AMERICAN CAMPUS COMMUNITIES INC [ACC] Filings

10-Q 1 acc-20220331.htm 10-Q acc-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2022

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

For the Transition Period From _________ to_________

Commission file number: 001-32265

AMERICAN CAMPUS COMMUNITIES, INC.

(Exact name of registrant as specified in its charter)


Maryland		76-0753089
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

12700 Hill Country Blvd. Suite T-200 Austin, TX		78738
(Address of Principal Executive Offices)		(Zip Code)

	(512) 732-1000
	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, par value $.01 per share

ACC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated Filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

There were 139,483,032 shares of the American Campus Communities, Inc.’s common stock with a par value of $0.01 per share outstanding as of the close of business on April 29, 2022.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2022

TABLE OF CONTENTS


		PAGE NO.

PART I.

Item 1.	Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries

	Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	1

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021 (all unaudited)	2

	Consolidated Statements of Changes in Equity for the three months ended March 31, 2022 and 2021 (all unaudited)	3

	Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (all unaudited)	4

	Notes to Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	33

Item 4.	Controls and Procedures	33

PART II.

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	36

SIGNATURES		37

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	March 31, 2022		December 31, 2021
	(Unaudited)
Assets

Investments in real estate
Owned properties, net	$	6,637,363	$	6,676,811

On-campus participating properties, net	63,809		65,559
Investments in real estate, net	6,701,172		6,742,370

Cash and cash equivalents	87,656		120,351
Restricted cash	16,988		14,326
Student contracts receivable, net	20,476		14,187
Operating lease right of use assets	455,627		456,239
Other assets	214,329		227,113

Total assets	$	7,496,248	$	7,574,586

Liabilities and equity

Liabilities
Secured mortgage and bond debt, net	$	534,735	$	535,836

Unsecured notes, net	2,774,979		2,773,855
Unsecured term loan, net	199,912		199,824
Unsecured revolving credit facility	—		—
Accounts payable and accrued expenses	57,277		93,067
Operating lease liabilities	498,897		496,821
Other liabilities	152,202		173,898
Total liabilities	4,218,002		4,273,301

Commitments and contingencies (Note 11)

Redeemable noncontrolling interests	31,193		31,858

Equity
American Campus Communities, Inc. and Subsidiaries stockholders’ equity
Common stock, $0.01 par value, 800,000,000 shares authorized, 139,293,193 and 139,064,213 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	1,393		1,391
Additional paid in capital	4,693,018		4,694,242
Common stock held in rabbi trust, 90,223 and 92,700 shares at March 31, 2022 and December 31, 2021, respectively	(3,887)		(3,943)
Accumulated earnings and dividends	(1,586,700)		(1,559,765)
Accumulated other comprehensive loss	(9,830)		(14,547)
Total American Campus Communities, Inc. and Subsidiaries stockholders’ equity	3,093,994		3,117,378
Noncontrolling interests – partially owned properties	153,059		152,049
Total equity	3,247,053		3,269,427

Total liabilities and equity	$	7,496,248	$	7,574,586



Consolidated variable interest entities’ assets and liabilities included in the above balances

Investments in real estate, net	$	810,794	$	819,795
Cash, cash equivalents, and restricted cash	$	50,149	$	46,234
Other assets	$	22,464	$	23,743
Secured mortgage debt, net	$	404,128	$	404,790
Accounts payable, accrued expenses, and other liabilities	$	40,936	$	52,407

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands, except share and per share data)


	Three Months Ended March 31,
		2022		2021
Revenues
Owned properties		$	253,048	$	218,444
On-campus participating properties		10,694		8,958
Third-party development services		6,882		1,959
Third-party management services		3,122		3,361

Total revenues		273,746		232,722

Operating expenses
Owned properties		103,608		93,991
On-campus participating properties		4,001		3,290
Third-party development and management services		5,154		5,387
General and administrative		10,298		11,128
Depreciation and amortization		70,552		68,117
Ground/facility leases		6,138		3,208



Other operating expenses		—		1,200
Total operating expenses		199,751		186,321

Operating income		73,995		46,401

Nonoperating income (expenses)
Interest income		560		220
Interest expense		(30,061)		(28,977)
Amortization of deferred financing costs		(1,614)		(1,319)

Other nonoperating income		180		—
Total nonoperating expenses		(30,935)		(30,076)

Income before income taxes		43,060		16,325
Income tax provision		(340)		(340)
Net income		42,720		15,985



Net income attributable to noncontrolling interests		(3,537)		(367)
Net income attributable to ACC, Inc. and Subsidiaries common stockholders		$	39,183	$	15,618

