American Campus Communities, Inc. Reports Third Quarter Financial Results.AUSTIN Austin. 1 City (1990 pop. 21,907), seat of Mower co., SE Minn., on the Cedar River, near the Iowa line; inc. 1868. The commercial and industrial center of a rich farm region, it is noted as home to the Hormel meatpacking company, whose Spam Town museum , Texas -- American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Campus Communities, Inc. (NYSE NYSE See: New York Stock Exchange : ACC See adaptive cruise control. ) (the "company") today reported operating results for the third quarter ended September September: see month. 30, 2004. Highlights --Consummated the company's initial public offering ("IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. ") of 12.6 million shares of common stock, including the exercise of 515,000 shares of the underwriter's over-allotment option, representing gross offering proceeds of $220.8 million. --Secured a $75.0 million credit facility from a syndicate Syndicate organized crime unit throughout major cities of the United States. [Am. Hist.: NCE, 2018] See : Gangsterism of lenders led by Citigroup Citigroup U.S. holding company formed in 1998 from the merger of Citicorp (itself a holding company incorporated in 1967) and Travelers Group, Inc. The $70 billion merger included one of the largest U.S. investment banks, Salomon Smith Barney Inc. and Deutsche Bank Deutsche Bank AG (IPA: /'dɔɪ.tʃə/[1]) (ISIN: DE0005140008, NYSE: DB) (English: German Bank . --Completed the development, lease up, and commencement of operations at three new properties totaling 457 units and 1,635 beds in San Bernardino San Bernardino, city, United States San Bernardino (săn bûr'nədē`nō), city (1990 pop. 164,164), seat of San Bernardino co., S Calif., at the foot of the San Bernardino Mts.; inc. 1854. , CA, Fresno Fresno (frĕz`nō), city (1990 pop. 354,202), seat of Fresno co., S central Calif.; inc. 1885. Settled in 1872 as a station on the Central Pacific RR, Fresno profited from irrigated farming as early as the 1880s. , CA and Philadelphia Philadelphia, ancient cities Philadelphia, name of several ancient cities. One was in Lydia, W Asia Minor (now W Turkey). At the foot of Mt. Tmolus and near the location of modern Alaşehir, it was founded in the 2d cent. B.C. , PA. As of September 30, 2004, these properties were 99 percent occupied oc·cu·py tr.v. oc·cu·pied, oc·cu·py·ing, oc·cu·pies 1. To fill up (time or space): a lecture that occupied three hours. 2. To dwell or reside in. 3. . --Achieved 97 percent occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy for same store owned off-campus properties for the 2004/2005 academic year lease-up, a 9 percent increase over the 2003/2004 lease-up occupancy of 88 percent. The company's total owned portfolio achieved 98 percent occupancy for the 2004/2005 academic year lease up. --Initiated the development of a $35.8 million owned off-campus property in Buffalo, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , consisting of 271 units and 828 beds, which is scheduled to open for occupancy in August 2005. --Entered into a purchase and sale agreement to acquire five student-housing properties in Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and consisting of 446 units and 1,656 beds, for a purchase price of $53.5 million, including the assumption of $35.5 million in debt. Third Quarter Operating Results Quarterly information discussed herein reflects the combination of the company's operations since its commencement on August 17, 2004 concurrent At the same time. It implies that multiple processes are taking place simultaneously. See concurrent operation. with the consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the IPO, and the company's Predecessor predecessor - parent operations for the period prior to August 17, 2004. The company's Predecessor operations include among other items, higher debt and interest expense levels, and the operations of certain non-core assets that were distributed to the Predecessor owners as part of the formation transactions that are reflected as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. in the Predecessor statement of operations See Income statement. . Additionally, the post-IPO results in the third quarter of 2004 were impacted by a series of charges totaling approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.6 million related to the company's recent IPO and related formation transactions. The primary components of the charges include: (i) profits interest unit grants of approximately $2.1 million; (ii) restricted stock unit grants of $0.1 million; and (iii) write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. costs and exit fees associated with the repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. of approximately $1.2 million. These items were partially offset by the recognition of a deferred tax asset associated with a step up in the tax basis of on-campus on-campus adjective Referring to an on-site site of a medical complex with multiple buildings. Cf 'Off campus.'