2015.03.31 10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended March 31, 2015.   
 
o 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.)
Commission file number 333-181102-01 (American Campus Communities Operating Partnership, L.P.)
 
AMERICAN CAMPUS COMMUNITIES, INC.
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
 
 Maryland (American Campus Communities, Inc.)
Maryland (American Campus Communities Operating
Partnership, L.P.)
 
 76-0753089 (American Campus Communities, Inc.)
56-2473181 (American Campus Communities Operating
Partnership, L.P.)
 (State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer Identification No.)
 
12700 Hill Country Blvd., Suite T-200
Austin, TX
(Address of Principal Executive Offices)
 
 
78738
(Zip Code)
 
(512) 732-1000
Registrant’s telephone number, including area code
 
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.
American Campus Communities, Inc.
Yes x  No o
American Campus Communities Operating Partnership, L.P.
Yes x  No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
American Campus Communities, Inc.
Yes x  No o
American Campus Communities Operating Partnership, L.P.
Yes x  No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
American Campus Communities, Inc.                                                                                                                                    
Large accelerated filer x  
Accelerated Filer o



Non-accelerated filer   o     (Do not check if a smaller reporting company) 
Smaller reporting company o

American Campus Communities Operating Partnership, L.P.
Large accelerated filer o
Accelerated Filer o
Non-accelerated filer   x     (Do not check if a smaller reporting company) 
Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
American Campus Communities, Inc.
Yes o  No x
American Campus Communities Operating Partnership, L.P
Yes o  No x
                                                                                           
There were 112,301,250 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, 2015.
 



EXPLANATORY NOTE
 
This report combines the reports on Form 10-Q for the quarterly period ended March 31, 2015 of American Campus Communities, Inc. and American Campus Communities Operating Partnership, L.P.  Unless stated otherwise or the context otherwise requires, references to “ACC” mean American Campus Communities, Inc., a Maryland real estate investment trust (“REIT”), and references to “ACCOP” mean American Campus Communities Operating Partnership, L.P., a Maryland limited partnership.  References to the “Company,” “we,” “us” or “our” mean collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP.  References to the “Operating Partnership” mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP. The following chart illustrates the Company’s and the Operating Partnership’s corporate structure:
 

The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC. As of March 31, 2015, ACC Holdings held an ownership interest in ACCOP of less than 1%. The limited partners of ACCOP are ACC and other limited partners consisting of current and former members of management and nonaffiliated third parties.  As of March 31, 2015, ACC owned an approximate 98.6% limited partnership interest in ACCOP.  As the sole member of the general partner of ACCOP, ACC has exclusive control of ACCOP’s day-to-day management.  Management operates the Company and the Operating Partnership as one business. The management of ACC consists of the same members as the management of ACCOP. The Company is structured as an umbrella partnership REIT (“UPREIT”) and ACC contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, ACC receives a number of units of the Operating Partnership (“OP Units,” see definition below) 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 ACC Holdings and the common shares issued to the public. The Company believes that combining the reports on Form 10-Q of ACC and ACCOP into this single report provides the following benefits:
 
(1)
enhances investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
(2)
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and
(3)
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.




ACC consolidates ACCOP for financial reporting purposes, and ACC essentially has no assets or liabilities other than its investment in ACCOP. Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements. However, the Company believes it is important to understand the few differences between the Company and the Operating Partnership in the context of how the entities operate as a consolidated company. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership. ACC also issues public equity from time to time and guarantees certain debt of ACCOP, as disclosed in this report. ACC does not have any indebtedness, as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.  Except for the net proceeds from ACC’s equity offerings, which are contributed to the capital of ACCOP in exchange for OP Units on a one-for-one common share per OP Unit basis, the Operating Partnership generates all remaining capital required by the Company’s business. These sources include, but are not limited to, the Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its credit facility, and proceeds received from the disposition of certain properties.  Noncontrolling interests, stockholders’ equity, and partners’ capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The noncontrolling interests in the Operating Partnership’s financial statements consist of the interests of unaffiliated partners in various consolidated joint ventures. The noncontrolling interests in the Company’s financial statements include the same noncontrolling interests at the Operating Partnership level and OP Unit holders of the Operating Partnership. The differences between stockholders’ equity and partners’ capital result from differences in the equity issued at the Company and Operating Partnership levels.
 
