ACC 2013.09.30 10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended September 30, 2013.   
 
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.)
Commission file number 333-181102-01 (American Campus Communities Operating Partnership, L.P.)
 
AMERICAN CAMPUS COMMUNITIES, INC.
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
 
 Maryland (American Campus Communities, Inc.)
Maryland (American Campus Communities Operating
Partnership, L.P.)
 
 76-0753089 (American Campus Communities, Inc.)
56-2473181 (American Campus Communities Operating
Partnership, L.P.)
 (State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer Identification No.)
 
12700 Hill Country Blvd., Suite T-200
Austin, TX
(Address of Principal Executive Offices)
 
 
78738
(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.
American Campus Communities, Inc.
Yes x  No o
American Campus Communities Operating Partnership, L.P.
Yes x  No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
American Campus Communities, Inc.
Yes x  No o
American Campus Communities Operating Partnership, L.P.
Yes x  No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
American Campus Communities, Inc.                                                                                                                                    
Large accelerated filer x  
Accelerated Filer o



Non-accelerated filer   o     (Do not check if a smaller reporting company) 
Smaller reporting company o

American Campus Communities Operating Partnership, L.P.
Large accelerated filer o
Accelerated Filer o
Non-accelerated filer   x     (Do not check if a smaller reporting company) 
Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
American Campus Communities, Inc.
Yes o  No x
American Campus Communities Operating Partnership, L.P
Yes o  No x
                                                                                           
There were 104,782,817 shares of the American Campus Communities, Inc.’s common stock with a par value of $0.01 per share outstanding as of the close of business on October 31, 2013.
 



EXPLANATORY NOTE
 
This report combines the reports on Form 10-Q for the quarterly period ended September 30, 2013 of American Campus Communities, Inc. and American Campus Communities Operating Partnership, L.P.  Unless stated otherwise or the context otherwise requires, references to “ACC” mean American Campus Communities, Inc., a Maryland real estate investment trust (“REIT”), and references to “ACCOP” mean American Campus Communities Operating Partnership, L.P., a Maryland limited partnership.  References to the “Company,” “we,” “us” or “our” mean collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP.  References to the “Operating Partnership” mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP. The following chart illustrates the Company’s and the Operating Partnership’s corporate structure:
 

The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC. As of September 30, 2013, ACC Holdings held an ownership interest in ACCOP of less than 1%. The limited partners of ACCOP are ACC and other limited partners consisting of current and former members of management and nonaffiliated third parties.  As of September 30, 2013, ACC owned an approximate 98.7% limited partnership interest in ACCOP.  As the sole member of the general partner of ACCOP, ACC has exclusive control of ACCOP’s day-to-day management.  Management operates the Company and the Operating Partnership as one business. The management of ACC consists of the same members as the management of ACCOP. The Company is structured as an umbrella partnership REIT (“UPREIT”) and ACC contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, ACC receives a number of units of the Operating Partnership (“OP Units,” see definition below) equal to the number of common shares it has issued in the equity offering. Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of OP Units in the Operating Partnership. Based on the terms of ACCOP’s partnership agreement, OP Units can be exchanged for ACC’s common shares on a one-for-one basis. The Company maintains a one-for-one relationship between the OP Units of the Operating Partnership issued to ACC and ACC Holdings and the common shares issued to the public. The Company believes that combining the reports on Form 10-Q of ACC and ACCOP into this single report provides the following benefits:
 
(1)
enhances investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
(2)
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and
(3)
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

ACC consolidates ACCOP for financial reporting purposes, and ACC essentially has no assets or liabilities other than its investment in ACCOP. Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements. However, the Company believes it is important to understand the few differences between the Company and



the Operating Partnership in the context of how the entities operate as a consolidated company. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership. ACC also issues public equity from time to time and guarantees certain debt of ACCOP, as disclosed in this report. ACC does not have any indebtedness, as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.  Except for the net proceeds from ACC’s equity offerings, which are contributed to the capital of ACCOP in exchange for OP Units on a one-for-one common share per OP Unit basis, the Operating Partnership generates all remaining capital required by the Company’s business. These sources include, but are not limited to, the Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its credit facility, and proceeds received from the disposition of certain properties.  Noncontrolling interests, stockholders’ equity, and partners’ capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The noncontrolling interests in the Operating Partnership’s financial statements consist of the interests of unaffiliated partners in various consolidated joint ventures. The noncontrolling interests in the Company’s financial statements include the same noncontrolling interests at the Operating Partnership level and OP Unit holders of the Operating Partnership. The differences between stockholders’ equity and partners’ capital result from differences in the equity issued at the Company and Operating Partnership levels.
 
To help investors understand the significant differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership. A single set of consolidated notes to such financial statements is presented that includes separate discussions for the Company and the Operating Partnership when applicable (for example, noncontrolling interests, stockholders’ equity or partners’ capital, earnings per share or unit, etc.).  A combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section is also included that presents discrete information related to each entity, as applicable. This report also includes separate Part I, Item 4 Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.
 
In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company operates its business through the Operating Partnership. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
 



FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2013
 TABLE OF CONTENTS
 
 
PAGE NO.
 
 
PART I.
 