. participating properties owned by our TRS See traffic engineering methods. TRS - term rewriting system , resulting in an income tax benefit of $0.8 million. As a result, the historic results of operations prior to the IPO and the related combined results of operations for the quarter discussed herein are not indicative indicative: see mood. , or in some instances directly comparable, to the results of operations after the IPO. For the three months ended September 30, 2004, the company had total revenues of $13.7 million compared to $13.3 million for the three months ended September 30, 2003, an increase of $0.4 million. The net loss, for the three months ended September 30, 2004, was $5.2 million, compared to a net loss of $1.5 million for the third quarter in 2003. Funds from Operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. ("FFO FFO See: Funds from operations ") for the three months ended September 30, 2004 and 2003 were ($2.6 million) and $0.7 million, respectively. Funds from operations - modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. for operational performance of on-campus participating properties ("FFOM FFOM Fraction Fermentescible des Ordures Ménagères FFOM Fellow of the Faculty of Occupational Medicine (Royal College of Physicians, London) ") for the three months ended September 30, 2004 and 2003 were ($2.2 million) and $1.3 million, respectively. Excluding the charges specifically related to the IPO and formation transactions as described in the preceding paragraph, net loss, FFO and FFOM for the three month period ended September 30, 2004 would have been $2.6 million, $0.0 million and $0.4 million, respectively. As anticipated in our Prospectus A document, notice, circular, advertisement, letter, or communication in written form or by radio or television that offers any security for sale, or confirms the sale of any security. dated August 11, 2004, the decline in our 2004 third quarter operating results is primarily the result of the decline in the third party development services revenues. A reconciliation of FFO and FFOM to net loss, the most directly comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure, is included in a schedule accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. this press release. Bill Bayless, Chief Executive Officer of American Campus Communities, stated, "The successful completion of our initial public offering during the quarter demonstrates the market's confidence in our strategy and proven track record. We are pleased that in tandem Adv. 1. in tandem - one behind the other; "ride tandem on a bicycle built for two"; "riding horses down the path in tandem" tandem with our public offering, we were able to secure a $75 million credit facility, deliver nine development properties for either our own account or third party clients, and lease our owned portfolio to a level in excess of 95 percent for the upcoming academic year. Our third quarter reflects the seasonality of our operations, as our business activities coincide with the beginning of the academic year at the nation's colleges and universities." Portfolio/Business Update The company opened six third party on-campus development projects representing in excess of $218 million in development, and consisting of more than 1,500 units and 4,000 beds. Four of the respective institutions have contracted the company to provide on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" property management services. In addition, during the quarter the company secured two additional third party management contracts. At the end of the quarter, the company owned 17 properties containing more than 4,000 units and 12,000 beds, an increase of 2,000 beds and 20% over the third quarter 2003 and, including the owned properties, the company managed 35 properties representing more than 8,700 units and 24,000 beds, an increase of 4,700 beds, or a 24% increase, over the third quarter 2003. Growth Activity As previously announced, the company commenced development on a $35.8 million owned off-campus development near the State University of New York (body) State University of New York - (SUNY) The public university system of New York State, USA, with campuses throughout the state. at Buffalo. The 271-unit, 828-bed development is expected to open for occupancy in the third quarter of 2005. The company also entered into an agreement to acquire five student-housing properties in Florida. The properties total 446 units and 1,656 beds with occupancy of approximately 95 percent, and currently generate average monthly revenue per bed of $445. The acquisition is expected to close in the fourth quarter of 2004. With regard to these transactions, Mr. Bayless commented, "We are excited about the opportunities afforded us by the Buffalo development and the Florida acquisitions. Both transactions fit well into our growth strategy, which focuses on owning high quality assets, located in close proximity PROXIMITY. Kindred between two persons. Dig. 38, 16, 8. to colleges and universities, that offer product differentiation Product Differentiation A source of competitive advantage that depends on producing some item that is regarded to have unique and valuable characteristics. , which provides a competitive advantage in the marketplace. Our strategy to maximize In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows. shareholder return is disciplined - we will not grow for the sake of growth, but will build value by staying true to the market and investment criteria criteria (krītēr´ē  ),n. that has made us the premiere company in the student housing industry." Third Quarter Distribution As previously announced the Board of Directors approved a quarterly dividend distribution of $0.1651 per share, which will be paid on November November: see month. 29, 2004 to all common shareholders of record as of November 22, 2004. 2004 Outlook The company believes that the financial results for the fourth quarter of 2004 will be affected by national and regional economic trends and events, the acquisition of properties, the amount of income recognized by the taxable REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). subsidiary, and any corresponding income tax expense and other factors. Based upon these assumptions management anticipates that the fourth quarter 2004 FFO will be in the range of $0.44 to $0.47 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share and that FFOM will be in the range of $0.35 to $0.38 per diluted share. All guidance is based on the current expectations and judgment of the company's management team. A reconciliation of the range provided for projected net income to projected FFO and FFOM for the fourth quarter of 2004, and assumptions utilized is included in the tables herein. 