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American Campus Communities (NYSE: ACC) is a real estate investment trust (REIT) headquartered in Austin, TX, and the largest owner, manager and developer of high-quality student housing communities in the United States. As of September 30, 2016, American Campus Communities owned 170 student housing properties containing approximately 105,300 beds. Including its owned and third-party managed properties, ACC’s total managed portfolio consisted of 205 properties with approximately 133,600 beds.
- Positive industry supply-demand ratio
- Tremendous opportunity to modernize the student housing product both on and off campus
- Continued growth of net operating income and dividend
- Strong balance sheet positioned for growth
- Recession resiliency demonstrated by revenue and income growth through the Great Recession
Adviser Access spoke to American Campus Communities CEO Bill Bayless about the future of student housing.
Advisor Access: What makes student housing an attractive asset class to invest in?
Bill Bayless: In total, the higher education landscape in the United States is composed of more than 4,600 institutions serving 20 million students. Within this broad universe of colleges and universities, American Campus Communities focuses on four-year public flagship universities and select four-year private institutions with enrollment greater than 15,000 students. Our target market contains 255 colleges and universities with 6.1 million students. These are campuses with a residential heritage that have exhibited consistent enrollment growth over many decades.
From an overall supply standpoint the vast majority of the current housing available for students in these markets, whether located on campus or off campus, is not meeting the needs of today’s student. The majority of the existing on-campus housing supply, where 21% of students are living, was designed for the Baby Boom generation and is functionally obsolete—offering little in the way of privacy, amenities or technological requirements such as reliable internet service. These are the dorms of the last century, typically cinder block construction with double or triple occupancy, group bathing facilities, no amenities within the buildings, and limited private or group study space.
The majority of available off-campus housing, where approximately 79% of students live, was not designed for students and is typically composed of low-quality, low-density absentee landlord communities, such as duplexes and single family homes located near campus. Overall, very little modern student housing was developed across the country until the mid-1990s, when ACC was founded and began focusing on this drastically underserved segment of the real estate market.
This landscape provides a tremendous opportunity for the ownership of conveniently located, academically oriented, purpose-built student housing communities in Tier 1 college markets throughout the United States.
AA: What is the company’s overall growth strategy?
BB: First and foremost, ACC prides itself on being an operator of high-quality academically oriented student housing communities. We are very fortunate to also operate in a young sector, which provides the company with several very attractive growth avenues. We have achieved internal growth from our existing asset base, each and every year with 11 consecutive years of same-store net operating income (NOI) growth and 48 consecutive quarters of same-store revenue growth, including through the Great Recession of 2008 and 2009.
Further, operating in an industry that is still in its infancy continues to provide external growth opportunities through the development of new on-campus and off-campus student housing communities, as well as the acquisition of existing properties. Since our IPO, ACC has developed or acquired a total of over $8.0 billion in assets, and in the fall of 2017 we will deliver 10 new properties totaling over $600 million in development across 10 collegiate markets. This is our largest annual development year since inception, highlighting the continued opportunity for accretive new assets across the country.