30,623       24,908  
  On-campus participating properties
    2,499       2,499       4,794       4,525  
  Third party development and management services
    2,328       1,147       4,436       2,441  
  General and administrative
    3,237       2,190       5,371       13,518  
  Depreciation and amortization
    11,114       7,768       19,143       14,738  
  Ground/facility leases
    368       495       727       790  
Total operating expenses
    36,284       27,145       65,094       60,920  
                                 
Operating income
    7,264       6,221       19,895       7,396  
                                 
Nonoperating income and (expenses):
                               
  Interest income
    642       314       804       1,021  
  Interest expense
    (8,733 )     (6,920 )     (15,712 )     (13,380 )
  Amortization of deferred financing costs
    (448 )     (314 )     (759 )     (612 )
  Loss from unconsolidated joint ventures
    (129 )     -       (255 )     -  
Total nonoperating expenses
    (8,668 )     (6,920 )     (15,922 )     (12,971 )
                                 
(Loss) income before income taxes, minority interests,                                
and discontinued operations
    (1,404 )     (699 )     3,973       (5,575 )
Income tax provision
    (73 )     (60 )     (133 )     (120 )
Minority interests
    (65 )     (26 )     (473 )     232  
(Loss) income from continuing operations
    (1,542 )     (785 )     3,367       (5,463 )
                                 
Discontinued operations:
                               
  Income attributable to discontinued operations
    92       -       92       -  
Net (loss) income
  $ (1,450 )   $ (785 )   $ 3,459     $ (5,463 )
                                 
(Loss) income per share – basic:
                               
  (Loss) income from continuing operations per share
  $  (0.04 )   $  (0.03 )   $ 0.11     $ (0.24 )
  Net (loss) income per share
  $ (0.04 )   $  (0.03 )   $ 0.11     $ (0.24 )
(Loss) income per share – diluted:
                               
  (Loss) income from continuing operations per share
  $  (0.04 )   $  (0.03 )   $ 0.11     $ (0.23 )
  Net (loss) income per share
  $  (0.04 )   $  (0.03 )   $ 0.11     $ (0.23 )
Weighted average common shares outstanding:
                               
  Basic
    35,692,653       23,271,223       31,512,271       23,107,888  
  Diluted
    37,098,977       25,259,335       33,272,354       25,250,312  
                                 
Distributions declared per common share
  $ 0.3375     $ 0.3375     $ 0.675     $ 0.675  
 
 
 
See accompanying notes to consolidated financial statements.
 
2

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)

   
Six Months Ended June 30,
 
   
2008
   
2007
 
Net income (loss)
  $ 3,459     $ (5,463 )
                 
Other comprehensive income:
               
    Change in fair value of interest rate swaps
    182       104  
Net comprehensive income (loss)
  $ 3,641     $ (5,359 )
 
 

See accompanying notes to consolidated financial statements.
 
3

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
   
Six Months Ended June 30,
 
   
2008
   
2007
 
Operating activities
           
Net income (loss)
  $ 3,459     $ (5,463 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
               
     Minority interests share of income (loss)
    473       (232 )
     Depreciation and amortization
    19,143       14,738  
     Amortization of deferred financing costs and debt premiums/discounts
    77       (122 )
 Share-based compensation
    1,057       663  
     Loss from unconsolidated joint ventures
    258       -  
     Amortization of gain on interest rate swap termination
    (121 )     (91 )
     Income tax provision
    120       120  
     Changes in operating assets and liabilities:
               
              Restricted cash
    (3,381 )     (3,809 )
              Student contracts receivable, net
    1,810       819  
              Other assets
    (5,732 )     (2,586 )
              Accounts payable and accrued expenses
    (2,783 )     7,511  
              Other liabilities
    (2,785 )     (1,979 )
Net cash provided by operating activities
    11,595       9,569  
Investing activities
               
     Cash paid for property acquisitions
    (287,245 )     (38,161 )
     Cash paid for land purchases
    (3,017 )     -  
     Investments in wholly-owned properties
    (73,007 )     (43,960 )
     Investments in unconsolidated joint ventures
    (8,208 )     -  
     Investments in on-campus participating properties
    (196 )     (227 )
     Purchase of corporate furniture, fixtures and equipment
    (1,141 )     (516 )
     Distributions received from unconsolidated JVs
    15       -  
     Net cash used in investing activities
    (372,799 )     (82,864 )
Financing activities
               
     Proceeds from sale of common stock
    264,500       -  
     Offering costs
    (12,264 )     -  
     Proceeds from sale of preferred stock
    131       -  
     Pay-off of mortgage loans
    (24,225 )     -  
     Proceeds from contribution of properties to joint venture
    74,368       -  
     Proceeds from secured term loan
    100,000       -  
     Revolving credit facility, net
    (9,600 )     9,100  
     Proceeds from construction loans
    55,051       17,370  
     Principal payments on debt
    (3,318 )     (3,103 )
     Change in construction accounts payable
    (3,279 )     (1,360 )
     Debt issuance and assumption costs
    (5,754 )     (1,638 )
     Distributions to common and restricted stockholders
    (21,851 )     (15,666 )
     Distributions to minority partners
    (1,158 )     (1,555 )
     Net cash provided by financing activities
    412,601       3,148  
Net change in cash and cash equivalents
    51,397       (70,147 )
Cash and cash equivalents at beginning of period
    12,073       79,107  
Cash and cash equivalents at end of period
  $ 63,470     $ 8,960  
Supplemental disclosure of non-cash investing and financing activities
               
      Issuance of common stock in connection with company acquisition
  $ (154,739 )   $ -  
     Issuance of Common Units in connection with company acquisition
  $ (199 )   $ -  
     Loans assumed in connection with property acquisitions
  $ (615,175 )   $ (88,307 )
     Contribution of land from minority partner in development joint venture
  $ -     $ 2,756  
     Change in fair value of derivative instruments, net
  $ 182     $ 104  
Supplemental disclosure of cash flow information
               
     Interest paid
  $ 13,295     $ 13,945  
See accompanying notes to consolidated financial statements.
 
4

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.     Organization and Description of Business  

American Campus Communities, Inc. (the “Company”) is a real estate investment trust (“REIT”) that was incorporated on March 9, 2004 and commenced operations effective with the completion of an initial public offering (“IPO”) on August 17, 2004.  Through the Company’s controlling interest in American Campus Communities Operating Partnership LP (the “Operating Partnership”), the Company 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.  The Company 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.

On April 23, 2008, the Company completed an equity offering, consisting of the sale of 9,200,000 shares of the Company’s common stock at a price of $28.75 per share, including the exercise of 1,200,000 shares issued as a result of the exercise of the underwriters’ overallotment option in full at closing.  The offering generated gross proceeds of $264.5 million.  The aggregate proceeds to the Company, net of the underwriting discount, structuring fee and expenses of the offering, were approximately $252.1 million.

As of June 30, 2008, the Company’s property portfolio contained 88 student housing properties with approximately 54,300 beds and approximately 18,200 apartment units, including 42 properties containing approximately 25,000 beds and approximately 8,400 units added as a result of the Company’s acquisition on June 11, 2008 of the student housing business of GMH Communities Trust (“GMH”), as more fully discussed in Note 3 herein.  The Company’s property portfolio consisted of 82 owned off-campus properties that are in close proximity to colleges and universities, two American Campus Equity (“ACETM”) properties currently under development that will be operated under ground/facility leases with a related university system and four on-campus participating properties operated under ground/facility leases with the related university systems.  As of June 30, 2008, the Company also owned a minority interest in joint ventures that owned an aggregate of 21 student housing properties with approximately 12,100 beds in approximately 3,600 units. The Company’s communities contain modern housing units, offer resort-style amenities and are supported by a resident assistant system and other student-oriented programming.

Through the Company’s taxable REIT subsidiaries (“TRS”), it also provides construction management and development services, primarily for student housing properties owned by colleges and universities, charitable foundations, and others.  As of June 30, 2008, the Company provided third-party management and leasing services for 36 properties (six of which the Company served as the third-party developer and construction manager) that represented approximately 25,700 beds in approximately 9,200 units.  Third-party management and leasing services are typically provided pursuant to multi-year management contracts that have initial terms that range from one to five years.  As of June 30, 2008, the Company’s total owned, joint venture and third-party managed portfolio was comprised of 145 properties with approximately 92,100 beds in approximately 31,000 units.