Other comprehensive income
Change in fair value of interest rate swaps and other		4,717		2,518
Comprehensive income		$	43,900	$	18,136

Net income per share attributable to ACC, Inc. and Subsidiaries common stockholders
Basic		$	0.28	$	0.11
Diluted		$	0.27	$	0.11

Weighted-average common shares outstanding
Basic		139,237,447		137,711,965
Diluted		140,536,609		139,008,642

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited, in thousands, except share data)


	Common Shares	Par Value of Common Shares		Additional Paid in Capital		Common Shares Held in Rabbi Trust	Common Shares Held in Rabbi Trust at Cost		Accumulated Earnings and Dividends		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests – Partially Owned Properties		Total
Equity, December 31, 2021	139,064,213	$	1,391	$	4,694,242	92,700	$	(3,943)	$	(1,559,765)	$	(14,547)	$	152,049	$	3,269,427
Adjustments to reflect redeemable noncontrolling interests at fair value	—	—		577		—	—		—		—		—		577
Amortization of restricted stock awards	—	—		4,294		—	—		—		—		—		4,294
Vesting of restricted stock awards	226,503	2		(6,039)		—	—		—		—		—		(6,037)
Distributions to common and restricted stockholders ($0.47 per common share)	—	—		—		—	—		(66,118)		—		—		(66,118)

Distributions to noncontrolling interests - partially owned properties	—	—		—		—	—		—		—		(2,381)		(2,381)


Change in fair value of interest rate swaps and other	—	—		—		—	—		—		4,717		—		4,717

Withdrawals from deferred compensation plan, net of deposits	2,477	—		(56)		(2,477)	56		—		—		—		—
Net income	—	—		—		—	—		39,183		—		3,391		42,574
Equity, March 31, 2022	139,293,193	$	1,393	$	4,693,018	90,223	$	(3,887)	$	(1,586,700)	$	(9,830)	$	153,059	$	3,247,053


	Common Shares	Par Value of Common Shares		Additional Paid in Capital		Common Shares Held in Rabbi Trust	Common Shares Held in Rabbi Trust at Cost		Accumulated Earnings and Dividends		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests – Partially Owned Properties		Total
Equity, December 31, 2020	137,540,345	$	1,375	$	4,472,170	91,746	$	(3,951)	$	(1,332,689)	$	(22,777)	$	42,409	$	3,156,537
Adjustments to reflect redeemable noncontrolling interests at fair value	—	—		(354)		—	—		—		—		—		(354)
Amortization of restricted stock awards and vesting of restricted stock units	9,054	—		5,148		—	—		—		—		—		5,148
Vesting of restricted stock awards	224,647	3		(4,472)		—	—		—		—		—		(4,469)
Distributions to common and restricted stockholders ($0.47 per common share)	—	—		—		—	—		(65,421)		—		—		(65,421)

Distributions to noncontrolling interests - partially owned properties	—	—		—		—	—		—		—		(1,138)		(1,138)


Change in fair value of interest rate swaps and other	—	—		—		—	—		—		2,518		—		2,518


Deposits to deferred compensation plan, net of withdrawals	(10,115)	—		375		10,115	(375)		—		—		—		—
Net income	—	—		—		—	—		15,618		—		300		15,918
Equity, March 31, 2021	137,763,931	$	1,378	$	4,472,867	101,861	$	(4,326)	$	(1,382,492)	$	(20,259)	$	41,571	$	3,108,739

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Three Months Ended March 31,
	2022		2021
Operating activities
Net income	$	42,720	$	15,985
Adjustments to reconcile net income to net cash provided by operating activities

Gain from insurance settlement	(180)		—


Depreciation and amortization	70,552		68,117
Amortization of deferred financing costs and debt premiums/discounts	1,775		1,107
Share-based compensation	4,294		5,148
Income tax provision	340		340
Amortization of interest rate swap terminations	426		426

Changes in operating assets and liabilities
Student contracts receivable, net	(6,289)		(2,552)
Other assets	12,693		(3,479)
Accounts payable and accrued expenses	(36,130)		(27,178)
Other liabilities	(16,787)		(8,100)
Net cash provided by operating activities	73,414		49,814

Investing activities


Capital expenditures for owned properties	(10,252)		(9,329)
Investments in owned properties under development	(20,664)		(57,565)
Other investing activities	3,359		319
Net cash used in investing activities	(27,557)		(66,575)

Financing activities



Pay-off of mortgage loans	—		(10,295)