2005 Outlook The company believes that the financial results for the fiscal year ended December December: see month. 31, 2005 will be affected by national and regional economic trends and events, the acquisition of properties, the ability of the company to be awarded development projects and the timing of such awards, the amount of income recognized by the taxable REIT subsidiary, and any corresponding income tax expense and other factors. Based upon these assumptions management anticipates that the fiscal year 2005 FFO will be in the range of $1.54 to $1.67 per diluted share and that FFOM will be in the range of $1.32 to $1.47 per diluted share. All guidance is based on the current expectations and judgment of the company's management team. A reconciliation of the range provided for projected net income to projected FFO and FFOM for the fiscal year ended December 31, 2005, and assumptions utilized is included in the tables herein. Earnings Call The company will host a conference call to discuss third quarter results and provide a company update on Thursday Thursday: see week. , November 11, 2004 at 11:00 a.m. Eastern, 10:00 a.m. Central, 9:00 a.m. Mountain, 8:00 a.m. Pacific. To participate by telephone please dial 800-475-2151 or 973-582-2749 at least 5 minutes before start time. You may also participate in the call by webcast on the Company website at www.americancampuscommunities.com or at www.fulldisclosure.com. To listen to a live broadcast, go to this site at least 15 minutes prior to the scheduled start time in order to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. , and install any necessary audio software. In addition, informational slides to accompany To go along with; to go with or to attend as a companion or associate. A motor vehicle statute may require beginning drivers or drivers under a certain age to be accompanied by a licensed adult driver whenever operating an automobile. the conference call will be available at www.americancampuscommunities.com in the Investor Relations Investor relations The process by which the corporation communicates with its investors. section, or at www.fulldisclosure.com at the beginning of the call. About the Company American Campus Communities, Inc. is the only publicly traded REIT solely focused on student housing in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . American Campus Communities is a fully integrated, self-managed and self-administered equity REIT Equity REIT A Real Estate Investment Trust that assumes ownership status in the property it invests in enabling investors of the REIT to earn dividends on rental income from the property and appreciation in property resale. Antithesis of a Mortgage REIT. with expertise in the acquisition, design, finance, development, construction management, leasing and management of student housing properties. The company owns 17 high-quality student housing properties, containing more than 4,100 apartment units and 12,600 beds. In conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the properties owned, the company manages 35 student housing properties, representing more than 24,000 beds. For more information please go to the company website at www.americancampuscommunities.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains forward-looking statements, which express the current beliefs and expectations of management. Except for historical information, the matters discussed in this press release are forward-looking statements and can be identified by the use of the words "anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result" and similar expressions. Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including risks and uncertainties inherent in the national economy, the real estate industry in general, and in our specific markets; the effect of terrorism terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. or the threat of terrorism; legislative or regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. changes including changes to laws governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. REITS REITS Real Estate Investors of the Tri-States (Harrison, TN) ; our dependence on key personnel whose continued service is not guaranteed; availability of qualified acquisition and development targets; availability of capital and financing; rising interest rates; rising insurance rates; impact of ad valorem According to value. The term ad valorem is derived from the Latin ad valentiam, meaning "to the value." It is commonly applied to a tax imposed on the value of property. and income taxation; changes in generally accepted accounting principals; and our continued ability to successfully lease and operate our properties. While we believe these forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. These forward-looking statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES AND
AMERICAN CAMPUS PREDECESSOR
CONSOLIDATED AND COMBINED BALANCE SHEETS
(In thousands except share and per share data)
Company Predecessor
------------- -------------
September 30, December 31,
2004 2003
------------- -------------
(Unaudited)
Assets
Investments in real estate:
Student housing facilities subject to
leases, net $68,168 $69,713
Student housing facility subject to
lease-held for sale - 7,976
Student housing properties, net 268,137 222,907
------------- -------------
Investments in real estate, net 336,305 300,596
Cash and cash equivalents 5,491 5,227
Restricted cash and short-term investments 7,385 9,503
Student contracts receivable, net 2,000 2,355
Other assets 10,969 12,885
------------- -------------
Total assets $362,150 $330,566
============= =============
