American Campus Communities sees FFOM Increase to $24 Million in Q3

AUSTIN-William C. Bayless Jr., American Campus Communities Inc.’s CEO was in rare form during the company’s Oct. 26 Q3 earnings call and with good reason. He had plenty of good news to report.

“We continue to make meaningful progress on all fronts,” he stated. On the balance sheet, ACC’s FFOM ended up at $24 million, compared to $20 million year over year, while overall revenue totaled $97.3 million versus $85.7 million from the same time a year ago.  

Furthermore, occupancy also saw a slight uptick from Q3 2010’s 98.3% occupancy, with the portfolio showing 98.5% occupancy this past quarter. The company also demonstrated continued construction and acquisition activity.

Wall Street seemed to be somewhat skeptical, however, as the company’s stock price was slightly down at the close of business day, Oct. 26. Though not specifically addressed during the conference call, the company’s operating income did decrease $0.2 million (1.2%) year over year because of construction savings earned on a third-party development project completed during Q3 2010 which was, in turn, offset by the acquisition of 16 properties during the second half of 2010. Also adding to this figure was increased occupancy and rental rates for the 2011-2012 academic year.

Net income also dropped – it was $1.6 million during the past quarter versus $3.9 million during Q3 2010. The drop was attributed to a non-cash gain of $3.9 million that had been recognized during Q2 2010 which was related to the purchase of 11 properties from a joint venture in which the company previously had a 10% interest. Lest investors should worry about the decrease, it was set off by a decrease in interest expense resulting from loans that had been paid off in 2010 and 2011. Furthermore, an increase in construction and acquisitions also somewhat took their toll on net income.

Additionally, very good news for American Campus Communities was reviewed a couple of days before the earnings call.  On Oct. 25, company executives announced that Moody’s Investor Service assigned a Baa3 Issuer Rating, making ACC the first student housing company to achieve investment grade rating. Such a move, Bayless comment, will ultimately help the company to access the unsecured bond market.  However, during the question and answer period, EVP capital markets Daniel Perry pointed out that, while the rating came in sooner than expected, ACC isn’t ready to start going crazy with unsecured financing.  “We don’t feel the urgency,” he remarked. “The bond market isn’t really open right now anyway. We think the first half of 2012 is the first time we’d look at going out and getting a bond deal done.”