S&P Awards BBB Rating to American Campus Communities

AUSTIN – A handful of weeks after receiving a Baa3 Issuer Rating from Moody’s Investors Service Inc., American Campus Communities Inc. has obtained a BBB corporate credit rating from Standard & Poor’s Rating Services. ACC  is the first student housing owner, developer, operator and manager to receive ratings from these credit agencies.

Analysts following the student housing industry tell GlobeSt.com that the ratings are important for both ACC and the student housing industry, which is still a fairly new one. “This not only gives ACC better and cheaper access to capital, but added to the fact it was added to the S&P 400 not so long ago, it puts them on the screens of a lot more institutional investors,” explains analyst Haendel St. Juste with Keefe, Bruyette & Woods Inc. in Manhattan. “Better cost of capital , better overall valuations, should come from something like this.”

St. Juste adds that obtaining the credit ratings has been one of ACC’s core goals for the past couple of years, and the company achieved that goal sooner than anticipated.

Andrew Dizio, vice president and research analyst with Janney Montgomery Scott LLC’s Philadelphia office agrees that obtaining “stable” ratings from S&P and Moody’s will be of enormous help to ACC when it comes to obtaining liquidity. Furthermore, Dizio said he wasn’t surpised that ACC was the first student housing company to attract the interest of the credit agencies.

“ACC has been a pioneer in the industry in terms of everything from raising equity, to working with Fannie and Freddie,” Dizio says. “This is another step in legitimizing the industry, and ACC has led the way since going public.”

He goes on to say that ACC’s next likely step would be to issue unsecured bonds. During a recent conference call, ACC indicated there was no pressing need to move in that direction right now. However, as the student housing developer works through its pipeline in the coming year, it could start issuing those bonds to create more liquidity.

“Assuming everything is status quo and assuming the bond markets remain open, I’d expect them to raise some public debt in 2012,” Dizio predicts. Calls to ACC were not returned by deadline.

Debt issuance aside, S&P’s and Moody’s actions mean others in the student housing industry should find it a little less onerous to obtain ratings. Memphis, TN-based Education Realty Trust (EDR), a collegiate housing REIT, is working toward obtaining credit ratings within the next year and a half or so. Dizio, however, believes EDR will need to built its asset base a little more before it can achieve the ratings.

Both Dizio and St. Juste point out that student housing is still a relatively small sector in real estate, but one with a great deal of potential. As such, Moody's and S&P's actions will help investors sit up and take notice of the industry.

“As these companies establish themselves and continue to obtain institutional credibility, there will be good long-term prospects for them,” St. Juste adds.