Liabilities and stockholders' and
Predecessor owners' equity
Liabilities:
Mortgage loans, bonds payable, and lines
of credit $193,028 $267,518
Note payable secured by leasehold held
for sale - 8,080
Accounts payable and accrued expenses 6,856 3,847
Other liabilities 21,636 23,211
------------- -------------
Total liabilities 221,520 302,656
Minority interests 2,545 252
Stockholders' and Predecessor owners' equity:
Common stock, $.01 par value, 800,000,000
shares authorized, 12,615,000 shares
issued and outstanding 126 -
Additional paid in capital 139,606 -
Accumulated deficit (1,538) -
Accumulated other comprehensive loss (109) (197)
Predecessor owners' equity - 27,855
------------- -------------
Total stockholders' and Predecessor
owners' equity 138,085 27,658
------------- -------------
Total liabilities and stockholders' and
Predecessor owners' equity $362,150 $330,566
============= =============
AMERICAN CAMPUS COMMUNITIES, INC. AND AMERICAN CAMPUS PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Company Predecessor
------------- -----------------------
Period from Period from Three
August 17, July 1, Months
2004 to 2004 to Ended
September August 16, September
30, 2004 2004 30, 2003
------------- ----------- -----------
Revenues:
Student housing rental revenue $5,045 $4,146 $7,500
Student housing facilities
subject to leases revenue 2,483 845 2,893
Third party development
services 332 178 2,679
Third party development
services - student housing
facilities subject to leases 13 14 30
Third party facility management
services - affiliates - 19 58
Third party management services 340 176 178
Resident services 114 - -
------------- ----------- -----------
Total revenues 8,327 5,378 13,338
Operating expenses:
Student housing 2,391 2,942 4,265
Student housing facilities
subject to leases 431 1,601 2,170
Third party development and
management services 718 612 1,401
General and administrative 2,888 24 345
Depreciation and amortization 1,401 1,284 2,209
Ground lease 100 202 43
------------- ----------- -----------
Total operating expenses 7,929 6,665 10,433
------------- ----------- -----------
Operating income (loss) 398 (1,287) 2,905
Nonoperating income and
(expenses):
Interest income 14 18 20
Interest expense (2,006) (2,575) (4,235)
Amortization of deferred
financing costs (702) (81) (140)
Other nonoperating income - 274 -
------------- ----------- -----------
Total nonoperating expenses (2,694) (2,364) (4,355)
------------- ----------- -----------
Loss before income tax benefit,
minority interests, and
discontinued operations (2,296) (3,651) (1,450)
Income tax benefit 757 - -
Minority interests 1 85 (4)
------------- ----------- -----------
Loss from continuing operations (1,538) (3,566) (1,454)
Loss attributable to discontinued
operations - (104) (90)
------------- ----------- -----------
Net loss $(1,538) $(3,670) $(1,544)
============= =========== ===========
Loss per share - basic:
Loss from continuing operations
per share $(0.13)
=============
Net loss per share $(0.13)
=============
Loss per share - diluted:
Loss from continuing operations
per share $(0.13)
=============
Net loss per share $(0.13)
=============
Weighted-average common shares
outstanding:
Basic 12,290,256
=============
Diluted 12,290,256
=============
AMERICAN CAMPUS COMMUNITIES, INC. AND AMERICAN CAMPUS PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Company Predecessor
------------- ----------------------
Period from Period from Nine
August 17, January 1, Months
2004 to 2004 to Ended
September August 16, September
30, 2004 2004 30, 2003
------------- ----------- ----------
Revenues:
Student housing rental revenue $5,045 $19,861 $23,815
Student housing facilities
subject to leases revenue 2,483 9,340 10,904
Third party development services 332 3,896 6,253
Third party development services
- student housing facilities
subject to leases 13 497 86
Third party facility management
services - affiliates - 178 246
Third party management services 340 789 572
Resident services 114 - -
Other income - - 12
------------- ----------- ----------
Total revenues 8,327 34,561 41,888
Operating expenses:
Student housing 2,391 10,120 11,544
Student housing facilities
subject to leases 431 5,354 5,719
Third party development and
management services 718 3,403 3,941
General and administrative 2,888 1,032 1,188
Depreciation and Amortization 1,401 5,815 6,631
Ground lease 100 598 302
------------- ----------- ----------
Total operating expenses 7,929 26,322 29,325
------------- ----------- ----------
Operating income 398 8,239 12,563
Nonoperating income and
(expenses):
Interest income 14 43 56
Interest expense (2,006) (11,142) (12,641)
Amortization of deferred
financing costs (702) (369) (418)
Other nonoperating income - 274 -
------------- ----------- ----------
Total nonoperating expenses (2,694) (11,194) (13,003)
------------- ----------- ----------
Loss before income tax benefit,
minority interests, and
discontinued operations (2,296) (2,955) (440)
Income tax benefit 757 - -
Minority interests 1 129 (25)
------------- ----------- ----------
Loss from continuing operations (1,538) (2,826) (465)
Discontinued operations:
Loss attributable to
discontinued operations - (373) (102)
Gain from disposition of real
estate - 58 -
------------- ----------- ----------
Total discontinued operations - (315) (102)
------------- ----------- ----------
Net loss $(1,538) $(3,141) $(567)
============= =========== ==========
Loss per share - basic:
Loss from continuing operations
per share $(0.13)
=============
Net loss per share $(0.13)
=============
Loss per share - diluted:
Loss from continuing operations
per share $(0.13)
=============
Net loss per share $(0.13)
=============
Weighted-average common shares
outstanding:
Basic 12,290,256
=============
Diluted 12,290,256
=============
AMERICAN CAMPUS COMMUNITIES, INC.