To help investors understand the significant differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership. A single set of consolidated notes to such financial statements is presented that includes separate discussions for the Company and the Operating Partnership when applicable (for example, noncontrolling interests, stockholders’ equity or partners’ capital, earnings per share or unit, etc.).  A combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section is also included that presents discrete information related to each entity, as applicable. This report also includes separate Part I, Item 4 Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.
 
In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company operates its business through the Operating Partnership. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
 



FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2015
 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, 2015 (unaudited) and December 31, 2014
 
 
 
 
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014 (all unaudited)
 
 
 
 
Consolidated Statement of Changes in Equity for the three months ended March 31, 2015 (unaudited)
 
 
 
 
Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (all unaudited)
 
 
 
 
Consolidated Financial Statements of American Campus Communities Operating Partnership, L.P. and Subsidiaries:
 
 
 
 
 
Consolidated Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014
 
 
 
 
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014 (all unaudited)
 
 
 
 
Consolidated Statement of Changes in Capital for the three months ended March 31, 2015 (unaudited)
 
 
 
 
Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (all unaudited)
 
 
 
 
Notes to Consolidated Financial Statements of American Campus Communities, Inc. and Subsidiaries and American Campus Communities Operating Partnership, L.P. and Subsidiaries (unaudited)
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
PART II.
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
SIGNATURES
 


AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)



 
 
March 31, 2015
 
December 31, 2014
 
 
(Unaudited)
 
 
Assets
 
 
 
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
Wholly-owned properties, net
 
$
5,429,719

 
$
5,308,707

Wholly-owned properties held for sale
 

 
131,014

On-campus participating properties, net
 
92,759

 
94,128

Investments in real estate, net
 
5,522,478

 
5,533,849

 
 
 
 
 
Cash and cash equivalents
 
17,812

 
25,062

Restricted cash
 
34,091

 
31,937

Student contracts receivable, net
 
7,942

 
10,145

Other assets
 
237,242

 
233,755

 
 
 
 
 
Total assets
 
$
5,819,565

 
$
5,834,748

 
 
 
 
 
Liabilities and equity
 
 

 
 

 
 
 
 
 
Liabilities:
 
 

 
 

Secured mortgage, construction and bond debt
 
$
1,194,524

 
$
1,331,914

Unsecured notes
 
798,347

 
798,305

Unsecured term loans
 
600,000

 
600,000

Unsecured revolving credit facility
 
131,900

 
242,500

Accounts payable and accrued expenses
 
51,790

 
70,629

Other liabilities
 
123,171

 
121,645

Total liabilities
 
2,899,732

 
3,164,993

 
 
 
 
 
Commitments and contingencies (Note 14)
 


 


 
 
 
 
 
Redeemable noncontrolling interests
 
67,432

 
54,472

 
 
 
 
 
Equity:
 
 

 
 

American Campus Communities, Inc. stockholders’ equity:
 
 

 
 

Common stock, $.01 par value, 800,000,000 shares authorized, 112,301,250 and 107,175,236 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively
 
1,123

 
1,072

Additional paid in capital
 
3,315,711

 
3,102,540

Accumulated earnings and dividends
 
(460,753
)
 
(487,986
)
Accumulated other comprehensive loss
 
(7,838
)
 
(6,072
)
Total American Campus Communities, Inc. stockholders’ equity
 
2,848,243

 
2,609,554

Noncontrolling interests - partially owned properties
 
4,158

 
5,729

Total equity
 
2,852,401

 
2,615,283

 
 
 
 
 
Total liabilities and equity
 
$
5,819,565

 
$
5,834,748

 


See accompanying notes to consolidated financial statements.