2.   Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the financial position, results of operations and cash flows of the Company, the Operating Partnership and subsidiaries of the Operating Partnership, including joint ventures in which the Company has a controlling interest.  Third-party equity interests in the Operating Partnership and consolidated joint ventures are reflected as minority interests in the consolidated financial statements.  The Company also has a non-controlling interest in three unconsolidated joint ventures, which are accounted for under the equity method.  All significant intercompany amounts have been eliminated.  All dollar amounts in the tables herein, except share and per share amounts, are stated in thousands unless otherwise indicated.

New Accounting Pronouncements

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value Measurements" and SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities."  SFAS No. 157 defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements.  SFAS No. 159 permits an entity to elect fair value as the initial and subsequent measurement method for financial assets and liabilities.  The Company has not elected the fair value option for any financial instruments, however does reserve the right to elect to measure future eligible financial assets or liabilities at fair value.  The adoption of SFAS No. 157 and SFAS No. 159 did not have a material impact on the Company’s consolidated financial statements.  See Note 13 herein for a detailed discussion of fair value disclosures.
 
5

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Pending Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations," which replaces SFAS No. 141, " Business Combinations," which, among other things, establishes principles and requirements for how an acquirer entity recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed (including intangibles) and any noncontrolling interests in the acquired entity. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating what impact the adoption of SFAS No. 141(R) will have on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.” SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of SFAS No. 141(R). SFAS No. 160 is effective for the Company beginning January 1, 2009.  The Company is currently evaluating what impact the adoption of SFAS No. 160 will have on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” which is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows.  SFAS No. 161 will be effective for the Company beginning January 1, 2009.  The Company is currently evaluating what impact the adoption of SFAS No. 161 will have on its consolidated financial statements, but anticipates it will only result in additional disclosures regarding derivative instruments.

Interim Financial Statements

The accompanying interim financial statements are unaudited, but have been prepared in accordance with GAAP for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all disclosures required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included.  Because of the seasonal nature of the Company’s operations, the results of operations and cash flows for any interim period are not necessarily indicative of results for other interim periods or for the full year.  These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December, 31, 2007.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investments in Real Estate

Investments in real estate are recorded at historical cost.  Major improvements that extend the life of an asset are capitalized and depreciated over the remaining useful life of the asset.  The cost of ordinary repairs and maintenance is charged to expense when incurred.  Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets as follows:

Buildings and improvements
 
7-40 years
Leasehold interest - on-campus
   participating properties
 
25-34 years (shorter of useful life or respective lease term)
Furniture, fixtures and equipment
 
3-7 years
 
6

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The cost of buildings and improvements includes the purchase price of the property, including legal fees and acquisition costs.  Project costs directly associated with the development and construction of an owned real estate project, which include interest, property taxes, and amortization of deferred finance costs, are capitalized as construction in progress.  Upon completion of the project, costs are transferred into the applicable asset category and depreciation commences.  Interest totaling approximately $2.0 million and $1.5 million was capitalized during the three months ended June 30, 2008 and 2007, respectively, and $3.7 million and $2.6 million was capitalized during the six months ended June 30, 2008 and 2007, respectively.  Amortization of deferred financing costs totaling approximately $0.1 million was capitalized during both the three month periods ended June 30, 2008 and 2007, and approximately $0.2 million was capitalized during both the six month periods ended June 30, 2008 and 2007.

Management assesses whether there has been an impairment in the value of the Company’s investments in real estate whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Impairment is recognized when estimated expected future cash flows (undiscounted and before interest charges) are less than the carrying value of the property. The estimation of expected future net cash flows is inherently uncertain and relies on assumptions regarding current and future economics and market conditions.  If such conditions change, then an adjustment to the carrying value of the Company’s long-lived assets could occur in the future period in which the conditions change. To the extent that a property is impaired, the excess of the carrying amount of the property over its estimated fair value is charged to earnings. The Company believes that there were no impairments of the carrying values of its investments in real estate as of June 30, 2008.

The Company allocates the purchase price of acquired properties to net tangible and identified intangible assets based on relative fair values in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 141, Business Combinations.  Fair value estimates are based on information obtained from a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data.  Information obtained about each property as a result of due diligence, marketing and leasing activities is also considered.  The value of in-place leases is based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued “as-if” vacant.  As lease terms are typically one year or less, rates on in-place leases generally approximate market rental rates.  Factors considered in the valuation of in-place leases include an estimate of the carrying costs during the expected lease-up period considering current market conditions, nature of the tenancy, and costs to execute similar leases.  Carrying costs include estimates of lost rentals at market rates during the expected lease-up period, as well as marketing and other operating expenses.  The value of in-place leases is amortized over the remaining initial term of the respective leases, generally less than one year.  The purchase price of property acquisitions is not expected to be allocated to tenant relationships, considering the terms of the leases and the expected levels of renewals.  The Company’s allocation of purchase price is contingent upon the receipt of final third-party appraisals and additional analyses necessary to finalize the allocation.

Intangible Assets

In connection with property acquisitions completed during the six months ended June 30, 2008 and 2007, the Company capitalized approximately $16.8 million and $1.2 million, respectively, related to management’s estimate of the fair value of the in-place leases assumed.  These intangible assets are amortized on a straight-line basis over the average remaining term of the underlying leases.  The Company also capitalized $1.5 million related to management’s estimate of the fair value of third-party management contracts acquired from GMH in June 2008.  These intangible assets are amortized on a straight-line basis over the average remaining term of the contracts.  The amortization is included in depreciation and amortization expense in the accompanying consolidated statements of operations.  See Note 3 herein for a detailed discussion of the property acquisitions completed during the six months ended June 30, 2008.

Debt Premiums and Discounts

Debt premiums and discounts represent fair value adjustments to account for the difference between the stated rates and market rates of debt assumed in connection with the Company’s property acquisitions.  The debt premiums and discounts are amortized to interest expense over the term of the related loans using the effective-interest method.  As of June 30, 2008 and December 31, 2007, unamortized debt premiums were $6.8 million and $5.0 million, respectively, and unamortized debt discounts were $12.2 million and $0.7 million, respectively.  Debt premiums and discounts are included in secured debt on the accompanying consolidated balance sheets.

7

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Third-Party Development Services Revenue and Costs

Development revenues are generally recognized based on a proportionate performance method based on contract deliverables, while construction revenues are recognized using the percentage of completion method, as determined by construction costs incurred relative to total estimated construction costs.  Costs associated with such projects are deferred and recognized in relation to the revenues earned on executed contracts.  For projects where the Company’s fee is based on a fixed price, any cost overruns incurred during construction, as compared to the original budget, will reduce the net fee generated on those projects.  Incentive fees are generally recognized when the project is complete and performance has been agreed upon by all parties, or when performance has been verified by an independent third-party.  The Company also evaluates the collectibility of fee income and expense reimbursements generated through the provision of development and construction management services based upon the individual facts and circumstances, including the contractual right to receive such amounts in accordance with the terms of the various projects, and reserves any amounts that are deemed to be uncollectible.

Pre-development expenditures such as architectural fees, permits and deposits associated with the pursuit of third-party and owned development projects are expensed as incurred, until such time that management believes it is probable that the contract will be executed and/or construction will commence.  Because the Company frequently incurs these pre-development expenditures before a financing commitment and/or required permits and authorizations have been obtained, the Company bears the risk of loss of these pre-development expenditures if financing cannot ultimately be arranged on acceptable terms or the Company is unable to successfully obtain the required permits and authorizations.  As such, management evaluates the status of third-party and owned projects that have not yet commenced construction on a periodic basis and expenses any deferred costs related to projects whose current status indicates the commencement of construction is unlikely and/or the costs may not provide future value to the Company in the form of revenues.  Such write-offs are included in third-party development and management services expenses (in the case of third-party development projects) or general and administrative expenses (in the case of owned development projects) on the accompanying consolidated statements of operations.  As of June 30, 2008, the Company deferred approximately $6.3 million in pre-development costs related to third-party and owned development projects that had not yet commenced construction.  Of this amount, approximately $3.2 million was reimbursed subsequent to quarter end as financing for one of our third-party development projects closed on July 30, 2008 and construction commenced on August 1, 2008.  Pre-development costs are included in other assets on the accompanying consolidated balance sheets.

Joint Ventures

The Company holds interests in both consolidated and unconsolidated joint ventures. The Company determines consolidation based on standards set forth in FASB Interpretation No. 46R, Consolidation of Variable Interest Entities  (“FIN 46”) and Emerging Issues Task Force (EITF) Issue No. 04-5,  Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.  For joint ventures that are variable interest entities as defined under FIN 46 where the Company is not the primary beneficiary, it does not consolidate the joint venture for financial reporting purposes. Based on the guidance set forth in EITF 04-5, the Company consolidates certain joint venture investments because it exercises significant control over major operating decisions, such as approval of budgets, property management, investment activity and changes in financing.  For joint ventures under EITF 04-5, where the Company does not exercise significant control over major operating and management decisions, but where it exercises significant influence, the Company uses the equity method of accounting and does not consolidate the joint venture for financial reporting purposes.