As of September 30, 2004, our property portfolio consisted of the
following:
PRIMARY UNIVERSITY
PROPERTY LOCATION SERVED UNITS BEDS
-------------------- ---------------- ------------------- ----- ------
Owned off campus properties:
Commons On Apache Tempe, AZ Arizona State
University Main
Campus 111 444
The Village at Blacksburg, VA Virginia
Blacksburg Polytechnic
Institute and
State University 288 1,056
The Village on Tempe, AZ Arizona State
University University Main
Campus 288 918
River Club Athens, GA The University of
Apartments Georgia-Athens 266 794
River Walk Athens, GA The University of
Townhomes Georgia-Athens 100 340
The Callaway House College Station, Texas A&M
TX University 173 538
The Village at Orlando, FL The University of
Alafaya Club Central Florida 228 840
The Village at Orlando, FL The University of
Science Drive Central Florida 192 732
University Village Boulder, CO The University of
at Boulder Creek Colorado at
Boulder 82 309
University Village Fresno, CA California State
at Fresno University, Fresno 105 406
University Village San Bernardino, California State
at San Bernardino CA University, San
Bernardino 132 480
University Village Philadelphia, PA Temple University
at TU 220 749
University Village Buffalo, NY State University of
at Sweet Home(a) New York - Buffalo 271 828
----- ------
Total owned off campus properties 2,456 8,434
On campus participating properties:
University Prairie View, TX Prairie View A&M
Village--PVAMU University 612 1,920
University Prairie View, TX Prairie View A&M
College--PVAMU University 756 1,470
University Laredo, TX Texas A&M
Village--TAMIU International
University 84 252
Cullen Oaks Houston, TX The University of
Houston 231 525
----- ------
Total on campus participating properties 1,683 4,167
Total owned properties 4,139 12,601
===== ======
(a) Under construction -- scheduled opening in August 2005.
NET OPERATING INCOME
Same store and new store net operating income for owned off campus
properties and on campus participating properties for the three months
ended September 30, 2004 and 2003 is as follows:
Three Three
Months Months
Ended Ended
September September
30, 2004 30, 2003 Change ($) Change (%)
---------- ---------- ---------- ----------
Property Revenues
Owned Off Campus
Properties
Same Store Properties $7,869 $7,500 $369 4.9%
New Properties 1,322 - 1,322 100.0%
---------- ---------- ---------- ----------
Total Owned Off Campus
Properties 9,191 7,500 1,691 22.5%
On Campus Participating
Properties
Same Store Properties 3,205 2,766 439 15.9%
New Properties 123 127 (4) -3.1%
---------- ---------- ---------- ----------
Total On Campus
Participating
Properties 3,328 2,893 435 15.0%
---------- ---------- ---------- ----------
Total Property
Revenues $12,519 $10,393 $2,126 20.5%
========== ========== ========== ==========
Property Operating Expenses
Owned Off Campus
Properties
Same Store Properties $4,645 $4,265 $380 8.9%
New Properties 688 - 688 100.0%
---------- ---------- ---------- ----------
Total Owned Off Campus
Properties 5,333 4,265 1,068 25.0%
On Campus Participating
Properties
Same Store Properties 1,938 2,103 (165) -7.8%
New Properties 94 67 27 40.3%
---------- ---------- ---------- ----------
Total On Campus
Participating
Properties 2,032 2,170 (138) -6.4%
---------- ---------- ---------- ----------
Total Property
Operating Expenses $7,365 $6,435 $930 14.5%
========== ========== ========== ==========
Property Net Operating
Income
Owned Off Campus
Properties
Same Store Properties $3,224 $3,235 $(11) -0.3%
New Properties 634 - 634 100.0%
---------- ---------- ---------- ----------
Total Owned Off Campus
Properties 3,858 3,235 623 19.3%
On Campus Participating
Properties
Same Store Properties 1,267 663 604 91.1%
New Properties 29 60 (31) -51.7%
---------- ---------- ---------- ----------
Total On Campus
Participating
Properties 1,296 723 573 79.3%
---------- ---------- ---------- ----------
Total Property Net
Operating Income $5,154 $3,958 $1,196 30.2%
========== ========== ========== ==========
Same store and new store net operating income for owned off campus
properties and on campus participating properties for the nine months
ended September 30, 2004 and 2003 is as follows:
Nine Nine
Months Months
Ended Ended
September September
30, 2004 30, 2003 Change ($) Change (%)
---------- ---------- ---------- ----------
Property Revenues
Owned Off Campus
Properties
Same Store Properties $23,584 $23,815 $(231) -1.0%
New Properties 1,322 - 1,322 100.0%
---------- ---------- ---------- ----------
Total Owned Off Campus
Properties 24,906 23,815 1,091 4.6%
On Campus Participating
Properties
Same Store Properties 11,269 10,777 492 4.6%
New Properties 554 127 427 336.2%
---------- ---------- ---------- ----------
Total On Campus
Participating
Properties 11,823 10,904 919 8.4%
---------- ---------- ---------- ----------
Total Property
Revenues $36,729 $34,719 $2,010 5.8%
========== ========== ========== ==========
Property Operating Expenses
Owned Off Campus
Properties
Same Store Properties $11,823 $11,544 $279 2.4%
New Properties 688 - 688 100.0%
---------- ---------- ---------- ----------
Total Owned Off Campus
Properties 12,511 11,544 967 8.4%
On Campus Participating
Properties
Same Store Properties 5,513 5,652 (139) -2.5%
New Properties 272 67 205 306.0%
---------- ---------- ---------- ----------
Total On Campus
Participating
Properties 5,785 5,719 66 1.2%
---------- ---------- ---------- ----------
Total Property
Operating Expenses $18,296 $17,263 $1,033 6.0%
========== ========== ========== ==========
Property Net Operating
Income
Owned Off Campus
Properties
Same Store Properties $11,761 $12,271 $(510) -4.2%
New Properties 634 - 634 100.0%
---------- ---------- ---------- ----------
Total Owned Off Campus
Properties 12,395 12,271 124 1.0%
On Campus Participating
Properties
Same Store Properties 5,756 5,125 631 12.3%
New Properties 282 60 222 370.0%
---------- ---------- ---------- ----------
Total On Campus
Participating
Properties 6,038 5,185 853 16.5%
---------- ---------- ---------- ----------
Total Property Net
Operating Income $18,433 $17,456 $977 5.6%
========== ========== ========== ==========
FUNDS FROM OPERATIONS
As defined by NAREIT, FFO represents income (loss) before allocation
to minority interests (computed in accordance with GAAP), excluding
gains (or losses) from sales of property, plus real estate related
depreciation and amortization (excluding amortization of loan
origination costs) and after adjustments for unconsolidated
partnerships and joint ventures. We present FFO because we consider it
an important supplemental measure of our operating performance and
believe it is frequently used by securities analysts, investors and
other interested parties in the evaluation of REITs, many of which
present FFO when reporting their results. FFO is intended to exclude
GAAP historical cost depreciation and amortization of real estate and
related assets, which assumes that the value of real estate diminishes
ratably over time. Historically, however, real estate values have
risen or fallen with market conditions. Because FFO excludes
depreciation and amortization unique to real estate, gains and losses
from property dispositions and extraordinary items, it provides a
performance measure that, when compared year over year, reflects the
impact to operations from trends in occupancy rates, rental rates,
operating costs, development activities and interest costs, providing
perspective not immediately apparent from net income.
We compute FFO in accordance with standards established by the Board
of Governors of NAREIT in its March 1995 White Paper (as amended in
November 1999 and April 2002), which may differ from the methodology
for calculating FFO utilized by other equity REITs and, accordingly,
may not be comparable to such other REITs. Further, FFO does not
represent amounts available for management's discretionary use because
of needed capital replacement or expansion, debt service obligations
or other commitments and uncertainties. FFO should not be considered
as an alternative to net income (loss) (computed in accordance with
GAAP) as an indicator of our financial performance or to cash flow
from operating activities (computed in accordance with GAAP) as an
indicator of our liquidity, nor is it indicative of funds available to
fund our cash needs, including our ability to pay dividends or make
distributions.