Proceeds from revolving credit facility	—		205,300
Paydowns of revolving credit facility	—		(113,900)


Scheduled principal payments on debt	(1,120)		(1,588)
Debt issuance costs	—		(237)


Taxes paid on net-share settlements	(6,037)		(4,469)
Distributions paid to common and restricted stockholders	(66,118)		(65,421)
Distributions paid to noncontrolling interests	(2,615)		(1,372)

Net cash (used in) provided by financing activities	(75,890)		8,018

Net change in cash, cash equivalents, and restricted cash	(30,033)		(8,743)
Cash, cash equivalents, and restricted cash at beginning of period	134,677		73,972
Cash, cash equivalents, and restricted cash at end of period	$	104,644	$	65,229

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents	$	87,656	$	41,111
Restricted cash	16,988		24,118
Total cash, cash equivalents, and restricted cash at end of period	$	104,644	$	65,229

Supplemental disclosure of non-cash investing and financing activities






Accrued development costs and capital expenditures	$	12,287	$	18,131
Change in fair value of redeemable noncontrolling interest	$	577	$	(354)






Supplemental disclosure of cash flow information
Interest paid, net of amounts capitalized	$	37,179	$	38,437

See accompanying notes to consolidated financial statements.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

American Campus Communities, Inc. (“ACC”) is a real estate investment trust (“REIT”) that commenced operations effective with the completion of an initial public offering (“IPO”) on August 17, 2004, and is one of the largest owners, managers, and developers of high quality student housing properties in the United States in terms of beds owned and under management. ACC is a fully integrated, self-managed, and self-administered equity REIT with expertise in the acquisition, design, financing, development, construction management, leasing, and management of student housing properties.

ACC is structured as an umbrella partnership REIT (“UPREIT”) and contributes all net proceeds from its various equity offerings to American Campus Communities Operating Partnership LP (“ACCOP” or “the Operating Partnership”). In return for those contributions, ACC receives a number of units of the Operating Partnership (“OP Units”) equal to the number of common shares it has issued in the equity offering. Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of OP Units in the Operating Partnership. Based on the terms of ACCOP’s partnership agreement, OP Units can be exchanged for ACC’s common shares on a one-for-one basis. The Company maintains a one-for-one relationship between the OP Units of the Operating Partnership issued to ACC and American Campus Communities Holdings, LLC (“ACC Holdings”), the general partner of ACCOP, and the common shares issued to the public.

As used in this report, unless stated otherwise or the context otherwise requires, references to “ACC,” “the Company,” “we,” “us,” or “our” mean American Campus Communities, Inc., a Maryland corporation that has elected to be treated as a REIT under the Internal Revenue Code, and its consolidated subsidiaries, including ACCOP.

As previously announced, on April 18, 2022, the Company and the Operating Partnership entered into an agreement and plan of merger (the “Merger Agreement”) with Abacus Parent LLC (“Parent”), Abacus Merger Sub I LLC (“Merger Sub I”), and Abacus Merger Sub II LLC (“Merger Sub II”). Parent, Merger Sub I, and Merger Sub II are affiliates of Blackstone Core+ perpetual capital vehicles, primarily comprised of Blackstone Real Estate Income Trust, Inc. and Blackstone Property Partners. Pursuant to the Merger Agreement, Merger Sub II will merge with and into the Operating Partnership (the “Partnership Merger”), with the Operating Partnership being the surviving entity, and immediately following the consummation of the Partnership Merger, the Company shall merge with and into Merger Sub I (the “Company Merger”), with Merger Sub I being the surviving entity. Pursuant to the Merger Agreement, the outstanding shares of common stock of the Company will be acquired for $65.47 per share (the “Merger Consideration”) in an all-cash transaction. During the term of the Merger Agreement, the Company may not pay dividends except as necessary to preserve its tax status as a REIT, and any such dividends would result in an offsetting decrease to the Merger Consideration.

The Company Merger, Partnership Merger, and the other transactions contemplated by the Merger Agreement (the “Merger Transactions”) are subject to customary closing conditions, including approval by the Company’s common stockholders. The Merger Transactions are expected to close during the third quarter of 2022. The Company can provide no assurances regarding whether the Merger Transactions will close as expected during the third quarter of 2022 or at all. The Board of Directors of the Company has unanimously approved the Merger Agreement, and has recommended approval of the merger, and the other transactions contemplated by the Merger Agreement, by the Company’s stockholders.