1

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,
 
 
2015
 
2014
Revenues
 
 
 
 
Wholly-owned properties
 
$
179,898

 
$
171,950

On-campus participating properties
 
9,200

 
8,188

Third-party development services
 
564

 
187

Third-party management services
 
2,001

 
1,985

Resident services
 
830

 
873

Total revenues
 
192,493

 
183,183

 
 
 
 
 
Operating expenses
 
 

 
 

Wholly-owned properties
 
79,010

 
75,808

On-campus participating properties
 
2,668

 
2,482

Third-party development and management services
 
3,047

 
2,786

General and administrative
 
4,843

 
4,374

Depreciation and amortization
 
50,651

 
48,175

Ground/facility leases
 
2,098

 
1,563

Total operating expenses
 
142,317

 
135,188

 
 
 
 
 
Operating income
 
50,176

 
47,995

 
 
 
 
 
Nonoperating income and (expense)
 
 

 
 

Interest income
 
1,112

 
1,031

Interest expense
 
(21,988
)
 
(21,090
)
Amortization of deferred financing costs
 
(1,379
)
 
(1,499
)
Gain from disposition of real estate
 
44,252

 

Loss from early extinguishment of debt
 
(595
)
 

Total nonoperating income (expense)
 
21,402

 
(21,558
)
 
 
 
 
 
Income before income taxes and discontinued operations
 
71,578

 
26,437

Income tax provision
 
(311
)
 
(290
)
Income from continuing operations
 
71,267

 
26,147

Discontinued operations:
 
 
 
 
Loss attributable to discontinued operations
 

 
(123
)
Gain from disposition of real estate
 

 
2,843

Total discontinued operations
 

 
2,720

Net income
 
71,267

 
28,867

Net income attributable to noncontrolling interests
 
 

 
 

Redeemable noncontrolling interests
 
(747
)
 
(381
)
Partially owned properties
 
(323
)
 
(88
)
Net income attributable to noncontrolling interests
 
(1,070
)
 
(469
)
Net income attributable to common shareholders
 
$
70,197

 
$
28,398

 
 
 
 
 
Other comprehensive loss
 
 

 
 

Change in fair value of interest rate swaps
 
(1,868
)
 
(993
)
Comprehensive income
 
$
68,329

 
$
27,405

 
 
 
 
 
Income per share attributable to common shareholders - basic
 
 

 
 

  Income from continuing operations per share
 
$
0.63

 
$
0.24

Net income per share
 
$
0.63

 
$
0.27

 
 
 
 
 
Income per share attributable to common shareholders - diluted
 
 

 
 

Income from continuing operations per share
 
$
0.62

 
$
0.24

Net income per share
 
$
0.62

 
$
0.27

 
 
 
 
 
Weighted-average common shares outstanding
 
 

 
 

Basic
 
110,955,099

 
104,821,669

Diluted
 
112,974,505

 
105,556,833

 

See accompanying notes to consolidated financial statements.

2

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited, in thousands, except share data)



 
 
Common
Shares
 
Par Value of
Common
Shares
 
Additional Paid
in Capital
 
Accumulated
Earnings and
Dividends
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests –
Partially Owned
Properties
 
Total
Equity, December 31, 2014
 
107,175,236

 
$
1,072

 
$
3,102,540

 
$
(487,986
)
 
$
(6,072
)
 
$
5,729

 
$
2,615,283

Adjustments to reflect redeemable noncontrolling interests at fair value
 

 

 
(1,072
)
 

 

 

 
(1,072
)
Amortization of restricted stock awards
 

 

 
2,061

 

 

 

 
2,061

Vesting of restricted stock awards
 
116,166

 
1

 
(2,879
)
 

 

 

 
(2,878
)
Distributions to common and restricted stockholders
 

 

 

 
(42,964
)
 

 

 
(42,964
)
Distributions to noncontrolling interests - partially owned properties
 

 

 

 

 

 
(394
)
 
(394
)
Increase in ownership of consolidated subsidiary
 

 

 
(208
)
 

 

 
(1,500
)
 
(1,708
)
Conversion of operating partnership units to common stock
 
76,183

 
1

 
2,577

 

 

 

 
2,578

Net proceeds from sale of common stock
 
4,933,665

 
49

 
212,692

 

 

 

 
212,741

Change in fair value of interest rate swaps
 

 

 

 

 
(1,868
)
 

 
(1,868
)
Amortization of interest rate swap terminations
 

 

 

 

 
102

 

 
102

Net income
 

 

 

 
70,197

 

 
323

 
70,520

Equity, March 31, 2015
 
112,301,250


$
1,123


$
3,315,711


$
(460,753
)

$
(7,838
)

$
4,158


$
2,852,401

 


See accompanying notes to consolidated financial statements.