Income Taxes

The Company and GMH have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).  To qualify as a REIT, these entities must meet a number of organizational and operational requirements, including a requirement that they currently distribute at least 90% of their adjusted taxable income to their stockholders.   As REITs, these entities will generally not be subject to corporate level federal income tax on taxable income they currently distribute to their stockholders. If the entities fail to qualify as a REIT in any taxable year, they will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for the subsequent four taxable years.   Even if these entities qualify for taxation as a REIT, they may be subject to certain state and local income and excise taxes on their income and property, and to federal income and excise taxes on their undistributed income.

8

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The Company owns two TRS entities that manage the Company’s non-REIT activities and are subject to federal, state and local income taxes.

Earnings Per Share

Basic earnings per share is computed using net income (loss) and the weighted average number of shares of the Company’s common stock outstanding during the period.  Diluted earnings per share reflects weighted average common shares issuable from the assumed conversion of restricted stock awards (“RSAs”) granted to employees and common and preferred units of limited partnership interest in the Operating Partnership (“Common Units” and “Series A Preferred Units,” respectively).  See Note 7 for a discussion of Common Units and Series A Preferred Units.

The following is a summary of the elements used in calculating basic and diluted earnings per share:
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2008
   
2007
   
2008
   
2007
 
Basic earnings per share calculation:
                       
  (Loss) income from continuing operations
  $ (1,542 )   $ (785 )   $ 3,367     $ (5,463 )
  Discontinued operations
    92       -       92       -  
  Net (loss) income
  $ (1,450 )   $ (785 )   $ 3,459     $ (5,463 )
                                 
  (Loss) income from continuing operations – per share
  $ (0.04 )   $ (0.03 )   $ 0.11     $ (0.24 )
  Income from discontinued operations – per share
  $ -     $ -     $ -     $ -  
  Net (loss) income – per share
  $ (0.04 )   $ (0.03 )   $ 0.11     $ (0.24 )
                                 
  Basic weighted average common shares outstanding
    35,692,653       23,271,223       31,512,271       23,107,888  
                                 
Diluted earnings per share calculation:
                               
  (Loss) income from continuing operations
  $ (1,542 )   $ (785 )   $ 3,367     $ (5,463 )
  Series A Preferred Unit distributions
    46       46       92       92  
  (Loss) income from continuing operations allocated to
     Common Units
    (36 )     (55 )     224       (417 )
  (Loss) income from continuing operations, as adjusted
    (1,532 )     (794 )     3,683       (5,788 )
  Discontinued operations
    92       -       92       -  
  Income from discontinued operations allocated to
     Common Units
    2       -       2       -  
  Income from discontinued operations, as adjusted
    94       -       94       -  
  Net (loss) income, as adjusted
  $ (1,438 )   $ (794 )   $ 3,777     $ (5,788 )
                                 
  (Loss) income from continuing operations – per share
  $ (0.04 )   $ (0.03 )   $ 0.11     $ (0.23 )
  Income from discontinued operations – per share
  $ -     $ -     $ -     $ -  
  Net (loss) income – per share
  $ (0.04 )   $ (0.03 )   $ 0.11     $ (0.23 )
                                 
  Basic weighted average common shares outstanding
    35,692,653       23,271,223       31,512,271       23,107,888  
  Common Units
    1,291,361       1,873,149       1,369,997       2,027,461  
  Series A Preferred Units
    114,963       114,963       114,963       114,963  
  RSAs (1)
    -       -       275,123       -  
  Diluted weighted average common shares outstanding
    37,098,977       25,259,335       33,272,354       25,250,312  
 
 
(1)
284,588 and 164,151 weighted average RSAs are excluded from diluted weighted average common shares outstanding for the three months ended June 30, 2008 and 2007, respectively, and 158,788 weighted average RSAs are excluded from diluted weighted average common shares outstanding for the six months ended June 30, 2007, because they would be anti-dilutive due to the Company’s loss position for these periods.
 
9

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

3.  Property Acquisitions

On June 11, 2008, the Company completed the acquisition of GMH pursuant to an Agreement and Plan of Merger dated as of February 11, 2008 (the “Merger Agreement”).  At the time of closing, the GMH student housing portfolio consisted of 42 wholly-owned properties containing 24,953 beds located in various markets throughout the country.  Two of the acquired wholly-owned properties were sold subsequent to the end of the quarter (see Note 16).

The aggregate consideration paid for the merger was as follows:

Fair value of the Company’s common stock issued
  $ 154,739    
Fair value of Common Units issued
    199    
Cash consideration paid for GMH common shares and partnership units
    239,616    
Merger costs
    52,681    
Total consideration
    447,235    
Fair value of mortgage loans assumed (see Note 9)
    598,804    
Total purchase price
  $ 1,046,039    

Under the terms of the Merger Agreement, each share of GMH common stock and each unit in the GMH Operating Partnership issued and outstanding as of the date of the Merger Agreement, received cash consideration of $3.36 per share and 0.07642 of a share of the Company’s common stock, or at the election of the GMH Operating Partnership unitholder, 0.07642 of a unit in the Operating Partnership.  The value of the Company’s common stock and Common Units issued was based on the closing price of the Company’s common stock on February 11, 2008.  The Company issued 5.4 million shares of common stock and 7,004 Common Units valued at $28.43 per share.

In connection with the merger, the Company incurred approximately $52.7 million of merger costs related to severance, legal, banking, accounting and finance costs, of which, approximately $16.3 million of these costs had not been paid as of June 30, 2008.

Concurrent with the closing of the GMH acquisition, the Company formed a joint venture with a wholly-owned subsidiary of Fidelity Real Estate Growth Fund III, LP (“Fidelity”) and transferred 15 GMH student housing properties to the venture with an estimated value of $325.9 million.  The Company also assumed GMH’s equity interest in an existing joint venture with Fidelity that owns six properties.  The Company serves as property manager for all of the joint venture properties and owns a 10% equity interest in these joint ventures. 
 
In February 2008, the Company acquired a 144-unit, 528-bed property (Pirate’s Place) located near the campus of East Carolina University in Greenville, North Carolina, for a purchase price of $10.6 million, which excludes $0.8 million of anticipated transaction costs, initial integration expenses and capital expenditures necessary to bring this property up to the Company’s operating standards.  As part of the transaction, the Company assumed approximately $7.0 million in fixed-rate mortgage debt with an annual interest rate of 7.15% and remaining term to maturity of 14.9 years.

In February 2008, the Company also acquired a 68-unit, 161-bed property (Sunnyside Commons) located near the campus of West Virginia University in Morgantown, West Virginia, for a purchase price of $7.5 million, which excludes $0.6 million of anticipated transaction costs, initial integration expenses and capital expenditures necessary to bring this property up to the Company’s operating standards.  The Company did not assume any debt as part of this transaction.

The acquired properties’ results of operations have been included in the accompanying consolidated statements of operations since their respective acquisition closing dates.  The following pro forma information for the three and six months ended June 30, 2008 and 2007 presents consolidated financial information for the Company as if the property acquisitions discussed above, the Company’s 2007 acquisitions and the Company’s October 2007 and April 2008 equity offerings had occurred at the beginning of the earliest period presented.  The unaudited pro forma information is provided for informational purposes only and is not indicative of results that would have occurred or which may occur in the future:

10

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2008
   
2007
   
2008
   
2007
 
Total revenues
  $ 67,610     $ 64,645     $ 140,845     $ 133,965  
Net (loss) income
  $ (2,065 )   $ (5,994 )   $ 2,669     $ (15,780 )
Net (loss) income per share – basic
  $ (0.05 )   $ (0.14 )   $ 0.06     $ (0.38 )
Net (loss) income per share – diluted
  $ (0.05 )   $ (0.14 )   $ 0.06     $ (0.38 )

4.  Discontinued Operations

As part of the acquisition of GMH on June 11, 2008, the Company acquired two properties (The Courtyards and The Verge) that were under contract to be sold as of the closing date.  In accordance with the provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), management classified these properties as wholly-owned properties-held for sale.  The dispositions of The Courtyards and The Verge were consummated in July 2008 and August 2008, respectively (see Note 16).