As of March 31, 2022, the Company’s property portfolio contained 166 properties with approximately 111,900 beds. The Company’s property portfolio consisted of 126 owned off-campus student housing properties that are in close proximity to colleges and universities, 34 American Campus Equity (“ACE®”) properties operated under ground/facility leases, and six on-campus participating properties (“OCPPs”) operated under ground/facility leases with the related university systems. Of the 166 properties, four of 10 phases at one property were under development as of March 31, 2022, and when completed will consist of a total of approximately 3,700 beds. The Company’s communities contain modern housing units and are supported by a resident assistant system and other student-oriented programming, with many offering resort-style amenities.

Through one of ACC’s taxable REIT subsidiaries (“TRSs”), the Company also provides construction management and development services primarily for student housing properties owned by colleges and universities, charitable foundations, and others. As of March 31, 2022, also through one of ACC’s TRSs, the Company provided third-party management and leasing services for 36 properties that represented approximately 28,400 beds. Third-party management and leasing services are typically provided pursuant to management contracts that have initial terms that range from one year to five years. As of March 31, 2022, the Company’s total owned and third-party managed portfolio included 202 properties with approximately 140,300 beds.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

2. Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements, presented in U.S. dollars, are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and revenue and expenses during the reporting periods. The Company’s actual results could differ from those estimates and assumptions. All material intercompany transactions among consolidated entities have been eliminated. All dollar amounts in the tables herein, except share and per share amounts, are stated in thousands unless otherwise indicated.

Principles of Consolidation

The Company’s consolidated financial statements include its accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which it has control. Investments acquired or created are evaluated based on the accounting guidance relating to variable interest entities (“VIEs”), which requires the consolidation of VIEs in which the Company is considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation using the voting interest model.

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04 “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. In March 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. In May 2021, the Company elected to apply the contract modification expedient to contracts affected by reference rate reform. This expedient allows the Company to treat contract modifications related to reference rate reform as a modification without additional analysis, as long as there are no changes to contractual cash flows as a result of the modification. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In addition, the Company does not expect the following accounting pronouncements to have a material effect on its consolidated financial statements:


Accounting Standards Update						Effective Date
ASU 2021-08 “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”						January 1, 2023

Recently Adopted Accounting Pronouncements

On January 1, 2022, the Company adopted the following accounting pronouncements which did not have a material effect on the Company’s consolidated financial statements:

•ASU 2020-06 “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity"

•ASU 2021-05 “Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments”

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Interim Financial Statements

The accompanying interim financial statements are unaudited but have been prepared in accordance with GAAP for interim financial information and in conjunction with the rules and regulations of the SEC. Accordingly, they do not include all disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements of the Company for the interim period have been included. Because of the seasonal nature of the Company’s operations, the results of operations and cash flows for any interim period are not necessarily indicative of results for other interim periods or for the full year. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Prior Year Reclassifications

Certain prior period amounts were reclassified to conform to current presentation, which include:

•Litigation settlement expenses previously reported in the general and administrative expenses line item on the statements of comprehensive income were reclassified for all applicable periods to the other operating expenses line item in the accompanying consolidated statements of comprehensive income.

Restricted Cash

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

Leases

As Lessee

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

In the accompanying consolidated statements of comprehensive income, rent expense for ACE properties and OCPPs is included in ground/facility leases expense, and rent expense for owned off-campus properties is included in owned properties operating expenses. During the three months ended March 31, 2022 and 2021, the Company received rent concessions in the form of ground rent abatements at one ACE property related to the initial suspension of the Disney College Internship Program due to the effects of the novel coronavirus disease pandemic (“COVID-19”). The abatements allow for variable ground rent payments in lieu of fixed ground rent payments until the occupancy for the project, which is currently being developed, is stabilized. These concessions are recorded as a reduction to ground/facility leases expense, in accordance with the FASB Staff Question & Answer “Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic,” issued in 2020 and are presented in the following table:


	Three Months Ended March 31,
		2022		2021
Ground rent abatements		$	2,717	$	1,131

As Lessor

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

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company recognizes the base lease payments provided for under the leases on a straight-line basis over the lease term, and variable payments are recognized in the period in which the changes in facts and circumstances, on which the variable payments are based, occur. Lease income under both student and commercial leases is included in owned properties revenues and on-campus participating properties revenues in the accompanying consolidated statements of comprehensive income and is presented in the following table:


	Three Months Ended March 31,
		2022		2021
Student lease income		$	248,118	$	213,854
Commercial lease income		$	3,265	$	2,945

Consolidated VIEs

The Company has investments in various entities that qualify as VIEs for accounting purposes and for which the Company is the primary beneficiary and therefore includes the entities in its consolidated financial statements. These VIEs include ACCOP, seven joint ventures that own a total of 13 operating properties and two land parcels, and six properties owned under the on-campus participating property (“OCPP”) structure. The VIE assets and liabilities consolidated within the Company's assets and liabilities are disclosed at the bottom of the accompanying consolidated balance sheets.