The following table presents a reconciliation of our FFO to our net
loss for the three months and nine months ended September 30, 2004 and
2003:
Period from
August 17,
2004
(Inception) Three Three Nine Nine
to Months Months Months Months
September Ended Ended Ended Ended
30, September September September September
2004 30, 2004 30, 2003 30, 2004 30, 2003
------------ --------- --------- --------- ---------
Net Loss $(1,538) $(5,208) $(1,544) $(4,679) $(567)
Minority Interest
In Income
(Losses) (1) (86) 4 (130) 25
Gain from
disposition of
real estate - - - (58) -
Real Estate
Related
Depreciation and
Amortization:
Total
depreciation
and
amortization 1,401 2,685 2,209 7,216 6,631
Discontinued
operations
depreciation
and
amortization - 44 90 219 259
Furniture,
fixtures, and
equipment
depreciation (36) (76) (69) (217) (215)
------------ --------- --------- --------- ---------
Funds From
Operations $(174) $(2,641) $690 $2,351 $6,133
============ ========= ========= ========= =========
Funds From
Operations per
share - basic $(0.01)
============
Funds From
Operations per
share - diluted $(0.01)
============
Weighted Average
Common Shares
Outstanding:
Basic 12,290,256
============
Diluted 12,290,256
============
Our FFO for the period from August 17, 2004 to September 30, 2004 was
impacted by a series of charges totaling approximately $2.6 million
related to our recent IPO and related formation transactions. The
primary components of the charges include: (i) PIU grants of
approximately $2.1 million, (ii) restricted stock grants of $0.1
million, and (iii) write-off of loan origination costs and exit fees
associated with the repayment of indebtedness of approximately $1.2
million. These items were partially offset by the recognition of a
deferred tax asset associated with a step up in the tax basis of
participating properties owned by our TRS, resulting in an income tax
benefit of $0.8 million.
While our on-campus participating properties contributed $11.8 million
and $10.9 million to our revenues for the nine months ended September
30, 2004 and 2003, respectively, and $3.3 million and $2.9 million to
our revenues for the three months ended September 30, 2004 and 2003,
respectively, under our participating ground leases, we and the
participating university systems each receive 50% of the properties'
net cash available for distribution after payment of operating
expenses, debt service (which includes significant amounts towards
repayment of principal) and capital expenditures. A substantial
portion of our revenues attributable to these properties is reflective
of cash that is required to be used for capital expenditures and for
the amortization of applicable property indebtedness. These amounts do
not increase our economic interest in these properties or otherwise
benefit us since our interest in the properties terminates upon the
repayment of the applicable property indebtedness.
As noted above, FFO excludes GAAP historical cost depreciation and
amortization of real estate and related assets because these GAAP
items assume that the value of real estate diminishes over time.
However, unlike the ownership of our owned off-campus properties, the
unique features of our ownership interest in our on-campus
participating properties cause the value of these properties to
diminish over time. For example, since the ground leases under which
we operate the participating properties require the reinvestment from
operations of specified amounts for capital expenditures and for the
repayment of debt while our interest in these properties terminates
upon the repayment of the debt, such capital expenditures do not
increase the value of the property to us and mortgage debt
amortization only increases the equity of the ground lessor.
Accordingly, when considering our FFO, we believe it is also a
meaningful measure of our performance to modify FFO to exclude the
operations of our on-campus participating properties and to consider
their impact on performance by including only that portion of our
revenues from those properties that are reflective of our share of net
cash flow and the management fees that we receive, both of which
increase and decrease with the operating measure of the properties, a
measure referred to herein as FFOM.
Funds From Operations--Modified for Operational Performance of
On-Campus Participating Properties:
Period from Period
August Three Three from Nine
17,2004 Months Months July 1, Months
(Inception) Ended Ended 2004 to Ended
to September September September August September
30, 2004 30, 2004 30, 2003 16, 2004 30, 2003
------------- --------- ---------- --------- ----------
Funds From
Operations $(174) $(2,641) $690 $2,351 $6,133
Elimination of
operations of
on-campus
participating
properties:
Net Loss from
on-campus
participating
properties 156 968 1,273 948 1,032
Amortization
of investment
in on-campus
participating
properties (438) (950) (821) (2,660) (2,420)
------------- --------- ---------- --------- ----------
Modifications
to reflect
operational
performance of
on-campus
participating
properties:
Our Share of
Net Cash Flow
(a) 115 302 43 698 302
Management
Fees 97 158 141 586 525
------------- --------- ---------- --------- ----------
Impact of On-
Campus
Participating
Properties 212 460 184 1,284 827
------------- --------- ---------- --------- ----------
Funds from
Operations -
Modified for
Operational
Performance of
On-Campus
Participating
Properties
(FFOM) $(244) $(2,163) $1,326 $1,923 $5,572
============= ========= ========== ========= ==========
FFOM per share
- basic $(0.02)
=============
FFOM per share
- diluted $(0.02)
=============
Weighted-
average common
shares
outstanding:
Basic 12,290,256
=============
Diluted 12,290,256
=============
(a) 50% of the properties' net cash available for distribution after
payment of operating expenses, debt service (including repayment of
principal) and capital expenditures. Schedule reflects amounts accrued
for the 50% lessor distribution for all periods
This narrower measure of performance measures our profitability for
these properties in a manner that is similar to the measure of our
profitability from our services business where we similarly incur no
initial or ongoing capital investment in a property and derive only
consequential benefits from capital expenditures and debt
amortization. We believe, however, that this narrower measure of
performance is inappropriate in traditional real estate ownership
structures where debt amortization and capital expenditures enhance
the property owner's long-term profitability from its investment.