The related net income of the aforementioned properties is reflected in the accompanying consolidated statements of operations as discontinued operations for the three and six months ended June 30, 2008.  Below is a summary of the results of operations for The Courtyards and The Verge for the three and six months ended June 30, 2008:

   
Three and Six Months
 
   
Ended June 30, 2008
 
Total revenues
  $ 342  
Total operating expenses
    (106 )
   Operating income
    236  
Total nonoperating expense
    (144 )
   Net income
  $ 92  


5.  Investments in Wholly-owned Properties

Wholly-owned properties consisted of the following:

   
June 30, 2008
   
December 31, 2007
 
Land
  $ 223,948     $ 102,109  
Buildings and improvements
    1,546,218       768,551  
Furniture, fixtures and equipment
    68,627       42,225  
Construction in progress
    178,162       104,540  
      2,016,955       1,017,425  
Less accumulated depreciation
    (85,639 )     (70,363 )
Wholly-owned properties, net
  $ 1,931,316     $ 947,062  

The Company completed the acquisition of GMH on June 11, 2008 and the acquired properties are included in the wholly-owned properties, net balance as of June 30, 2008.  The Company’s allocation of the purchase price for GMH is contingent upon the receipt of final third-party appraisals and additional analyses necessary to finalize the allocation.

6.  On-Campus Participating Properties

The Company is a party to ground/facility lease agreements (“Leases”) with certain state university systems and colleges (each, a “Lessor”) for the purpose of developing, constructing, and operating student housing facilities on university campuses. Under the terms of the Leases, title to the constructed facilities is held by the applicable Lessor and such Lessor receives a de minimus base rent paid at inception and 50% of defined net cash flows on an annual basis through the term of the lease.  The Leases terminate upon the earlier to occur of the final repayment of the related debt, the amortization period of which is contractually stipulated, or the end of the lease term.

11

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Pursuant to the Leases, in the event the leasehold estates do not achieve Financial Break Even (defined as revenues less operating expenses, excluding management fees, less debt service), the applicable Lessor would be required to make a rental payment, also known as the Contingent Payment, sufficient to achieve Financial Break Even.  The Contingent Payment provision remains in effect until such time as any financing placed on the facilities would receive an investment grade rating without the Contingent Payment provision.  In the event that the Lessor is required to make a Contingent Payment, future net cash flow distributions would be first applied to repay such Contingent Payments and then to unpaid management fees prior to normal distributions.  Beginning in November 1999 and December 2002, as a result of the debt financing on the facilities achieving investment grade ratings without the Contingent Payment provision, the Texas A&M University System is no longer required to make Contingent Payments under either the Prairie View A&M University Village or University College Leases.  The Contingent Payment obligation continues to be in effect for the Texas A&M International University and University of Houston leases.

In the event the Company seeks to sell its leasehold interest, the Leases provide the applicable Lessor the right of first refusal of a bona fide purchase offer and an option to purchase the lessee’s rights under the applicable Lease.
In conjunction with the execution of each Lease, the Company has entered into separate five-year agreements to manage the related facilities for 5% of defined gross receipts. The five-year terms of the management agreements are not contingent upon the continuation of the Leases. Upon expiration of the initial five year terms, the agreements continue on a month-to-month basis.

On-campus participating properties are as follows:

         
Historical Cost
 
Lessor/University
 
Lease
Commencement
Required Debt
Repayment (1)
 
June 30, 2008
   
December 31, 2007
 
Texas A&M University System /
  Prairie View A&M University (2)
 
2/1/96
9/1/23
  $ 38,588     $ 38,499  
Texas A&M University System /
  Texas A&M International
 
2/1/96
9/1/23
    6,045       6,039  
Texas A&M University System /
  Prairie View A&M University (3)
 
10/1/99
8/31/25  /  8/31/28
    24,087       24,037  
University of Houston System /
  University of Houston (4)
 
9/27/00
8/31/35
    34,742       34,691  
            103,462       103,266  
  Less accumulated amortization
          (32,503 )     (30,361 )
On-campus participating properties, net
        $ 70,959     $ 72,905  

 
(1)
Represents the effective lease termination date.  The Leases terminate upon the earlier to occur of the final repayment of the related debt or the end of the contractual lease term.
 
 
(2)
Consists of three phases placed in service between 1996 and 1998.
 
 
(3)
Consists of two phases placed in service in 2000 and 2003.
 
 
(4)
Consists of two phases placed in service in 2001 and 2005.

7.    Minority Interests

The Company consolidates the accounts of the Operating Partnership and its subsidiaries into its consolidated financial statements.  However, the Company does not own 100% of the Operating Partnership and certain consolidated real estate joint ventures.  The amounts reported as minority interests on the Company’s consolidated balance sheets reflect the portion of these consolidated entities’ equity that the Company does not own.  Accordingly, the amounts reported as minority interest on the Company’s consolidated statements of operations reflect the portion of these consolidated entities’ net income or loss not allocated to the Company.
 
Equity interests in the Operating Partnership not owned by the Company are held in the form of Common Units and Series A Preferred Units.  Common Units and Series A Preferred Units are exchangeable into an equal number of shares of the Company’s common stock, or, at the Company’s election, cash.  A Common Unit and a share of the Company’s common stock have essentially the same economic characteristics, as they effectively participate equally in the net income and distributions of the Operating Partnership.  Series A Preferred Units have a cumulative preferential per annum cash distribution rate of 5.99%, payable quarterly concurrently with the payment of dividends on the Company’s common stock.

12

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Income or loss allocated to minority interests on the Company’s consolidated statements of operations includes the Series A Preferred Unit distributions as well as the pro rata share of the Operating Partnership’s net income or loss allocated to Common Units.  The Common Unitholders’ minority interest in the Operating Partnership is reported at an amount equal to their ownership percentage of the net equity of the Operating Partnership at the end of each reporting period.  Common Units and Series A Preferred Units issued in connection with the 2006 acquisition of the Royal Portfolio became exchangeable into an equal number of shares of the Company’s common stock on March 1, 2007.  As a result, 326,432 Common Units were converted into shares of the Company’s common stock during the six months ended June 30, 2008.  As of June 30, 2008 and December 31, 2007, approximately 3% and 6%, respectively, of the equity interests of the Operating Partnership was held by persons affiliated with Royal Properties and certain current and former members of management in the form of Common Units and Series A Preferred Units.

Minority interests also include the equity interests of unaffiliated joint venture partners in four joint ventures.  Three of the joint ventures own and operate the Company’s Callaway House, University Village at Sweet Home and University Centre owned-off campus properties.  The other joint venture was formed to develop, own, and operate the Company’s Villas at Chestnut Ridge owned off-campus property, which is scheduled to open for occupancy in August 2008.

8.  Investment in Unconsolidated Joint Ventures

Concurrent with the closing of the GMH acquisition, the Company formed a joint venture with a subsidiary of Fidelity and transferred 15 GMH student housing properties to the venture with an estimated value of $325.9 million.  The Company also assumed GMH’s equity interest in an existing joint venture with Fidelity that owns six properties.  The Company serves as property manager for all of the joint venture properties and owns a 10% equity interest in these joint ventures.  The Company’s $8.1 million investment in these two joint ventures at June 30, 2008 is included in other assets in the accompanying consolidated balance sheets, and the Company’s $46,000 share in the loss from these two joint ventures for both the three and six months ended June 30, 2008 is included in loss from unconsolidated joint ventures in the accompanying consolidated statements of operations.

The Company also holds a minority equity interest in a joint venture that owns a military housing privatization project with the United States Navy to design, develop, construct, renovate, and manage unaccompanied soldier housing located on naval bases in Norfolk and Newport News, Virginia.  In December 2007, the joint venture closed and obtained financing through taxable revenue bonds, at which time definitive legal agreements were executed.  The Company’s $1.3 million and $1.5 million investment in this joint venture at June 30, 2008 and December 31, 2007, respectively, is included in other assets in the accompanying consolidated balance sheets, and the Company’s $0.1 million and $0.2 million share in the loss from this joint venture for the three and six months ended June 30, 2008, respectively, is included in loss from unconsolidated joint ventures in the accompanying consolidated statements of operations.