3

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands) 


 
 
Three Months Ended March 31,
 
 
2015
 
2014
Operating activities
 
 
 
 
Net income
 
$
71,267

 
$
28,867

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Gains from disposition of real estate
 
(44,252
)
 
(2,843
)
Depreciation and amortization
 
50,273

 
48,222

Amortization of deferred financing costs and debt premiums/discounts
 
(1,540
)
 
(1,666
)
Share-based compensation
 
2,061

 
1,864

Income tax provision
 
311

 
290

Amortization of interest rate swap terminations
 
102

 

Changes in operating assets and liabilities:
 
 

 
 

Restricted cash
 
(2,971
)
 
(2,911
)
Student contracts receivable, net
 
1,585

 
1,211

Other assets
 
11,667

 
4,585

Accounts payable and accrued expenses
 
(21,509
)
 
(19,990
)
Other liabilities
 
7,240

 
3,437

Net cash provided by operating activities
 
74,234

 
61,066

 
 
 
 
 
Investing activities
 
 

 
 

Proceeds from disposition of properties
 
226,532

 
1,327

Cash paid for property acquisitions
 
(166,581
)
 
(9,117
)
Cash paid for land acquisitions
 

 
(2,952
)
Capital expenditures for wholly-owned properties
 
(11,495
)
 
(8,815
)
Investments in wholly-owned properties under development
 
(56,972
)
 
(59,990
)
Capital expenditures for on-campus participating properties
 
(333
)
 
(333
)
Investment in on-campus participating property under development
 
(448
)
 
(11,959
)
Decrease in escrow deposits for investment transactions
 
512

 
520

Change in restricted cash related to capital reserves
 
1,377

 
2,208

Increase in ownership of consolidated subsidiary
 
(1,708
)
 

Purchase of corporate furniture, fixtures and equipment
 
(2,213
)
 
(878
)
Net cash used in investing activities
 
(11,329
)
 
(89,989
)
 
 
 
 
 
Financing activities
 
 

 
 

Proceeds from sale of common stock
 
216,666

 

Offering costs
 
(3,250
)
 

Pay-off of mortgage and construction loans
 
(125,370
)
 
(68,574
)
Proceeds from revolving credit facilities
 
172,200

 
143,400

Pay downs of revolving credit facilities
 
(282,800
)
 
(22,400
)
Proceeds from construction loan
 
258

 
12,162

Scheduled principal payments on debt
 
(3,841
)
 
(4,221
)
Debt issuance and assumption costs
 
(196
)
 
(396
)
Distributions to common and restricted stockholders
 
(42,964
)
 
(38,043
)
Distributions to noncontrolling partners
 
(858
)
 
(545
)
Net cash (used in) provided by financing activities
 
(70,155
)
 
21,383

 
 
 
 
 
Net change in cash and cash equivalents
 
(7,250
)
 
(7,540
)
Cash and cash equivalents at beginning of period
 
25,062

 
38,751

Cash and cash equivalents at end of period
 
$
17,812

 
$
31,211

 
 
 
 
 
Supplemental disclosure of non-cash investing and financing activities
 
 

 
 

Loans assumed in connection with property acquisitions
 
$
(11,623
)
 
$

Issuance of common units in connection with property acquisitions
 
$
(14,182
)
 
$

Change in fair value of derivative instruments, net
 
$
(1,868
)
 
$
(993
)
 
 
 
 
 
Supplemental disclosure of cash flow information
 
 

 
 

Interest paid
 
$
21,151

 
$
24,300

 

See accompanying notes to consolidated financial statements.