 
 
 
Item 1.
Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries:
 
 
 
 
 
Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012
 
 
 
 
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012 (all unaudited)
 
 
 
 
Consolidated Statement of Changes in Equity for the nine months ended September 30, 2013 (unaudited)
 
 
 
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (all unaudited)
 
 
 
 
Consolidated Financial Statements of American Campus Communities Operating Partnership, L.P. and Subsidiaries:
 
 
 
 
 
Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012
 
 
 
 
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012 (all unaudited)
 
 
 
 
Consolidated Statement of Changes in Capital for the nine months ended September 30, 2013 (unaudited)
 
 
 
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (all unaudited)
 
 
 
 
Notes to Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries and American Campus Communities Operating Partnership, L.P. and Subsidiaries (unaudited)
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
PART II.
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
SIGNATURES
 


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



 
 
September 30, 2013
 
December 31, 2012
 
 
(Unaudited)
 
 
Assets
 
 
 
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
Wholly-owned properties, net
 
$
5,003,173

 
$
4,871,376

Wholly-owned properties held for sale
 
23,707

 

On-campus participating properties, net
 
62,162

 
57,346

Investments in real estate, net
 
5,089,042

 
4,928,722

 
 
 
 
 
Cash and cash equivalents
 
25,267

 
21,454

Restricted cash
 
37,480

 
36,790

Student contracts receivable, net
 
17,207

 
14,122

Other assets
 
151,090

 
117,874

 
 
 
 
 
Total assets
 
$
5,320,086

 
$
5,118,962

 
 
 
 
 
Liabilities and equity
 
 

 
 

 
 
 
 
 
Liabilities:
 
 

 
 

Secured mortgage, construction and bond debt
 
$
1,414,943

 
$
1,509,105

Secured agency facility
 
95,355

 
104,000

Unsecured notes
 
398,692

 

Unsecured term loan
 
350,000

 
350,000

Unsecured revolving credit facility
 
175,300

 
258,000

Accounts payable and accrued expenses
 
63,895

 
56,046

Other liabilities
 
135,788

 
107,223

Total liabilities
 
2,633,973

 
2,384,374

 
 
 
 
 
Commitments and contingencies (Note 14)
 


 


 
 
 
 
 
Redeemable noncontrolling interests
 
49,790

 
57,534

 
 
 
 
 
Equity:
 
 

 
 

American Campus Communities, Inc. stockholders’ equity:
 
 

 
 

Common stock, $.01 par value, 800,000,000 shares authorized, 104,782,817 and 104,665,212 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively
 
1,043

 
1,043

Additional paid in capital
 
3,014,239

 
3,001,520

Accumulated earnings and dividends
 
(382,231
)
 
(347,521
)
Accumulated other comprehensive loss
 
(2,210
)
 
(6,661
)
Total American Campus Communities, Inc. stockholders’ equity
 
2,630,841

 
2,648,381

Noncontrolling interests - partially owned properties
 
5,482

 
28,673

Total equity
 
2,636,323

 
2,677,054

 
 
 
 
 
Total liabilities and equity
 
$
5,320,086

 
$
5,118,962

 


See accompanying notes to consolidated financial statements.

1

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


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
 
Wholly-owned properties
 
$
150,668

 
$
104,062

 
$
449,779

 
$
286,932

On-campus participating properties
 
5,066

 
5,087

 
17,871

 
17,766

Third-party development services
 
622

 
1,467

 
1,656

 
7,427

Third-party management services
 
1,792

 
1,687

 
5,425

 
5,083

Resident services
 
883

 
454

 
1,912

 
982

Total revenues
 
159,031

 
112,757

 
476,643

 
318,190

 
 
 
 
 
 
 
 
 
Operating expenses
 
 

 
 

 
 

 
 

Wholly-owned properties
 
87,189

 
57,941

 
222,768

 
141,772

On-campus participating properties
 
3,021

 
3,010

 
8,454

 
8,306

Third-party development and management services
 
3,058

 
2,602

 
7,786

 
8,013

General and administrative
 
3,934

 
7,582

 
12,366

 
15,760

Depreciation and amortization
 
45,248

 
27,165

 
138,373

 
73,355

Ground/facility leases
 
1,386

 
1,093

 
3,749

 
2,861

Total operating expenses
 
143,836

 
99,393

 
393,496

 
250,067

 
 
 
 
 
 
 
 
 
Operating income
 
15,195

 
13,364

 
83,147

 
68,123

 
 
 
 
 
 
 
 
 
Nonoperating income and (expenses)
 
 

 
 

 
 

 
 

Interest income
 
792

 
428

 
2,165

 
1,355

Interest expense
 
(19,819
)
 
(13,530
)
 
(57,063
)
 
(38,742
)
Amortization of deferred financing costs
 
(1,413
)
 
(1,060
)
 
(4,143
)
 
(3,012
)
Income from unconsolidated joint ventures
 

 

 

 
444

Other nonoperating income (expense)
 
134

 
136

 
(2,666
)
 
14

Total nonoperating expenses
 
(20,306
)
 
(14,026
)
 
(61,707
)
 
(39,941
)
 
 
 
 
 
 
 
 
 
(Loss) income before income taxes and discontinued operations
 
(5,111
)
 
(662
)
 
21,440

 
28,182

Income tax provision
 
(255
)
 
(181
)
 
(765
)
 
(493
)
(Loss) income from continuing operations
 
(5,366
)
 
(843
)
 
20,675

 
27,689

Income attributable to discontinued operations
 
367

 
1,865

 
5,373

 
7,062

Gain from disposition of real estate
 
52,831

 

 
52,831

 
83

Total discontinued operations
 
53,198

 
1,865

 
58,204

 
7,145

Net income
 
47,832

 
1,022

 
78,879

 
34,834

Net income attributable to noncontrolling interests
 
 

 
 

 
 

 
 

Redeemable noncontrolling interests
 
(573
)
 
(66
)
 
(986
)
 
(541
)
Partially owned properties
 
(83
)
 
(329
)
 
(1,078
)
 
(1,312
)
Net income attributable to noncontrolling interests
 
(656
)
 