9.  Debt

A summary of the Company’s outstanding consolidated indebtedness, including unamortized debt premiums and discounts, is as follows:

   
June 30, 2008
   
December 31, 2007
 
Debt secured by wholly-owned properties:
           
  Mortgage loans payable
  $ 1,009,161     $ 397,270  
  Construction loans payable
    98,703       43,652  
      1,107,864       440,922  
Debt secured by on-campus participating properties:
               
  Mortgage loans payable
    33,123       33,156  
  Bonds payable
    55,030       55,030  
      88,153       88,186  
Secured term loan
    100,000       -  
Revolving credit facility
    -       9,600  
Unamortized debt premiums
    6,779       4,988  
Unamortized debt discounts
    (12,244 )     (666 )
Total debt
  $ 1,290,552     $ 543,030  

13

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

Loans Assumed in Conjunction with Property Acquisition

In connection with the June 11, 2008 acquisition of the GMH Portfolio (see Note 3), the Company assumed approximately $608.2 million of fixed rate debt mortgage debt.  At the time of assumption, the debt had a weighted average interest rate of 5.43% and an average term to maturity of 6.2 years.  Upon assumption of this debt, the Company recorded debt discounts and debt premiums of approximately $11.7 million and $2.3 million, respectively, to reflect the estimated fair value of the debt assumed.  These mortgage loans are secured by the related properties.

In connection with the February 2008 acquisition of Pirate’s Place (see Note 3), a wholly-owned property, the Company assumed approximately $7.0 million of fixed-rate mortgage debt with an annual interest rate of 7.15% and January 2023 maturity date.  Upon assumption of this debt, the Company recorded a debt premium of approximately $0.3 million, to reflect the estimated fair value of the debt assumed.  This mortgage loan is secured by a lien on the related property.

Revolving Credit Facility

In May 2008, the Operating Partnership amended its $115 million revolving credit facility to increase the size of the facility to $160 million, which may be expanded by up to an additional $65 million upon the satisfaction of certain conditions.  The maturity date of the facility is August 17, 2009 and the Company continues to guarantees the Operating Partnership’s obligations under the facility.
 
Availability under the revolving credit facility is limited to an "aggregate borrowing base amount" equal to the lesser of (i) 65% of the value of certain properties, calculated as set forth in the credit facility, and (ii) the adjusted net operating income from these properties divided by a formula amount.  The facility bears interest at a variable rate, at the Company’s option, based upon a base rate or one-, two-, three-, or six-month LIBOR plus, in each case, a spread based upon the Company’s total leverage.  Additionally, the Company is required to pay an unused commitment fee ranging from 0.15% to 0.20% per annum, depending on the aggregate unused balance.  In April 2008, the Company paid off the entire balance on the revolving credit facility using proceeds from its equity offering (see Note 1).  As of June 30, 2008, the total availability under the facility balance (subject to the satisfaction of certain financial covenants) totaled approximately $154.3 million.

The terms of the facility include certain restrictions and covenants, which limit, among other items, the incurrence of additional indebtedness, liens, and the disposition of assets. The facility contains customary affirmative and negative covenants and also contains financial covenants that, among other things, require the Company to maintain certain minimum ratios of "EBITDA" (earnings before interest, taxes, depreciation and amortization) to fixed charges.  The Company may not pay distributions that exceed 100% of funds from operations for any four consecutive quarters.  The financial covenants also include consolidated net worth and leverage ratio tests.  As of June 30, 2008, the Company was in compliance with all such covenants.

Senior Secured Term Loan

On May 23, 2008, the Operating Partnership obtained a $100 million senior secured term loan.  The secured term loan has an initial term of 36 months and can be extended through May 2012 through the exercise of a 12-month extension period.  The secured term loan bears interest at a variable rate, at the Company’s option, based upon a base rate or one-, two-, three-, or six-month LIBOR plus, in each case, a spread based upon the Company’s total leverage.  On June 11, 2008, the Operating Partnership borrowed in full from the secured term loan and used the proceeds to fund a portion of the total cash consideration for the GMH acquisition.  As of June 30, 2008, the balance outstanding on the secured term loan was $100 million, bearing interest at a rate of 3.95%.  The Company guarantees the Operating Partnership’s obligations under the secured term loan.  The secured term loan includes the same restrictions and covenants as the revolving credit facility, described above.

10.  Incentive Award Plan

Pursuant to the 2004 Incentive Award Plan (the “Plan”), selected employees and directors of the Company and the Company’s affiliates are granted stock options, RSUs, RSAs, Common Units, profit interest units (“PIUs”), and other stock-based incentive awards.  The Company has reserved a total of 1,210,000 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.  As of June 30, 2008, 585,232 shares were available for issuance under the Plan.

14

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Restricted Stock Units

Upon initial appointment to the Board of Directors and reelection to the Board of Directors at each Annual Meeting of Stockholders, each outside member of the Board of Directors is granted RSUs.  For all 2006 and 2007 RSU grants, no shares of stock were issued at the time of the RSU awards, and the Company was not required to set aside a fund for the payment of any such award; however, the stock was deemed to be awarded on the date of grant.  Upon the Settlement Date, which is three years from the date of grant, 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 held by 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.

Upon reelection to the Board of Directors in May 2008, the Chairman of the Board of Directors was granted RSUs valued at $42,500 and the remaining outside members were each granted RSUs valued at $32,500.  In connection with the GMH acquisition on June 11, 2008, the Company appointed a new member to the Board of Directors and granted RSUs valued at $32,500.  The number of RSUs was determined based on the fair market value of the company’s stock on the date of grant, as defined in the Plan.  All awards vested and settled immediately on the date of grant; accordingly, a compensation charge of approximately $0.2 million was recorded during the three months ended June 30, 2008 related to these awards.  A summary of the Company’s RSUs under the Plan as of June 30, 2008 and changes during the six months ended June 30, 2008, is presented below:

   
Number of
RSUs
 
Outstanding at December 31, 2007
    18,786  
Granted
    7,831  
Settled in common shares
    (10,834 )
Settled in cash
    (3,164 )
Outstanding at June 30, 2008
    12,619  

Restricted Stock Awards

The Company awards RSAs to its executive officers and certain employees that vest in equal annual installments over a three to five year period.  Unvested awards are forfeited upon the termination of an individual’s employment with the Company.  Recipients of RSAs receive dividends, as declared by the Company’s Board of Directors, on unvested shares, provided that the recipients continue to be employees of the Company.  A summary of the Company’s RSAs under the Plan as of June 30, 2008 and changes during the six months ended June 30, 2008, is presented below:

   
Number of
RSAs
 
Nonvested balance at December 31, 2007
    178,921  
Granted
    151,492  
Vested
    (32,353 )
Forfeited
    (14,172 )
Nonvested balance at June 30, 2008
    283,888  

In accordance with SFAS No. 123(R), the Company recognizes the value of these awards as an expense over the vesting periods, which amounted to approximately $0.5 million and $0.3 million for the three months ended June 30, 2008 and 2007, respectively, and $0.9 million and $0.5 million for the six months ended June 30, 2008 and 2007, respectively.

Common Units/PIUs

PIUs were issued to certain executive and senior officers upon consummation of the IPO.  In connection with the Company’s equity offering in July 2005, all 121,000 PIUs were converted to Common Units, as contemplated in the OP Agreement.

The Outperformance Bonus Plan was adopted upon consummation of the Company’s IPO in August 2004, and consisted of awards to key employees equal to the value of 367,682 shares of the Company’s common stock.  Such awards vested on the third anniversary of the IPO (August 2007), upon the Company’s achievement of specified performance measures.  Upon vesting, the Compensation Committee of the Board of Directors exercised its permitted discretion and granted 132,400 of the awards to selected recipients in the form of PIUs, with the remainder of the awards paid in cash in the amount of $6.7 million.  During the three and six months ended June 30, 2007, the Company recorded a compensation charge of approximately $0.3 million and $9.9 million, respectively, to reflect the value of such awards.  As a result of the October 2007 equity offering, a book-up event occurred for tax purposes, resulting in the 132,400 PIUs being converted to Common Units.

15

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Each Common Unit is deemed equivalent to one share of the Company’s common stock.  Common Units receive the same quarterly per unit distribution as the per share distributions on the Company’s common stock.

11.  Preferred Stock

As part of the Company’s acquisition of GMH, the Company acquired the GMH REIT, an entity that has elected to be taxed as a REIT under the Code.  In order to ensure that the entity meets certain organizational requirements, this entity issued 131 shares of 15% Series A Cumulative Non-voting Preferred Stock.  Holders of Series A Preferred Stock are entitled to receive, when and as authorized by the Company’s Board of Directors, cumulative preferential cash dividends at the rate of 15% per annum of the total of $1,000 per share plus all accumulated and unpaid dividends thereon.  The Company may redeem shares of the Series A Preferred Stock at any time at a redemption price equal to $1,000 per share, plus a redemption premium per share that varies based on the date of redemption.
 