Impairment of Long-Lived Assets

Management assesses whether there has been an impairment in the value of the Company’s investments in real estate whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is recognized when estimated expected future undiscounted cash flows are less than the carrying value of the property, or when a property meets the criteria to be classified as held for sale, at which time an impairment charge is recognized for any excess of the carrying value of the property over the expected net proceeds from the disposal. 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. In the case of any impairment, the valuation would be based on Level 3 inputs. There were no impairments of the carrying values of the Company's investments in real estate as of March 31, 2022.

3. Earnings Per Share

Basic earnings per share is computed using net income attributable to common stockholders and the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings per share reflects common shares issuable from the assumed conversion of OP Units and common share awards granted. Only those items having a dilutive impact on basic earnings per share are included in diluted earnings per share.

The following potentially dilutive securities were outstanding for the three months ended March 31, 2022 and 2021, but were not included in the computation of diluted earnings per share because the effects of their inclusion would be anti-dilutive.


	Three Months Ended March 31,
		2022	2021
Common OP Units (Note 7)		468,475	468,475
Preferred OP Units (Note 7)		35,242	35,242

Total potentially dilutive securities		503,717	503,717

AMERICAN CAMPUS COMMUNITIES, INC. 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 March 31,
		2022		2021
Numerator – basic and diluted earnings per share
Net income		$	42,720	$	15,985
Net income attributable to noncontrolling interests		(3,537)		(367)
Net income attributable to ACC, Inc. and Subsidiaries common stockholders		39,183		15,618
Amount allocated to participating securities		(714)		(734)
Net income attributable to ACC, Inc. and Subsidiaries common stockholders		$	38,469	$	14,884







Denominator
Basic weighted average common shares outstanding		139,237,447		137,711,965
Unvested restricted stock awards (Note 8)		1,299,162		1,296,677


Diluted weighted average common shares outstanding		140,536,609		139,008,642

Earnings per share
Net income attributable to common stockholders - basic		$	0.28	$	0.11
Net income attributable to common stockholders - diluted		$	0.27	$	0.11

4. Investments in Real Estate

Owned Properties

Owned properties, both wholly-owned and those owned through investments in VIEs, consisted of the following:


	March 31, 2022		December 31, 2021
Land	$	678,254	$	678,254
Buildings and improvements	7,295,097		7,241,918
Furniture, fixtures, and equipment	431,163		425,469
Construction in progress	211,558		242,566
	8,616,072		8,588,207
Less accumulated depreciation	(1,978,709)		(1,911,396)
Owned properties, net	$	6,637,363	$	6,676,811

Project costs directly associated with the development and construction of an owned real estate project, which include interest, property taxes, and amortization of deferred financing costs, are capitalized as construction in progress. Upon completion of the project, costs are transferred into the applicable asset category and depreciation commences. Interest totaling approximately $1.6 million and $2.5 million was capitalized during the three months ended March 31, 2022 and 2021, respectively.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

On-Campus Participating Properties (OCPPs)

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

OCPPs consisted of the following:



	March 31, 2022		December 31, 2021

Buildings and improvements	$	160,476	$	160,275
Furniture, fixtures, and equipment	14,315		14,213
Construction in progress	—		60
	174,791		174,548
Less accumulated depreciation	(110,982)		(108,989)
On-campus participating properties, net	$	63,809	$	65,559

5. Debt

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


	March 31, 2022		December 31, 2021
Debt secured by owned properties
Mortgage loans payable
Unpaid principal balance	$	460,404	$	460,825
Unamortized deferred financing costs	(562)		(596)
Unamortized debt premiums	490		540
Unamortized debt discounts	(91)		(103)
	460,241		460,666



Debt secured by OCPPs
Mortgage loans payable (1)	60,288		60,986
Bonds payable (1)	14,695		14,695
Unamortized deferred financing costs	(489)		(511)

	74,494		75,170
Total secured mortgage and bond debt, net	534,735		535,836
Unsecured notes, net of unamortized OID and deferred financing costs (2)	2,774,979		2,773,855
Unsecured term loan, net of unamortized deferred financing costs (3)	199,912		199,824
Unsecured revolving credit facility	—		—
Total debt, net	$	3,509,626	$	3,509,515

(1)The creditors of mortgage loans payable and bonds payable related to OCPPs do not have recourse to the assets of the Company.