(395
)
 
(2,064
)
 
(1,853
)
Net income attributable to common shareholders
 
$
47,176

 
$
627

 
$
76,815

 
$
32,981

 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income
 
 

 
 

 
 

 
 

Change in fair value of interest rate swaps
 
(1,163
)
 
(2,386
)
 
4,451

 
(4,191
)
Comprehensive income (loss)
 
$
46,013

 
$
(1,759
)
 
$
81,266

 
$
28,790

 
 
 
 
 
 
 
 
 
(Loss) income per share attributable to common shareholders - basic
 
 

 
 

 
 

 
 

(Loss) income from continuing operations per share
 
$
(0.05
)
 
$
(0.02
)
 
$
0.18

 
$
0.32

Net income per share
 
$
0.45

 
$

 
$
0.73

 
$
0.41

(Loss) income per share attributable to common shareholders - diluted
 
 

 
 

 
 

 
 

(Loss) income from continuing operations per share
 
$
(0.05
)
 
$
(0.02
)
 
$
0.18

 
$
0.31

Net income per share
 
$
0.45

 
$

 
$
0.72

 
$
0.40

Weighted-average common shares outstanding
 
 

 
 

 
 

 
 

Basic
 
104,781,431

 
89,169,868

 
104,752,982

 
79,404,323

Diluted
 
104,781,431

 
89,169,868

 
105,381,053

 
80,009,463

 

See accompanying notes to consolidated financial statements.

2

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited, in thousands, except share data)


 
 
Common
Shares
 
Par Value of
Common
Shares
 
Additional Paid
in Capital
 
Accumulated
Earnings and
Dividends
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests –
partially owned
properties
 
Total
Equity, December 31, 2012
 
104,665,212

 
$
1,043

 
$
3,001,520

 
$
(347,521
)
 
$
(6,661
)
 
$
28,673

 
$
2,677,054

Adjustments to reflect redeemable noncontrolling interests at fair value
 

 

 
10,823

 

 

 

 
10,823

Amortization of restricted stock awards
 

 

 
4,806

 

 

 

 
4,806

Vesting of restricted stock awards and restricted stock units
 
116,105

 

 
(2,928
)
 

 

 

 
(2,928
)
Distributions to common and restricted stockholders
 

 

 

 
(111,525
)
 

 

 
(111,525
)
Distributions to noncontrolling joint venture partners
 

 

 

 

 

 
(861
)
 
(861
)
Contributions by noncontrolling partners
 

 

 

 

 

 
1,500

 
1,500

Increase in ownership of consolidated subsidiary
 

 

 

 

 

 
(24,908
)
 
(24,908
)
Conversion of preferred units to common stock
 
1,500

 

 
18

 

 

 

 
18

Change in fair value of interest rate swaps
 

 

 

 

 
4,451

 

 
4,451

Net income
 

 

 

 
76,815

 

 
1,078

 
77,893

Equity, September 30, 2013
 
104,782,817

 
$
1,043

 
$
3,014,239

 
$
(382,231
)
 
$
(2,210
)
 
$
5,482

 
$
2,636,323

 


See accompanying notes to consolidated financial statements.

3

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


 
 
Nine Months Ended September 30,
 
 
2013
 
2012
Operating activities
 
 
 
 
Net income
 
$
78,879

 
$
34,834

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Gain from disposition of real estate
 
(52,831
)
 
(83
)
Loss on remeasurement of equity method investment
 

 
122

Depreciation and amortization
 
140,059

 
77,407

Amortization of deferred financing costs and debt premiums/discounts
 
(6,397
)
 
1,904

Share-based compensation
 
5,008

 
3,948

Income from unconsolidated joint ventures
 

 
(444
)
Income tax provision
 
765

 
493

Changes in operating assets and liabilities:
 
 

 
 

Restricted cash
 
1,468

 
(2,772
)
Student contracts receivable, net
 
(3,333
)
 
(4,088
)
Other assets
 
(16,315
)
 
1,224

Accounts payable and accrued expenses
 
3,577

 
8,930

Other liabilities
 
25,919

 
11,877

Net cash provided by operating activities
 
176,799

 
133,352

 
 
 
 
 
Investing activities
 
 

 
 

Proceeds from disposition of real estate
 
155,234

 
28,167

Cash paid for property acquisitions
 
(92,508
)
 
(634,581
)
Cash paid for land acquisitions
 
(9,920
)
 
(25,103
)
Capital expenditures for wholly-owned properties
 
(52,587
)
 
(20,739
)
Investments in wholly-owned properties under development
 
(219,036
)
 
(265,070
)
Capital expenditures for on-campus participating properties
 
(1,323
)
 
(1,710
)
Investment in on-campus participating properties under development
 
(7,045
)
 

Investment in loans receivable
 
(52,038
)
 

Investment in mezzanine loans
 
(8,750
)
 
(2,000
)
Repayment of mezzanine loan
 

 
4,000

Increase in escrow deposits
 
(2,500
)
 
(19,170
)
Change in restricted cash related to capital reserves
 
(1,156
)
 
(366
)
Proceeds from insurance settlement
 
636

 

Purchase of corporate furniture, fixtures and equipment
 
(1,997
)
 
(1,396
)
Net cash used in investing activities
 
(292,990
)
 
(937,968
)
 
 
 
 
 
Financing activities
 
 

 
 

Proceeds from unsecured notes
 
398,636

 

Proceeds from sale of common stock
 

 
838,313

Offering costs
 

 
(33,223
)
Pay-off of mortgage loans and construction loans
 
(61,891
)
 