12.   Interest Rate Hedges

In February 2007, the Company extended the maturity date of the Cullen Oaks Phase I and Phase II loans to February 2014.  The extended loans bear interest at a rate of LIBOR plus 1.35% and required payments of interest only through May 2008 and monthly payments of principal and interest from May 2008 through the maturity date.  In connection with these loan extensions, the Company terminated the existing interest rate swap agreement and received a termination payment from the lender of approximately $0.4 million.  In accordance with SFAS No. 133, the $0.4 million gain will be amortized from accumulated other comprehensive income to earnings over the remaining term of the terminated interest rate swap agreement (through November 2008).  As of June 30, 2008, approximately $0.3 million of the $0.4 million gain was amortized from accumulated other comprehensive income to earnings.

In addition, the Company entered into an interest rate swap agreement effective February 15, 2007 through February 15, 2014, that is designated to hedge its exposure to fluctuations in interest payments attributed to changes in interest rates associated with payments on the Cullen Oaks Phase I and Phase II loans.  Under the terms of the interest rate swap agreement, the Company pays a fixed rate of 6.69% and receives a floating rate of LIBOR plus 1.35%.  The interest rate swap had an estimated negative fair value of approximately $1.9 million at June 30, 2008 and is reflected in other liabilities in the accompanying consolidated balance sheets.  Ineffectiveness resulting from the Company’s hedges is not material.

13.  Fair Value Disclosures

On January 1, 2008, the Company adopted SFAS No. 157, which defines fair value, establishes a framework for measuring fair value and also expands disclosures about fair value measurements.  SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.  The following table presents information about our liability measured at fair value on a recurring basis as of June 30, 2008, and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value.  The Company completed the acquisition of GMH on June 11, 2008 and the acquired properties are included in the wholly-owned properties, net balance as of June 30, 2008.  The Company’s allocation of purchase price for GMH is contingent upon the receipt of final third-party appraisals and additional analyses necessary to finalize the allocation.

16

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities the Company has the ability to access.  Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices observable for the asset or liability, such as interest rates and yield curves observable at commonly quoted intervals.  Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.  In instances in which the inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input significant to the fair value measurement in its entirety.  The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.  Disclosures concerning assets and liabilities measured at fair value are as follows:

Liability Measured at Fair Value on a Recurring Basis at June 30, 2008

   
Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
   
Significant Other
Observable Inputs
(Level 2)
   
Significant
Unobservable
Inputs (Level 3)
   
Balance at June 30,
2008
 
Liability:
                       
Derivative financial instrument
  $ -     $ 1,906     $ -     $ 1,906  

The Company uses derivative financial instruments, specifically interest rate swaps, for nontrading purposes.  The Company uses interest rate swaps to manage interest rate risk arising from previously unhedged interest payments associated with variable rate debt.  Through June 30, 2008, derivative financial instruments were designated and qualified as cash flow hedges.  Derivative contracts with positive net fair values inclusive of net accrued interest receipts or payments, are recorded in other assets.  Derivative contracts with negative net fair values, inclusive of net accrued interest payments or receipts, are recorded in other liabilities.  The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative.  This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.  The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

To comply with the provisions of SFAS No. 157, the Company incorporates credit valuation adjustments to appropriately reflect its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds and guarantees.

Although the Company has determined the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustment associated with its derivative utilizes Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparty.  However, as of June 30, 2008, the Company has assessed the significance of the impact of the credit valuation adjustment on the overall valuation of its derivative position and has determined that the credit valuation adjustment is not significant to the overall valuation of the Company’s derivative.  As a result, the Company has determined its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

14.  Commitments and Contingencies

Commitments

Development-related guarantees: The Company commonly provides alternate housing and project cost guarantees, subject to force majeure.  These guarantees are typically limited, on an aggregate basis, to the amount of the projects’ related development fees or a contractually agreed-upon maximum exposure amount.  Alternate housing guarantees typically expire five days after construction is complete and generally require the Company to provide substitute living quarters and transportation for students to and from the university if the project is not complete by an agreed-upon completion date.  Under project cost guarantees, the Company is responsible for the construction cost of a project in excess of an approved budget.   The budget consists primarily of costs included in the general contractors’ guaranteed maximum price contract (“GMP”).  In most cases, the GMP obligates the general contractor, subject to force majeure and approved change orders, to provide completion date guarantees and to cover cost overruns and liquidated damages.  In addition, the GMP is typically secured with payment and performance bonds.  Project cost guarantees expire upon completion of certain developer obligations, which are normally satisfied within one year after completion of the project.

17

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
On one completed project, the Company has guaranteed losses up to $3.0 million in excess of the development fee if the loss is due to any failure of the Company to maintain, or cause its professionals to maintain, required insurance for a period of five years after completion of the project (August 2009).
The Company’s estimated maximum exposure amount under the above guarantees is approximately $12.2 million

At June 30, 2008, management did not anticipate any material deviations from schedule or budget related to third-party development projects currently in progress.  The Company has estimated the fair value of guarantees entered into or modified after December 31, 2002, the effective date of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to be immaterial.

In the normal course of business, the Company enters into various development-related purchase commitments with parties that provide development-related goods and services.  In the event that the Company was to terminate development services prior to the completion of projects under construction, the Company could potentially be committed to satisfy outstanding purchase orders with such parties.

Guaranty of Joint Venture Mortgage Debt: As discussed in Note 8 herein, the Company holds a 10% equity interest in two unconsolidated joint ventures with mortgage debt outstanding of approximately $342.3 million as of June 30, 2008.  The Company serves as the guarantor of this debt which means it agrees to be liable to the lender for any loss, damage, cost, expense, liability, claim or other obligation incurred by the lender arising out of or in connection with fraud by the borrower in connection with the loan.
 
Contingencies

Litigation:  In the normal course of business, the Company is subject to claims, lawsuits, and legal proceedings. While it is not possible to ascertain the ultimate outcome of such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

Letters of Intent:  In the ordinary course of the Company’s business, the Company enters into letters of intent indicating a willingness to negotiate for acquisitions, dispositions or joint ventures.  Such letters of intent are non-binding, and neither party to the letter of intent is obligated to pursue negotiations unless and until a definitive contract is entered into by the parties.  Even if definitive contracts are entered into, the letters of intent relating to the acquisition and disposition of real property and resulting contracts generally contemplate that such contracts will provide the acquirer with time to evaluate the property and conduct due diligence, during which periods the acquiror will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money.  There can be no assurance that definitive contracts will be entered into with respect to any matter covered by letters of intent or that the Company will consummate any transaction contemplated by any definitive contract.  Furthermore, due diligence periods for real property are frequently extended as needed.  An acquisition or disposition of real property becomes probable at the time that the due diligence period expires and the definitive contract has not been terminated.  The Company is then at risk under a real property acquisition contract, but only to the extent of any earnest money deposits associated with the contract, and is obligated to sell under a real property sales contract.
 
Environmental Matters:  The Company is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Company's business, assets or results of operations. However, there can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Company's results of operations and cash flows.

15.  Segments

The Company defines business segments by their distinct customer base and service provided.  The Company has identified four reportable segments: Wholly-Owned Properties, On-Campus Participating Properties, Development Services and Property Management Services.  Management evaluates each segment’s performance based on operating income before depreciation, amortization, minority interests and allocation of corporate overhead.  Intercompany fees are reflected at the contractually stipulated amounts.

18

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2008
   
2007
   
2008
   
2007
 
Wholly-Owned Properties
                       
Rental revenues
  $ 37,655     $ 28,330     $ 69,774     $ 55,816  
Interest income
    8       100       73       171  
Total revenues from external customers
    37,663       28,430       69,847       55,987  
Operating expenses before depreciation and amortization
    16,533       12,951       30,207       24,717  
Interest expense
    7,880       6,092       13,948       11,556  
Operating income before depreciation and amortization,
   minority interests and allocation of corporate overhead
  $ 13,250     $ 9,387     $ 25,692     $ 19,714  
Depreciation and amortization
  $ 9,894     $ 6,549     $ 16,695     $ 12,386  
Capital expenditures
  $ 31,670     $ 26,847     $ 69,990     $ 43,960  
Total segment assets at June 30,
  $ 1,915,732     $ 892,365     $ 1,915,732     $ 892,365  
                                 
On-Campus Participating Properties
                               
Rental revenues
  $ 3,948     $ 3,740     $ 10,692     $ 10,077  
Interest income
    53       91       132       169  
Total revenues from external customers
    4,001       3,831       10,824       10,246  
Operating expenses before depreciation, amortization, and
   ground/facility leases
    2,337       2,343       4,442       4,209  
Ground/facility leases
    368       495       727       790  
Interest expense
    1,531       1,562       3,093       3,135  
Operating (loss) income before depreciation and amortization,
   minority interests and allocation of corporate overhead
  $ (235 )   $ (569 )   $ 2,562     $ 2,112  
Depreciation and amortization
  $ 1,074     $ 1,065     $ 2,143     $ 2,126  
Capital expenditures
  $ 144     $ 162     $ 196     $ 227  
Total segment assets at June 30,
  $ 84,472     $ 87,730     $ 84,472     $ 87,730  
                                 