Our FFOM may have limitations as an analytical tool because it
reflects the unique contractual calculation of net cash flow from our
on-campus participating properties which is different from that of our
off campus owned properties. Additionally, FFOM reflects features of
our ownership interests in our on-campus participating properties that
are unique to us. Companies that are considered to be in our industry
may not have similar ownership structures; and therefore those
companies may not calculate a FFOM in the same manner that we do, or
at all, limiting its usefulness as a comparative measure. We
compensate for these limitations by relying primarily on our GAAP and
FFO results and using our FFOM only supplementally.
2004 AND 2005 OUTLOOK
2004 Outlook
A reconciliation of the range provided for projected net income to
projected FFO and FFOM for the fourth quarter of 2004 is as follows
(in thousands, except per share data):
Low High
------- -------
Net income $2,700 $2,975
Minority Interests (10) (5)
Depreciation and Amortization 2,900 3,000
------- -------
Funds From Operations $5,590 $5,970
======= =======
Funds From Operations $5,590 $5,970
Elimination of operations of on-campus
participating properties:
Net income from on-campus participating
properties (1,100) (1,050)
Amortization of investment in on-campus
participating properties (850) (850)
------- -------
Modifications to reflect operational performance
of on-campus participating properties:
Our Share of Net Cash Flow 550 575
Management Fees 250 250
------- -------
Impact of On-Campus Participating Properties 800 825
------- -------
Funds from Operations - Modified for
Operational Performance of On-Campus
Participating Properties (FFOM) $4,440 $4,895
======= =======
Weighted average common shares outstanding
assuming dilution 12,744 12,744
======= =======
Net income per average common share $0.21 $0.23
======= =======
FFO per average common share $0.44 $0.47
======= =======
FFOM per average common share $0.35 $0.38
======= =======
The fourth quarter of 2004 guidance assumes, among other things that:
(i) the purchase of the Florida properties is completed by
mid-December 2004, including the assumption of $35.5 million of debt
with the balance of the purchase price financed under the credit
facility; (ii) awarded projects will commence as expected; (iii) the
company will record a gain of approximately $0.6 million from a
partial insurance settlement related to a 2003 fire at our Fresno
property; and (iv) the LIBOR and prime rate of interest will remain
relatively constant during the period.
2005 Outlook
A reconciliation of the range provided for projected net income to
projected FFO and FFOM for the fiscal year ended December 31, 2005 is
as follows (in thousands, except per share data):
Low High
-------- --------
Net income $5,300 $6,500
Minority Interests (50) (25)
Depreciation and Amortization 14,400 14,800
-------- --------
Funds From Operations $19,650 $21,275
======== ========
Funds From Operations $19,650 $21,275
Elimination of operations of on-campus
participating properties:
Net income from on-campus participating
properties (600) (400)
Amortization of investment in on-campus
participating properties (3,400) (3,400)
-------- --------
Modifications to reflect operational performance
of on-campus participating properties:
Our Share of Net Cash Flow 400 500
Management Fees 800 800
-------- --------
Impact of On-Campus Participating Properties 1,200 1,300
-------- --------
Funds from Operations - Modified for
Operational Performance of On-Campus
Participating Properties (FFOM) $16,850 $18,775
======== ========
Weighted average common shares outstanding
assuming dilution 12,744 12,744
======== ========
Net income per average common share $0.42 $0.51
======== ========
FFO per average common share $1.54 $1.67
======== ========
FFOM per average common share $1.32 $1.47
======== ========
The fiscal year ended December 31, 2005 guidance assumes, among other
things that: (i) the purchase of the Florida properties is completed
by mid-December 2004, includes the assumption of $35.5 million of debt
recognized at fair value with the balance of the purchase price
financed under the credit facility; (ii) the company will enter into
additional property acquisition(s) by mid year at favorable terms;
(iii) the owned off-campus property in Buffalo will open on time, will
be completed on budget, and that 50% of the project will be
permanently financed upon completion; (iv) the company will continue
to operate the University Village at San Bernardino property, which is
presently under a purchase option, throughout 2005; (v) the company
will be able to enter into third-party development and construction
projects contracts that will generate revenues consistent with our
historic levels; (vi) the company's 2005/2006 academic year lease up
will be at similar rates and occupancy as compared to those currently
experienced by the company; (vii) benefit costs will remain relatively
constant; (viii) the company's cost to comply with Sarbanes Oxley
Section 404 by the end of next year will be approximately $0.5 million
and (ix) the LIBOR and prime rate of interest will remain relatively
constant during the period.
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