(62,182
)
Proceeds from unsecured term loan
 

 
150,000

Proceeds from credit facilities
 
364,855

 
371,000

Pay downs of credit facilities
 
(456,200
)
 
(438,000
)
Proceeds from construction loans
 
3,917

 
72,583

Principal payments on debt
 
(11,353
)
 
(8,064
)
Redemption of common units for cash
 

 
(132
)
Debt issuance and assumption costs
 
(4,239
)
 
(5,655
)
Distributions to common and restricted stockholders
 
(111,525
)
 
(82,083
)
Distributions to noncontrolling partners
 
(2,196
)
 
(2,329
)
Net cash provided by financing activities
 
120,004

 
800,228

 
 
 
 
 
Net change in cash and cash equivalents
 
3,813

 
(4,388
)
Cash and cash equivalents at beginning of period
 
21,454

 
22,399

Cash and cash equivalents at end of period
 
$
25,267

 
$
18,011

 
 
 
 
 
Supplemental disclosure of non-cash investing and financing activities
 
 

 
 

Loans assumed in connection with property acquisitions
 
$

 
$
(250,073
)
Issuance of common units in connection with property acquisitions
 
$
(3,451
)
 
$
(15,000
)
Change in fair value of derivative instruments, net
 
$
4,451

 
$
(4,191
)
 
 
 
 
 
Supplemental disclosure of cash flow information
 
 

 
 

Interest paid
 
$
70,226

 
$
48,390

 

See accompanying notes to consolidated financial statements.

4

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)


 
 
September 30, 2013
 
December 31, 2012
 
 
(Unaudited)
 
 
Assets
 
 
 
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
Wholly-owned properties, net
 
$
5,003,173

 
$
4,871,376

Wholly-owned properties held for sale
 
23,707

 

On-campus participating properties, net
 
62,162

 
57,346

Investments in real estate, net
 
5,089,042

 
4,928,722

 
 
 
 
 
Cash and cash equivalents
 
25,267

 
21,454

Restricted cash
 
37,480

 
36,790

Student contracts receivable, net
 
17,207

 
14,122

Other assets
 
151,090

 
117,874

 
 
 
 
 
Total assets
 
$
5,320,086

 
$
5,118,962

 
 
 
 
 
Liabilities and capital
 
 

 
 

 
 
 
 
 
Liabilities:
 
 

 
 

Secured mortgage, construction and bond debt
 
$
1,414,943

 
$
1,509,105

Secured agency facility
 
95,355

 
104,000

Unsecured notes
 
398,692

 

Unsecured term loan
 
350,000

 
350,000

Unsecured revolving credit facility
 
175,300

 
258,000

Accounts payable and accrued expenses
 
63,895

 
56,046

Other liabilities
 
135,788

 
107,223

Total liabilities
 
2,633,973

 
2,384,374

 
 
 
 
 
Commitments and contingencies (Note 14)
 


 


 
 
 
 
 
Redeemable limited partners
 
49,790

 
57,534

 
 
 
 
 
Capital:
 
 

 
 

Partners’ capital:
 
 

 
 

General partner – 12,222 OP units outstanding at both September 30, 2013 and December 31, 2012
 
112

 
116

Limited partner – 104,770,595 and 104,652,990 OP units outstanding at September 30, 2013 and December 31, 2012, respectively
 
2,632,939

 
2,654,926

Accumulated other comprehensive loss
 
(2,210
)
 
(6,661
)
Total partners’ capital
 
2,630,841

 
2,648,381

Noncontrolling interests - partially owned properties
 
5,482

 
28,673

Total capital
 
2,636,323

 
2,677,054

 
 
 
 
 
Total liabilities and capital
 
$
5,320,086

 
$
5,118,962

 


See accompanying notes to consolidated financial statements.

5

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands, except unit and per unit data)


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
 
Wholly-owned properties
 
$
150,668

 
$
104,062

 
$
449,779

 
$
286,932

On-campus participating properties
 
5,066

 
5,087

 
17,871

 
17,766

Third-party development services
 
622

 
1,467

 
1,656

 
7,427

Third-party management services
 
1,792

 
1,687

 
5,425

 
5,083

Resident services
 
883

 
454

 
1,912

 
982

Total revenues
 
159,031

 
112,757

 
476,643

 
318,190

 
 
 
 
 
 
 
 
 
Operating expenses
 
 

 
 

 
 

 
 

Wholly-owned properties
 
87,189

 
57,941

 
222,768

 
141,772

On-campus participating properties
 
3,021

 
3,010

 
8,454

 
8,306

Third-party development and management services
 
3,058

 
2,602

 
7,786

 
8,013

General and administrative
 
3,934

 
7,582

 
12,366

 
15,760

Depreciation and amortization
 
45,248

 
27,165

 
138,373

 
73,355

Ground/facility leases
 
1,386

 
1,093

 
3,749

 
2,861

Total operating expenses
 
143,836

 
99,393

 
393,496

 
250,067

 
 
 
 
 
 
 
 
 
Operating income
 
15,195

 
13,364

 
83,147

 
68,123

 
 
 
 
 
 
 
 
 
Nonoperating income and (expenses)
 
 

 
 

 
 

 
 

Interest income
 
792

 
428

 
2,165

 
1,355

Interest expense
 
(19,819
)
 
(13,530
)
 
(57,063
)
 
(38,742
)
Amortization of deferred financing costs
 
(1,413
)
 
(1,060
)
 
(4,143
)
 
(3,012
)
Income from unconsolidated joint ventures
 

 

 

 
444

Other nonoperating income (expense)
 
134

 
136

 
(2,666
)
 
14

Total nonoperating expenses
 
(20,306
)
 