Development Services
                               
Development and construction management fees
  $ 723     $ 646     $ 2,379     $ 1,051  
Operating expenses
    2,297       1,222       4,445       2,435  
Operating (loss) income before depreciation and amortization,
   minority interests and allocation of corporate overhead
  $ (1,574 )   $ (576 )   $ (2,066 )   $ (1,384 )
Total segment assets at June 30,
  $ 8,898     $ 1,793     $ 8,898     $ 1,793  
                                 
Property Management Services
                               
Property management fees from external customers
  $ 1,222     $ 650     $ 2,144     $ 1,372  
Intersegment revenues
    1,360       983       2,585       2,041  
Total revenues
    2,582       1,633       4,729       3,413  
Operating expenses
    1,106       676       2,021       1,370  
Operating income before depreciation and amortization,
   minority interests and allocation of corporate overhead
  $ 1,476     $ 957     $ 2,708     $ 2,043  
Total segment assets at June 30,
  $ 2,193     $ 1,574     $ 2,193     $ 1,574  
                                 
Reconciliations
                               
Total segment revenues
  $ 44,969     $ 34,540     $ 87,779     $ 70,697  
Unallocated interest income earned on corporate cash
    581       123       599       681  
Elimination of intersegment revenues
    (1,360 )     (983 )     (2,585 )     (2,041 )
Total consolidated revenues, including interest income
  $ 44,190     $ 33,680     $ 85,793     $ 69,337  
Segment operating income before depreciation, amortization,
   minority interests and allocation of corporate overhead
  $ 12,917     $ 9,199     $ 28,896     $ 22,485  
Depreciation and amortization, including amortization of
   deferred financing costs
    (11,562 )     (8,082 )     (19,902 )     (15,350 )
Net unallocated expenses relating to corporate overhead
    (2,630 )     (1,816 )     (4,766 )     (12,710 )
Loss from unconsolidated joint ventures
    (129 )     -       (255 )        
Income tax provision
    (73 )     (60 )     (133 )     (120 )
Minority interests
    (65 )     (26 )     (473 )     232  
(Loss) income from continuing operations
  $ (1,542 )   $ (785 )   $ 3,367     $ (5,463 )
Total segment assets at June 30,
  $ 2,011,295     $ 983,462     $ 2,011,295     $ 983,462  
Unallocated corporate assets and assets held for sale
    227,750       5,722       227,750       5,722  
Total assets at June 30,
  $ 2,239,045     $ 989,184     $ 2,239,045     $ 989,184  
 
19

 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
16.  Subsequent Events

Property Dispositions:  In July 2008, the Company sold a wholly-owned property, The Courtyards, for a purchase price of $17.4 million and had mortgage loan debt with a fair market value of $16.6 million as of June 30, 2008.  In August 2008, the Company sold another wholly-owned property, The Verge, for a purchase price of $36.4 million and had mortgage loan debt with a fair market value of $30.8 million as of June 30, 2008.  The Courtyards and The Verge were acquired on June 11, 2008 in connection with the acquisition of GMH, were under contract to be sold on the closing date, and were classified as wholly-owned properties-held for sale as of June 30, 2008.  No gain or loss was recorded on these dispositions for book purposes.
 
20

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

Forward-looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. We caution investors that any forward-looking statements presented in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions, which do not relate solely to historical matters, are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you that while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they were made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following: general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate); risks associated with changes in University admission or housing policies; risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments; failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully; risks and uncertainties affecting property development and construction (including, without limitation, construction delays, cost overruns, inability to obtain necessary permits and public opposition to such activities); risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets; costs of compliance with the Americans with Disabilities Act and other similar laws; potential liability for uninsured losses and environmental contamination; risks associated with our potential failure to qualify as a REIT under the Internal Revenue Code of 1986 (the “Code”), as amended, and possible adverse changes in tax and environmental laws; and risks associated with our dependence on key personnel whose continued service is not guaranteed.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in other sections of this report. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Our Company and Our Business

American Campus Communities, Inc. (referred to herein as “the Company,” “us,” “we,” and “our”) is a real estate investment trust (“REIT”) that was incorporated on March 9, 2004 and commenced operations effective with the completion of our initial public offering (“IPO”) on August 17, 2004.  Through our controlling interest in American Campus Communities Operating Partnership LP (the “Operating Partnership”), we are 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.  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.

On April 23, 2008, we completed an equity offering, consisting of the sale of 9,200,000 shares of our common stock at a price of $28.75 per share, including the exercise of 1,200,000 shares issued as a result of the exercise of the underwriters’ overallotment option in full at closing.  The offering generated gross proceeds of $264.5 million.  The aggregate proceeds, net of the underwriting discount, structuring fee and expenses of the offering, were approximately $252.1 million.

As of June 30, 2008, our property portfolio contained 88 student housing properties with approximately 54,300 beds and approximately 18,200 apartment units, including 42 properties containing approximately 25,000 beds and approximately 8,400 units added as a result of our acquisition of the student housing business of GMH.  Our property portfolio consisted of 82 owned off-campus properties that are in close proximity to colleges and universities, two ACE properties currently under development that will be operated under ground/facility leases with a related university system and four on-campus participating properties operated under ground/facility leases with the related university systems.  As of June 30, 2008, we also owned a minority interest in joint ventures that owned an aggregate of 21 student housing properties with approximately 12,100 beds in approximately 3,600 units.  Our communities contain modern housing units, offer resort-style amenities and are supported by a resident assistant system and other student-oriented programming.

21

 
Through our TRS entities, we also provide construction management and development services, primarily for student housing properties owned by colleges and universities, charitable foundations, and others.  As of June 30, 2008, we provided third-party management and leasing services for 36 properties (six of which we served as the third-party developer and construction manager) that represented approximately 25,700 beds in approximately 9,200 units.  Third-party management and leasing services are typically provided pursuant to multi-year management contracts that have initial terms that range from one to five years.  As of June 30, 2008, our total owned, joint venture and third-party managed portfolio included 145 properties with approximately 92,100 beds in approximately 31,000 units.

Third-Party Development Services

Our third-party development and construction management services as of June 30, 2008 consisted of five projects under contract and currently in progress with fees ranging from $0.2 million to $3.5 million.  As of June 30, 2008, fees of approximately $2.5 million remained to be earned by us with respect to these projects, which have scheduled completion dates of July 2008 through March 2010.

While we believe that our third party development/construction management and property management services allow us to develop strong and key relationships with colleges and universities, revenue from this area has over time become a smaller portion of our operations due to the continued focus on and growth of our wholly-owned property portfolio.  Nevertheless, we believe these services continue to provide synergies with respect to our ability to identify, acquire or develop, and successfully operate, student housing properties.

Acquisitions

On June 11, 2008, we completed the acquisition of GMH.  At the time of closing, the GMH student housing portfolio consisted of 42 wholly-owned properties containing 24,953 beds located in various markets throughout the country.  Two of the acquired properties were sold subsequent to the end of the quarter.  See Note 16 in the accompanying Notes to Consolidated Financial Statements for additional information on the property dispositions.  The total estimated purchase price of GMH was approximately $1.1 billion which was paid as follows: (i) the issuance of approximately $154.9 million of our common stock and Common Units valued at $28.43 per share; (ii) cash consideration paid of approximately $239.6 million which represented the payment of $3.36 per share for each share of GMH common stock and each unit in the GMH Operating Partnership issued and outstanding as of the date of the Merger Agreement (February 11, 2008); (iii) the assumption of $598.8 million of fixed-rate mortgage debt, which includes a net debt discount of $9.4 million; and (iv) $52.7 million of merger costs incurred as it relates to severance payments, legal, banking, accounting and finance costs.

In February 2008, we acquired a 144-unit, 528-bed property (Pirate’s Place) located near the campus of East Carolina University in Greenville, North Carolina, for a purchase price of $10.6 million, which excludes $0.8 million of anticipated transaction costs, initial integration expenses and capital expenditures necessary to bring this property up to our operating standards.  As part of the transaction, we assumed approximately $7.0 million in fixed-rate mortgage debt with an annual interest rate of 7.15% and remaining term to maturity of 14.9 years.