(2)Includes net unamortized original issue discount (“OID”) of $5.1 million and $5.3 million at March 31, 2022 and December 31, 2021, respectively, and net unamortized deferred financing costs of $19.9 million and $20.8 million at March 31, 2022 and December 31, 2021, respectively.

(3)Includes net unamortized deferred financing costs of $0.1 million and $0.2 million at March 31, 2022 and December 31, 2021, respectively.

We are subject to various restrictions under the Merger Agreement on issuing and assuming additional debt and utilizing our revolving credit facility.

Mortgage Loans Payable

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

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In February 2021, the Company refinanced $24.0 million of OCPP mortgage debt that was scheduled to mature in 2021, which extended the maturity to February 2028. Additionally, in February 2021, the Company entered into two interest rate swap agreements to convert the refinanced mortgage loan to a fixed rate of 2.8%. Refer to Note 9 for information related to derivatives.

Unsecured Notes

The following senior unsecured notes issued by the Operating Partnership were outstanding as of March 31, 2022:


Date Issued	Amount		% of Par Value	Coupon		Yield			Original Issue Discount		Term (Years)
April 2013	$	400,000	99.659	3.750	%	3.791	%		$	1,364	10
June 2014	400,000		99.861	4.125	%	4.269	%	(1)	556		10
October 2017	400,000		99.912	3.625	%	3.635	%		352		10
June 2019	400,000		99.704	3.300	%	3.680	%	(1)	1,184		7
January 2020	400,000		99.810	2.850	%	2.872	%		760		10
June 2020	400,000		99.142	3.875	%	3.974	%		3,432		10
October 2021	400,000		99.928	2.250	%	2.261	%		288		7
	$	2,800,000							$	7,936

(1)The yield includes the effect of the amortization of interest rate swap terminations (see Note 9).

The notes are fully and unconditionally guaranteed by the Company. Interest on the notes is payable semi-annually. The terms of the unsecured notes include certain financial covenants that require the Operating Partnership to limit the amount of total debt and secured debt as a percentage of total asset value, as defined. In addition, the Operating Partnership must maintain a minimum ratio of unencumbered asset value to unsecured debt, as well as a minimum interest coverage level. As of March 31, 2022, the Company was in compliance with all such covenants.

Unsecured Revolving Credit Facility

The Company is party to an unsecured revolving credit facility (“Credit Facility”) that has capacity of $1.0 billion and contains an accordion feature that allows the Company to expand the Credit Facility by up to an additional $500 million, subject to the satisfaction of certain conditions. Additionally, a component of the interest rate is based on the achievement of specified environmental, social, and governance (“ESG”) targets which include the achievement of diversity rates among the Company’s independent board members and employees and completion of certifications or renovations that meet certain sustainability standards. The Credit Facility matures in May 2025, and can be extended through two six-month extension options, subject to the satisfaction of certain conditions.

The Credit Facility bears interest at a variable rate, at the Company’s option, based upon a base rate of one-, three-, or six-month LIBOR, plus, in each case, a spread based upon the Company’s investment grade rating from either Moody’s Investor Services, Inc. or Standard & Poor’s Rating Group, subject to adjustment based upon the achievement of ESG targets described above. Additionally, the Company is required to pay a facility fee of 0.20% per annum on the $1.0 billion Credit Facility. As of March 31, 2022, the Credit Facility had a zero balance and availability under the Credit Facility totaled $1.0 billion.

The terms of the Credit Facility include certain restrictions and covenants, which limit, among other items, the incurrence of additional indebtedness and liens. The facility contains customary affirmative and negative covenants and also contains financial covenants that, among other things, require the Company to maintain certain maximum leverage ratios and minimum ratios of “EBITDA” (earnings before interest, taxes, depreciation, and amortization) to fixed charges. The financial covenants also include a minimum asset value requirement, a maximum secured debt ratio, and a minimum unsecured debt service coverage ratio. As of March 31, 2022, the Company was in compliance with all such covenants.

Unsecured Term Loan

The Company’s Term Loan totals $200 million and matures in June 2022. The agreement has an accordion feature that allows the Company to expand the amount by up to an additional $100 million, subject to the satisfaction of certain conditions. The Company is also currently party to two interest rate swap contracts to hedge the variable rate cash flows associated with the

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

LIBOR-based interest payments on the Term Loan. The weighted average annual rate on the Term Loan was 2.54% (1.44% + 1.10% spread) at March 31, 2022. The terms of the Term Loan include certain restrictions and covenants consistent with those of the unsecured revolving credit facility discussed above. As of March 31, 2022, the Company was in compliance with all such covenants.