(14,026
)
 
(61,707
)
 
(39,941
)
 
 
 
 
 
 
 
 
 
(Loss) income before income taxes and discontinued operations
 
(5,111
)
 
(662
)
 
21,440

 
28,182

Income tax provision
 
(255
)
 
(181
)
 
(765
)
 
(493
)
(Loss) income from continuing operations
 
(5,366
)
 
(843
)
 
20,675

 
27,689

Income attributable to discontinued operations
 
367

 
1,865

 
5,373

 
7,062

Gain from disposition of real estate
 
52,831

 

 
52,831

 
83

Total discontinued operations
 
53,198

 
1,865

 
58,204

 
7,145

Net income
 
47,832

 
1,022

 
78,879

 
34,834

Net income attributable to noncontrolling interests – partially owned properties
 
(83
)
 
(329
)
 
(1,078
)
 
(1,312
)
Net income attributable to American Campus Communities Operating Partnership, L.P.
 
47,749

 
693

 
77,801

 
33,522

Series A preferred unit distributions
 
(46
)
 
(46
)
 
(137
)
 
(137
)
Net income available to common unitholders
 
$
47,703

 
$
647

 
$
77,664

 
$
33,385

Other comprehensive (loss) income
 
 

 
 

 
 

 
 

Change in fair value of interest rate swaps
 
(1,163
)
 
(2,386
)
 
4,451

 
(4,191
)
Comprehensive income (loss)
 
$
46,540

 
$
(1,739
)
 
$
82,115

 
$
29,194

(Loss) income per unit attributable to common unitholders – basic
 
 

 
 

 
 

 
 

(Loss) income from continuing operations per unit
 
$
(0.05
)
 
$
(0.02
)
 
$
0.18

 
$
0.32

Net income per unit
 
$
0.45

 
$

 
$
0.73

 
$
0.41

(Loss) income per unit attributable to common unitholders – diluted
 
 

 
 

 
 

 
 

(Loss) income from continuing operations per unit
 
$
(0.05
)
 
$
(0.02
)
 
$
0.18

 
$
0.31

Net income per unit
 
$
0.45

 
$

 
$
0.72

 
$
0.40

Weighted-average common units outstanding
 
 

 
 

 
 

 
 

Basic
 
105,919,787

 
90,069,204

 
105,887,837

 
80,291,801

Diluted
 
105,919,787

 
90,069,204

 
106,515,908

 
80,896,941

 

See accompanying notes to consolidated financial statements.

6

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL
(unaudited, in thousands, except unit data)


 
 
 
 
 
 
 
 
 
 
Accumulated
 
Noncontrolling
 
 
 
 
 
 
 
 
Other
 
Interests -
 
 

 
 
General Partner
 
Limited Partner
 
Comprehensive
 
Partially Owned
 
 

 
 
Units
 
Amount
 
Units
 
Amount
 
Loss
 
Properties
 
Total
Capital as of December 31, 2012
 
12,222

 
$
116

 
104,652,990

 
$
2,654,926

 
$
(6,661
)
 
$
28,673

 
$
2,677,054

Adjustments to reflect redeemable limited partners’ interest at fair value
 

 

 

 
10,823

 

 

 
10,823

Amortization of restricted stock awards
 

 

 

 
4,806

 

 

 
4,806

Vesting of restricted stock awards and restricted stock units
 

 

 
116,105

 
(2,928
)
 

 

 
(2,928
)
Distributions
 

 
(13
)
 

 
(111,512
)
 

 

 
(111,525
)
Distributions to noncontrolling joint venture partners
 

 

 

 

 

 
(861
)
 
(861
)
Contributions by noncontrolling partners
 

 

 

 

 

 
1,500

 
1,500

Increase in ownership of consolidated subsidiary
 

 

 

 

 

 
(24,908
)
 
(24,908
)
Conversion of preferred units to common stock
 

 

 
1,500

 
18

 

 

 
18

Change in fair value of interest rate swaps
 

 

 

 

 
4,451

 

 
4,451

Net income
 

 
9

 

 
76,806

 

 
1,078

 
77,893

Capital as of September 30, 2013
 
12,222

 
$
112

 
104,770,595

 
$
2,632,939

 
$
(2,210
)
 
$
5,482

 
$
2,636,323

 
 

See accompanying notes to consolidated financial statements.

7

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands) 


 
 
Nine Months Ended September 30,
 
 
2013
 
2012
Operating activities
 
 
 
 
Net income
 
$
78,879

 
$
34,834

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Gain from disposition of real estate
 
(52,831
)
 
(83
)
Loss on remeasurement of equity method investment
 

 
122

Depreciation and amortization
 
140,059

 
77,407

Amortization of deferred financing costs and debt premiums/discounts
 
(6,397
)
 
1,904

Share-based compensation
 
5,008

 
3,948

Income from unconsolidated joint ventures
 

 
(444
)
Income tax provision
 
765

 
493

Changes in operating assets and liabilities:
 
 

 
 

Restricted cash
 
1,468

 
(2,772
)
Student contracts receivable, net
 
(3,333
)
 
(4,088
)
Other assets
 
(16,315
)
 
1,224

Accounts payable and accrued expenses
 
3,577

 
8,930

Other liabilities
 
25,919

 
11,877

Net cash provided by operating activities
 
176,799

 
133,352

 
 
 
 
 
Investing activities
 
 

 
 

Proceeds from disposition of real estate
 
155,234

 
28,167

Cash paid for property acquisitions
 
(92,508
)
 
(634,581
)
Cash paid for land acquisitions
 
(9,920
)
 