In February 2008, we also acquired a 68-unit, 161-bed property (Sunnyside Commons) located near the campus of West Virginia University in Morgantown, West Virginia, for a purchase price of $7.5 million, which excludes $0.6 million of anticipated transaction costs, initial integration expenses and capital expenditures necessary to bring this property up to our operating standards.  We did not assume any debt as part of this transaction.

Owned Development Activities

Overview:  As of June 30, 2008, we were in the process of constructing one owned off-campus property and two ACE properties that will be operated under ground/facility leases with a related university system.  We estimate that the total development costs relating to these activities will be approximately $298.8 million.  As of June 30, 2008, we have incurred development costs of approximately $177.3 million in connection with these properties, with the remaining development costs estimated at approximately $121.5 million.  The activities are described below:

22

 
Villas at Chestnut Ridge: As of June 30, 2008, our Villas at Chestnut Ridge owned off-campus property was under construction with total development costs estimated to be approximately $34.8 million.  The project is scheduled to complete construction and open for occupancy in August 2008 and serve students attending State University of New York - Buffalo.  As of June 30, 2008, the project was approximately 98% complete, and we estimate that remaining development costs will be approximately $6.3 million.  As of June 30, 2008, we have funded $3.2 million of the project’s development costs internally, with the remaining development costs to be funded through a construction loan.
 
Vista del Sol: As of June 30, 2008, our Vista del Sol ACE property was under construction with total development costs estimated to be approximately $137.5 million.  The project is scheduled to complete construction and open for occupancy in August 2008 and serve students attending Arizona State University.  As of June 30, 2008, the project was approximately 93% complete, and we estimate that remaining development costs will be approximately $21.1 million.  As of June 30, 2008, we have funded $37.5 million of the project’s development costs internally, with the remaining development costs to be funded through a construction loan.

Barrett Honors College:  As of June 30, 2008, our Barrett Honors College ACE property was under construction with total development costs estimated to be approximately $126.5 million.  The project is scheduled to complete construction and open for occupancy in August 2009 and serve students attending Arizona State University.  As of June 30, 2008, the project was approximately 20% complete, and we estimate that remaining development costs will be approximately $94.1 million.  As of June 30, 2008, we have funded 100% of the project’s development costs and will fund the remaining development costs internally.
 
23

 
Property Operations
As of June 30, 2008, our property portfolio consisted of the following:
 
PROPERTY
 
YR ACQUIRED / DEVELOPED (1)
 
 
 
LOCATION
 
 
PRIMARY UNIVERSITY SERVED
 
 
 
UNITS
 
 
 
BEDS
Wholly-Owned properties:
                   
1. Villas on Apache
 
1999
 
Tempe, AZ
 
Arizona State University Main Campus
 
111
 
288
2. The Village at Blacksburg
 
2000
 
Blacksburg, VA
 
Virginia Tech University
 
288
 
 1,056
3. River Club Apartments
 
1999
 
Athens, GA
 
The University of Georgia – Athens
 
266
 
 792
4. River Walk Townhomes
 
1999
 
Athens, GA
 
The University of Georgia – Athens
 
100
 
 336
5. The Callaway House
 
2001
 
College Station, TX
 
Texas A&M University
 
173
 
538
6. The Village at Alafaya Club
 
2000
 
Orlando, FL
 
The University of Central Florida
 
228
 
 839
7. The Village at Science Drive
 
2001
 
Orlando, FL
 
The University of Central Florida
 
192
 
732
8. University Village at Boulder Creek
 
2002
 
Boulder, CO
 
The University of Colorado at Boulder
 
82
 
 309
9. University Village at Fresno
 
2004
 
Fresno, CA
 
California State University – Fresno
 
105
 
406
10. University Village at TU
 
2004
 
Philadelphia, PA
 
Temple University
 
220
 
749
11. University Club Tallahassee
 
2005
 
Tallahassee, FL
 
Florida State University
 
152
 
608
12. The Grove at University Club
 
2005
 
Tallahassee, FL
 
Florida State University
 
64
 
128
13. College Club Tallahassee
 
2005
 
Tallahassee, FL
 
Florida A&M University
 
96
 
384
14. The Greens at College Club
 
2005
 
Tallahassee, FL
 
Florida A&M University
 
40
 
160
15. University Club Gainesville
 
2005
 
Gainesville, FL
 
University of Florida
 
94
 
376
16. City Parc at Fry Street
 
2005
 
Denton, TX
 
University of North Texas
 
136
 
418
17. The Estates
 
2005
 
Gainesville, FL
 
University of Florida
 
396
 
1,044
18. University Village at Sweet Home
 
2005
 
Amherst, NY
 
State University of New York – Buffalo
 
269
 
828
19. Entrada Real
 
2006
 
Tucson, AZ
 
University of Arizona
 
98
 
363
20. Royal Oaks
 
2006
 
Tallahassee, FL
 
Florida State University
 
82
 
224
21. Royal Pavilion
 
2006
 
Tallahassee, FL
 
Florida State University
 
60
 
204
22. Royal Village Tallahassee
 
2006
 
Tallahassee, FL
 
Florida State University
 
75
 
288
23. Royal Village Gainesville
 
2006
 
Gainesville, FL
 
University of Florida
 
118
 
448
24. Northgate Lakes
 
2006
 
Orlando, FL
 
The University of Central Florida
 
194
 
710
25. Royal Lexington
 
2006
 
Lexington, KY
 
University of Kentucky
 
94
 
364
26. The Woods at Greenland
 
2006
 
Murfreesboro, TN
 
Middle Tennessee State University
 
78
 
276
27. Raiders Crossing
 
2006
 
Murfreesboro, TN
 
Middle Tennessee State University
 
96
 
276
28. Raiders Pass
 
2006
 
Lubbock, TX
 
Texas Tech University
 
264
 
828
29. Aggie Station
 
2006
 
College Station, TX
 
Texas A&M University
 
156
 
450
30. The Outpost San Marcos
 
2006
 
San Marcos, TX
 
Texas State University – San Marcos
 
162
 
486
31. The Outpost San Antonio
 
2006
 
San Antonio, TX
 
University of Texas – San Antonio
 
276
 
828
32. Callaway Villas
 
2006
 
College Station, TX
 
Texas A&M University
 
236
 
704
33. Village on Sixth
 
2007
 
Huntington, WV
 
Marshall University
 
248
 
752
34. Newtown Crossing
 
2007
 
Lexington, KY
 
University of Kentucky
 
356
 
942
35. Olde Towne University Square
 
2007
 
Toledo, OH
 
University of Toledo
 
224
 
550
36. Peninsular Place
 
2007
 
Ypsilanti, MI
 
Eastern Michigan University
 
183
 
478
37. University Centre (2)
 
2007
 
Newark, NJ
 
Rutgers University, NJIT, Essex CCC
 
234
 
838
38. Sunnyside Commons (3)
 
2008
 
Morgantown, WV
 
West Virginia University
 
68
 
161
39. Pirate’s Place (3)
 
2008
 
Greenville, NC
 
East Carolina University
 
144
 
528
40. University Highlands (4)
 
2008
 
Reno, NV
 
University of Nevada at Reno
 
216
 
732
41. Jacob Heights I (4)
 
2008
 
Mankato, MN
 
Minnesota State University
 
42
 
162
42. Jacob Heights III (4)
 
2008
 
Mankato, MN
 
Minnesota State University
 
24
 
96
                     
 
24

 
PROPERTY
 
YR ACQUIRED / DEVELOPED (1
 
 
 
LOCATION
 
 
PRIMARY UNIVERSITY SERVED
 
 
 
UNITS
 
 
 
BEDS
Wholly-Owned properties:
                   
43. The Summit (4)
 
2008
 
Mankato, MN
 
Minnesota State University
 
192
 
672
44. GrandMarc – Seven Corners (4)
 
2008
 
Minneapolis, MN
 
University of Minnesota
 
219
 
440
45. University Village – Sacramento (4)
 
2008
 
Sacramento, CA
 
California State University – Sacramento
 
250
 
394
46. The Verge (4) (5)
 
2008
 
Sacramento, CA
 
California State University – Sacramento
 
306
 
792
47. Aztec Corner (4)
 
2008
 
San Diego, CA
 
San Diego State University
 
360
 
606
48. University Crossing (4)
 
2008
 
Philadelphia, PA
 
University of Pennsylvania / Drexel
 
507
 
1026
49. Campus Corner (4)
 
2008
 
Bloomington, IN
 
Indiana University
 
256
 
800
50. Tower at 3rd (4)
 
2008
 
Champaign, IL
 
University of Illinois
 
147
 
295
51. University Mills (4)
 
2008
 
Cedar Falls, IA
 
University of Northern Iowa
 
121
 
481