In 2021, the Company modified the Term Loan to include LIBOR transition language and to conform the covenants and various administrative items from the agreement to those in the Company’s Credit Facility which was also amended in 2021.

6. Stockholders’ Equity

The Company has an at-the-market share offering program (the “ATM Equity Program”) through which the Company may issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $500 million. The shares that may be sold under this program include shares of common stock of the Company with an aggregate offering price of approximately $500.0 million that were not sold under the Company's previous ATM equity program that expired in 2021. There was no activity under the Company’s ATM Equity Program during the three months ended March 31, 2022 and 2021. As of March 31, 2022, the Company had approximately $440.3 million available for issuance under its ATM Equity Program. Pursuant to the Merger Agreement, the Company is restricted from issuing common stock under the ATM Equity Program.

The Company has a Non-Qualified Deferred Compensation Plan (“Deferred Compensation Plan”) for the benefit of certain employees and members of the Company’s Board of Directors in which vested share awards (see Note 8), salary, and other cash amounts earned may be deposited. Deferred Compensation Plan assets are held in a rabbi trust, which is subject to the claims of the Company’s creditors in the event of bankruptcy or insolvency. The shares held in the Deferred Compensation Plan are classified within stockholders’ equity in a manner similar to the manner in which treasury stock is classified. Subsequent changes in the fair value of the shares are not recognized. During the three months ended March 31, 2022, 7,311 and 9,788 shares of vested stock were deposited into and withdrawn from the Deferred Compensation Plan, respectively. As of March 31, 2022, 90,223 shares of ACC’s common stock were held in the Deferred Compensation Plan.

Pursuant to the Merger Agreement, shares held in the Deferred Compensation Plan will, as of immediately before the effective time of the Merger Transactions, become vested and no longer subject to restriction, and all shares will, at the merger effective time, be adjusted and converted into a right of the holder to have allocated to the holder’s account under the Deferred Compensation Plan an amount denominated in cash equal to the product of (1) the number of shares of common stock allocated to such account as of the merger effective time and (2) the Merger Consideration, and will no longer represent a right to receive a number of shares of common stock or cash equal to or based on the value of a number of shares of common stock.

7. Noncontrolling Interests

Noncontrolling interests - partially owned properties: As of March 31, 2022, the Company consolidates six joint ventures that own and operate 13 owned off-campus properties and one land parcel. The portion of net assets attributable to the third-party partners in these arrangements is classified as “noncontrolling interests - partially owned properties” within equity on the accompanying consolidated balance sheets.

Redeemable noncontrolling interests - OP Units: Included in redeemable noncontrolling interests on the accompanying consolidated balance sheets are OP Units for which ACCOP is required, either by contract or securities law, to deliver registered shares of ACC’s common stock to the exchanging OP unitholder, or for which ACCOP has the intent or history of exchanging such units for cash. The units include Series A Preferred Units (“Preferred OP Units”) and Common OP Units. The value of OP Units is reported at the greater of fair value, which is based on the closing market value of the Company’s common stock at period end, or historical cost at the end of each reporting period. The OP unitholders’ share of the income or loss of the Company is included in “net income attributable to noncontrolling interests” on the consolidated statements of comprehensive income.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Below is a table summarizing the activity of redeemable noncontrolling interests for the three months ended March 31, 2022 and 2021:


Balance, December 31, 2021	$	31,858
Net income	146
Distributions	(234)




Adjustments to reflect redeemable noncontrolling interests at fair value	(577)
Balance, March 31, 2022	$	31,193


Balance, December 31, 2020	$	24,567
Net income	67
Distributions	(234)



Adjustments to reflect redeemable noncontrolling interests at fair value	354
Balance, March 31, 2021	$	24,754

Pursuant to the Merger Agreement, at the effective time of the Partnership Merger, each Common OP Unit and each Preferred OP Unit, or fraction thereof, issued and outstanding as of immediately prior to such time (other than common partnership units held by the Company or any wholly owned subsidiary of the Company) will be automatically cancelled and converted into the right to receive an amount in cash equal to the Merger Consideration, without interest and less any applicable withholding taxes.

8. Incentive Award Plan

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

Restricted Stock Awards

A summary of RSAs as of March 31, 2022 and activity during the three months then ended is presented below:


			Number of RSAs
Nonvested balance as of December 31, 2021			1,111,098
Granted			433,128
Vested (1)			(338,737)
Forfeited			(12,952)
Nonvested balance as of March 31, 2022			1,192,537

(1) Includes 112,234 shares withheld to satisfy tax obligations upon vesting.