(25,103
)
Capital expenditures for wholly-owned properties
 
(52,587
)
 
(20,739
)
Investments in wholly-owned properties under development
 
(219,036
)
 
(265,070
)
Capital expenditures for on-campus participating properties
 
(1,323
)
 
(1,710
)
Investment in loans receivable
 
(52,038
)
 

Investment in mezzanine loans
 
(8,750
)
 
(2,000
)
Investment in on-campus participating properties under development
 
(7,045
)
 

Repayment of mezzanine loan
 

 
4,000

Increase in escrow deposits
 
(2,500
)
 
(19,170
)
Change in restricted cash related to capital reserves
 
(1,156
)
 
(366
)
Proceeds from insurance settlement
 
636

 

Purchase of corporate furniture, fixtures and equipment
 
(1,997
)
 
(1,396
)
Net cash used in investing activities
 
(292,990
)
 
(937,968
)
 
 
 
 
 
Financing activities
 
 

 
 

Proceeds from unsecured notes
 
398,636

 

Proceeds from issuance of common units in exchange for contributions, net
 

 
805,090

Pay-off of mortgage loans and constructions loans
 
(61,891
)
 
(62,182
)
Proceeds from unsecured term loan
 

 
150,000

Proceeds from credit facilities
 
364,855

 
371,000

Paydowns of credit facilities
 
(456,200
)
 
(438,000
)
Proceeds from construction loans
 
3,917

 
72,583

Principal payments on debt
 
(11,353
)
 
(8,064
)
Redemption of common units for cash
 

 
(132
)
Debt issuance and assumption costs
 
(4,239
)
 
(5,655
)
Distributions paid on unvested restricted stock awards
 
(710
)
 
(652
)
Distributions paid on common units
 
(112,013
)
 
(82,301
)
Distributions paid on preferred units
 
(137
)
 
(137
)
Distributions paid to noncontrolling partners - partially owned properties
 
(861
)
 
(1,322
)
Net cash provided by financing activities
 
120,004

 
800,228

 
 
 
 
 
Net change in cash and cash equivalents
 
3,813

 
(4,388
)
Cash and cash equivalents at beginning of period
 
21,454

 
22,399

Cash and cash equivalents at end of period
 
$
25,267

 
$
18,011

 
 
 
 
 
Supplemental disclosure of non-cash investing and financing activities
 
 

 
 

Loans assumed in connection with property acquisitions
 
$

 
$
(250,073
)
Issuance of common units in connection with property acquistiions
 
$
(3,451
)
 
$
(15,000
)
Change in fair value of derivative instruments, net
 
$
4,451

 
$
(4,191
)
 
 
 
 
 
Supplemental disclosure of cash flow information
 
 

 
 

Interest paid
 
$
70,226

 
$
48,390

 

See accompanying notes to consolidated financial statements.

8

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



1.        Organization and Description of Business
 
American Campus Communities, Inc. (“ACC”) is a real estate investment trust (“REIT”) that commenced operations effective with the completion of an initial public offering (“IPO”) on August 17, 2004.  Through ACC’s controlling interest in American Campus Communities Operating Partnership, L.P. (“ACCOP”), ACC is one of the largest owners, managers and developers of high quality student housing properties in the United States in terms of beds owned and under management.  ACC is a fully integrated, self-managed and self-administered equity REIT with expertise in the acquisition, design, financing, development, construction management, leasing and management of student housing properties.  ACC’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “ACC.”
 
The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC.  As of September 30, 2013, ACC Holdings held an ownership interest in ACCOP of less than 1%. The limited partners of ACCOP are ACC and other limited partners consisting of current and former members of management and nonaffiliated third parties.  As of September 30, 2013, ACC owned an approximate 98.7% limited partnership interest in ACCOP.  As the sole member of the general partner of ACCOP, ACC has exclusive control of ACCOP’s day-to-day management.  Management operates ACC and ACCOP as one business.  The management of ACC consists of the same members as the management of ACCOP.  ACC consolidates ACCOP for financial reporting purposes, and ACC does not have significant assets other than its investment in ACCOP.  Therefore, the assets and liabilities of ACC and ACCOP are the same on their respective financial statements.  References to the “Company,” “we,” “us” or “our” mean collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP.  References to the “Operating Partnership” mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP.  Unless otherwise indicated, the accompanying Notes to the Consolidated Financial Statements apply to both the Company and the Operating Partnership.
 
As of September 30, 2013, our property portfolio contained 165 properties with approximately 100,600 beds in approximately 32,700 apartment units.  Our property portfolio consisted of 142 owned off-campus student housing properties that are in close proximity to colleges and universities, 18 American Campus Equity (“ACE®”) properties operated under ground/facility leases with eight university systems and five on-campus participating properties operated under ground/facility leases with the related university systems.  Of the 165 properties, eight were under development as of September 30, 2013, and when completed will consist of a total of approximately 5,500 beds in approximately 1,700 units.  Our communities contain modern housing units and are supported by a resident assistant system and other student-oriented programming, with many offering resort-style amenities.
 
Through one of ACC’s taxable REIT subsidiaries (“TRSs”), we also provide construction management and development services, primarily for student housing properties owned by colleges and universities, charitable foundations, and others.  As of September 30, 2013, also through one of ACC’s TRSs, we provided third-party management and leasing services for 35 properties that represented approximately 25,900 beds in approximately 10,500 units.  Third-party management and leasing services are typically provided pursuant to management contracts that have initial terms that range from one to five years.  As of September 30, 2013, our total owned and third-party managed portfolio included 200 properties with approximately 126,500 beds in approximately 43,200 units.
 
2.        Summary of Significant Accounting Policies
 
Basis of Presentation
 
The accompanying consolidated financial statements, presented in U.S. dollars, are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and revenue and expenses during the reporting periods. Our actual results could differ from those estimates and assumptions. All material intercompany transactions among consolidated entities have been eliminated. All dollar amounts in the tables herein, except share, per share, unit and per unit amounts, are stated in thousands unless otherwise indicated. Certain prior period amounts have been reclassified to conform to the current period presentation.
 
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 of the

9

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


Company 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, 2012.
 
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 are 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
 
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 $2.8 million and $2.4 million was capitalized during the three months ended September 30, 2013 and 2012, respectively, and $8.6 million and $8.3 million was capitalized during the nine months ended September 30, 2013 and 2012, respectively.  Amortization of deferred financing costs totaling approximately $0.1 and was capitalized as construction in progress during both the three months ended September 30, 2013 and 2012, and $0.2 million and was capitalized as construction in progress during both the nine months ended September 30, 2013 and 2012.
 
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 undiscounted cash flows 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 September 30, 2013.
 
The Company allocates the purchase price of acquired properties to net tangible and identified intangible assets based on relative fair values.  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, our own analysis of recently acquired and existing comparable properties in our portfolio, and other market data.  Information obtained about each property as a result of due diligence, marketing and leasing activities is also considered.  The value allocated to land is generally based on the actual purchase price adjusted to fair value (as necessary) if acquired separately, or market research / comparables if acquired as part of an existing operating property.  The value allocated to building is based on the fair value determined on an “as-if vacant” basis, which is estimated using an income, or discounted cash flow, approach that relies upon internally determined assumptions that we believe are consistent with current market conditions for similar properties. The value allocated to furniture, fixtures, and equipment is based on an estimate of the fair value of the appliances and fixtures inside the units.
 
Long-Lived Assets–Held for Sale
 
Long-lived assets to be disposed of are classified as Held for Sale in the period in which all of the following criteria are met:


10

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


a.
Management, having the authority to approve the action, commits to a plan to sell the asset.

b.
The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets.

c.
An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated.

d.
The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year.

e.
The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value.

f.
Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
 
Concurrent with this classification, the asset is recorded at the lower of cost or fair value less estimated selling costs, and depreciation ceases.
 
Loans Receivable
 
Loans held for investment are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan purchase discounts, and net of an allowance for loan losses when such loan is deemed to be impaired.  Loan purchase discounts are amortized over the term of the loan.  The Company considers a loan impaired when, based upon current information and events, it is probable that it will be unable to collect all amounts due for both principal and interest according to the contractual terms of the loan agreement.  Significant judgments are required in determining whether impairment has occurred.  The Company performs an impairment analysis by comparing either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable current market price or the fair value of the underlying collateral to the net carrying value of the loan, which may result in an allowance and corresponding loan loss charge.  Loans receivable are included in other assets on the accompanying consolidated balance sheets.
 
Intangible Assets
 
A portion of the purchase price of acquired properties is allocated to the value of in-place leases for both student and commercial tenants, which 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 for student leases 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.  The purchase price of property acquisitions is not expected to be allocated to student tenant relationships, considering the terms of the leases and the expected levels of renewals.
 
Amortization expense related to in-place leases was approximately $2.1 million and $1.4 million for the three months ended September 30, 2013 and 2012, respectively, and $13.0 million and $3.5 million for the nine months ended September 30, 2013 and 2012, respectively.  Accumulated amortization at September 30, 2013 and December 31, 2012 was approximately $24.8 million and $12.4 million, respectively.  Intangible assets, net of amortization, are included in other assets on the accompanying consolidated balance sheets and the amortization of intangible assets is included in depreciation and amortization expense in the accompanying consolidated statements of comprehensive income.  
 
Mortgage Debt - Premiums and Discounts
 
Mortgage debt premiums and discounts represent fair value adjustments to account for the difference between the stated rates and market rates of mortgage debt assumed in connection with the Company’s property acquisitions.  The mortgage debt premiums and discounts are amortized to interest expense over the term of the related mortgage loans using the effective-interest method.  The amortization of mortgage debt premiums and discounts resulted in a net decrease to interest expense of approximately $3.4 million and $0.6 million for the three months ended September 30, 2013 and 2012, respectively, and $10.6 million and $1.2 million for

11

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


the nine months ended September 30, 2013 and 2012, respectively.  Mortgage debt premiums and discounts are included in secured mortgage, construction and bond debt on the accompanying consolidated balance sheets and amortization of mortgage debt premiums and discounts is included in interest expense on the accompanying consolidated statements of comprehensive income.
 
Unsecured Notes - Original Issue Discount
 
In April 2013, the Company issued $400 million of senior unsecured notes at 99.659 percent of par value (see Note 8) and recorded an original issue discount of approximately $1.4 million.  The original issue discount is amortized to interest expense over the term of the unsecured notes using the effective-interest method.  The unamortized original issue discount was approximately $1.3 million as of September 30, 2013 and is included in unsecured notes on the accompanying consolidated balance sheets and amortization of the original issue discount of $28,000 and $56,000 for the three and nine months ended September 30, 2013, respectively, is included in interest expense on the accompanying consolidated statements of comprehensive income.
 
Pre-development Expenditures
 
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 comprehensive income.  As of September 30, 2013, the Company has deferred approximately $2.4 million in pre-development costs related to third-party and owned development projects that have not yet commenced construction.  Such costs are included in other assets on the accompanying consolidated balance sheets.