The fair value of RSAs is calculated based on the closing market value of ACC’s common stock on the date of grant. The fair value of these awards is amortized to expense over the vesting periods. Amortization expense for the three months ended March 31, 2022 and 2021 was approximately $4.3 million and $4.7 million, respectively.

Pursuant to the Merger Agreement, immediately prior to the effective time of the Merger Consideration, each outstanding unvested RSA, other than each outstanding equity-based award credited to a participant’s stock account under the Deferred Compensation Plan, and each outstanding unvested equity-based award with respect to which a valid deferral election under the Deferred Compensation Plan has been made, will automatically become fully vested and all restrictions and reacquisition rights thereon will lapse, and thereafter all shares of common stock represented thereby will be considered outstanding for all purposes under the Merger Agreement and will have the right to receive the Merger Consideration, less any applicable withholding taxes.

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

9. Derivative Instruments and Hedging Activities

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

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and forward starting swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Forward starting swaps are used to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a forecasted issuance of debt. These agreements contain provisions such that if the Company defaults on any of its indebtedness, regardless of whether the repayment of the indebtedness has been accelerated by the lender or not, then the Company could also be declared in default on its derivative obligations. As of March 31, 2022, the Company was not in default on any of its indebtedness or derivative instruments. Pursuant to the Merger Agreement, the Company is restricted from entering into new or amended indebtedness or derivative instruments.

The following table summarizes the Company’s outstanding interest rate swap contracts as of March 31, 2022, all of which have been designated as cash flow hedges and qualify for hedge accounting:


Hedged Debt Instrument	Effective Date	Maturity Date	Pay Fixed Rate	Receive Floating Rate Index	Current Notional Amount		Fair Value
Park Point mortgage loan	Feb 1, 2019	Jan 16, 2024	2.7475%	LIBOR - 1 month	$	69,926	$	(551)
College Park mortgage loan	Oct 16, 2019	Oct 16, 2022	1.2570%	LIBOR - 1 month	37,500		(1)
Unsecured term loan	Nov 4, 2019	Jun 27, 2022	1.4685%	LIBOR - 1 month	100,000		(170)
Unsecured term loan	Dec 2, 2019	Jun 27, 2022	1.4203%	LIBOR - 1 month	100,000		(158)
Cullen Oaks mortgage loan	Feb 16, 2021	Feb 15, 2028	0.7850%	LIBOR - 1 month	11,024		729
Cullen Oaks mortgage loan	Feb 16, 2021	Feb 15, 2028	0.7850%	LIBOR - 1 month	11,138		737
				Total	$	329,588	$	586

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2022 and December 31, 2021:

Asset Derivatives

Liability Derivatives

Balance Sheet Location

Fair Value as of

Balance Sheet Location

Fair Value as of

Description

3/31/2022

12/31/2021

3/31/2022

12/31/2021

Interest rate swap contracts

Other assets

1,466

464

Other liabilities

880

4,169

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The table below presents the effect of the Company’s derivative financial instruments on the accompanying consolidated statements of comprehensive income for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
Description		2022		2021
Change in fair value of derivatives and other recognized in other comprehensive income ("OCI")		$	3,054	$	786
Swap interest accruals reclassified to interest expense		1,237		1,306

Amortization of interest rate swap terminations (1)		426		426
Total change in OCI due to derivative financial instruments		$	4,717	$	2,518

Interest expense presented in the consolidated statements of comprehensive income in which the effects of cash flow hedges are recorded		$	30,061	$	28,977

(1)Represents amortization from OCI into interest expense.

As of March 31, 2022, the Company estimates that $2.5 million will be reclassified from OCI to interest expense over the next twelve months.

10. Fair Value Disclosures

There have been no significant changes in the Company’s policies and valuation techniques utilized to determine fair value from what was disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021.

Financial Instruments Carried at Fair Value

The following table presents information about the Company’s financial instruments measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. There were no Level 1 measurements for the periods presented, and the Company had no transfers between Levels 1, 2, or 3 during the periods presented.


	Fair Value Measurements as of
	March 31, 2022								December 31, 2021
		Level 2			Level 3		Total		Level 2			Level 3		Total
Assets
Derivative financial instruments		$	1,466	(1)	$	—	$	1,466	$	464	(1)	$	—	$	464
Liabilities
Derivative financial instruments		$	880	(1)	$	—	$	880	$	4,169	(1)	$	—	$	4,169
Mezzanine