Earnings per Share – Company
 
Basic earnings per share is computed using net income attributable to common shareholders and the weighted average number of shares of the Company’s common stock outstanding during the period.  Diluted earnings per share reflect common shares issuable from the assumed conversion of OP Units and common share awards granted.  Only those items having a dilutive impact on basic earnings per share are included in diluted earnings per share.
 
The following potentially dilutive securities were outstanding for the three and nine months ended September 30, 2013 and 2012, but were not included in the computation of diluted earnings per share because the effects of their inclusion would be anti-dilutive.
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2013
 
2012
 
2013
 
2012
Common OP Units (Note 10)
 
1,138,356

 
899,336

 
1,134,855

 
887,478

Preferred OP Units (Note 10)
 
114,014

 
114,128

 
114,090

 
114,128

Restricted Stock Awards (Note 11)
 
606,024

 
581,627

 

 

Total potentially dilutive securities
 
1,858,394

 
1,595,091

 
1,248,945

 
1,001,606

 

12

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


The following is a summary of the elements used in calculating basic and diluted earnings per share:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2013
 
2012
 
2013
 
2012
Numerator – basic and diluted earnings per share:
 
 
 
 
 
 
 
 
(Loss) income from continuing operations
 
$
(5,366
)
 
$
(843
)
 
$
20,675

 
$
27,689

Income from continuing operations attributable to noncontrolling interests
 
(30
)
 
(374
)
 
(1,380
)
 
(1,762
)
(Loss) income from continuing operations attributable to common shareholders
 
(5,396
)
 
(1,217
)
 
19,295

 
25,927

Amount allocated to participating securities
 
(218
)
 
(196
)
 
(710
)
 
(652
)
(Loss) income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
 
(5,614
)
 
(1,413
)
 
18,585

 
25,275

Income from discontinued operations
 
53,198

 
1,865

 
58,204

 
7,145

Income from discontinued operations attributable to noncontrolling interests
 
(626
)
 
(21
)
 
(684
)
 
(91
)
Income from discontinued operations attributable to common shareholders
 
52,572

 
1,844

 
57,520

 
7,054

Net income attributable to common shareholders
 
$
46,958

 
$
431

 
$
76,105

 
$
32,329

Denominator:
 
 

 
 

 
 

 
 

Basic weighted average common shares outstanding
 
104,781,431

 
89,169,868

 
104,752,982

 
79,404,323

Restricted Stock Awards (Note 11)
 

 

 
628,071

 
605,140

Diluted weighted average common shares outstanding
 
104,781,431

 
89,169,868

 
105,381,053

 
80,009,463

 
Earnings per share – basic:
 
 
 
 
 
 
 
 
(Loss) income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
 
$
(0.05
)
 
$
(0.02
)
 
$
0.18

 
$
0.32

Income from discontinued operations attributable to common shareholders
 
$
0.50

 
$
0.02

 
$
0.55

 
$
0.09

Net income attributable to common shareholders
 
$
0.45

 
$

 
$
0.73

 
$
0.41

Earnings per share – diluted:
 
 

 
 

 
 

 
 

(Loss) income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
 
$
(0.05
)
 
$
(0.02
)
 
$
0.18

 
$
0.31

Income from discontinued operations attributable to common shareholders
 
$
0.50

 
$
0.02

 
$
0.54

 
$
0.09

Net income attributable to common shareholders
 
$
0.45

 
$

 
$
0.72

 
$
0.40

 
Earnings per Unit – Operating Partnership
 
Basic earnings per OP Unit is computed using net income attributable to common unitholders and the weighted average number of common units outstanding during the period.  Diluted earnings per OP Unit reflects the potential dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units or resulted in the issuance of OP Units and then shared in the earnings of the Operating Partnership.

The following potentially dilutive securities were outstanding for the three months ended September 30, 2013 and 2012, but were not included in the computation of diluted earnings per unit because the effects of their inclusion would be anti-dilutive.


13

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


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2013
 
2012
 
2013
 
2012
Restricted Stock Awards (Note 11)
 
606,024

 
581,627

 

 

Total potentially dilutive securities
 
606,024

 
581,627

 

 


The following is a summary of the elements used in calculating basic and diluted earnings per unit:
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2013
 
2012
 
2013
 
2012
Numerator – basic and diluted earnings per unit:
 
 
 
 
 
 
 
 
(Loss) income from continuing operations
 
$
(5,366
)
 
$
(843
)
 
$
20,675

 
$
27,689

Income from continuing operations attributable to noncontrolling interests – partially owned properties
 
(83
)
 
(329
)
 
(1,078
)
 
(1,312
)
Loss (income) from continuing operations attributable to Series A preferred units
 
11

 
(44
)
 
(76
)
 
(127
)
Amount allocated to participating securities
 
(218
)
 
(196
)
 
(710
)
 
(652
)
(Loss) income from continuing operations attributable to common unitholders, net of amount allocated to participating securities
 
(5,656
)
 
(1,412
)
 
18,811

 
25,598

Income from discontinued operations
 
53,198

 
1,865

 
58,204

 
7,145

Income from discontinued operations attributable to Series A preferred units
 
(57
)
 
(2
)
 
(61
)
 
(10
)
Income from discontinued operations attributable to common unitholders
 
53,141

 
1,863

 
58,143

 
7,135

Net income attributable to common unitholders
 
$
47,485

 
$
451

 
$
76,954

 
$
32,733

Denominator:
 
 

 
 

 
 

 
 

Basic weighted average common units outstanding
 
105,919,787

 
90,069,204

 
105,887,837

 
80,291,801

Restricted Stock Awards (Note 11)
 

 

 
628,071

 
605,140

Diluted weighted average common units outstanding
 
105,919,787

 
90,069,204

 
106,515,908

 
80,896,941