4

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)



 
 
March 31, 2015
 
December 31, 2014
 
 
(Unaudited)
 
 
Assets
 
 
 
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
Wholly-owned properties, net
 
$
5,429,719

 
$
5,308,707

Wholly-owned properties held for sale
 

 
131,014

On-campus participating properties, net
 
92,759

 
94,128

Investments in real estate, net
 
5,522,478

 
5,533,849

 
 
 
 
 
Cash and cash equivalents
 
17,812

 
25,062

Restricted cash
 
34,091

 
31,937

Student contracts receivable, net
 
7,942

 
10,145

Other assets
 
237,242

 
233,755

 
 
 
 
 
Total assets
 
$
5,819,565

 
$
5,834,748

 
 
 
 
 
Liabilities and capital
 
 

 
 

 
 
 
 
 
Liabilities:
 
 

 
 

Secured mortgage, construction and bond debt
 
$
1,194,524

 
$
1,331,914

Unsecured notes
 
798,347

 
798,305

Unsecured term loans
 
600,000

 
600,000

Unsecured revolving credit facility
 
131,900

 
242,500

Accounts payable and accrued expenses
 
51,790

 
70,629

Other liabilities
 
123,171

 
121,645

Total liabilities
 
2,899,732

 
3,164,993

 
 
 
 
 
Commitments and contingencies (Note 14)
 


 


 
 
 
 
 
Redeemable limited partners
 
67,432

 
54,472

 
 
 
 
 
Capital:
 
 

 
 

Partners’ capital:
 
 

 
 

General partner – 12,222 OP units outstanding at both March 31, 2015 and December 31, 2014
 
103

 
100

Limited partner – 112,289,028 and 107,163,014 OP units outstanding at March 31, 2015 and December 31, 2014, respectively
 
2,855,978

 
2,615,526

Accumulated other comprehensive loss
 
(7,838
)
 
(6,072
)
Total partners’ capital
 
2,848,243

 
2,609,554

Noncontrolling interests - partially owned properties
 
4,158

 
5,729

Total capital
 
2,852,401

 
2,615,283

 
 
 
 
 
Total liabilities and capital
 
$
5,819,565

 
$
5,834,748

 


See accompanying notes to consolidated financial statements.

5

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands, except unit and per unit data)


 
 
Three Months Ended March 31,
 
 
2015
 
2014
Revenues
 
 
 
 
Wholly-owned properties
 
$
179,898

 
$
171,950

On-campus participating properties
 
9,200

 
8,188

Third-party development services
 
564

 
187

Third-party management services
 
2,001

 
1,985

Resident services
 
830

 
873

Total revenues
 
192,493

 
183,183

 
 
 
 
 
Operating expenses
 
 

 
 

Wholly-owned properties
 
79,010

 
75,808

On-campus participating properties
 
2,668

 
2,482

Third-party development and management services
 
3,047

 
2,786

General and administrative
 
4,843

 
4,374

Depreciation and amortization
 
50,651

 
48,175

Ground/facility leases
 
2,098

 
1,563

Total operating expenses
 
142,317

 
135,188

 
 
 
 
 
Operating income
 
50,176

 
47,995

 
 
 
 
 
Nonoperating income and (expense)
 
 

 
 

Interest income
 
1,112

 
1,031

Interest expense
 
(21,988
)
 
(21,090
)
Amortization of deferred financing costs
 
(1,379
)
 
(1,499
)
Gain from disposition of real estate
 
44,252

 

Loss from early extinguishment of debt
 
(595
)
 

Total nonoperating income (expense)
 
21,402

 
(21,558
)
Income before income taxes and discontinued operations
 
71,578

 
26,437

Income tax provision
 
(311
)
 
(290
)
Income from continuing operations
 
71,267

 
26,147

Discontinued operations:
 
 
 
 
Loss attributable to discontinued operations
 

 
(123
)
Gain from disposition of real estate
 

 
2,843

Total discontinued operations
 

 
2,720

Net income
 
71,267

 
28,867

Net income attributable to noncontrolling interests – partially owned properties
 
(323
)
 
(88
)
Net income attributable to American Campus Communities Operating Partnership, L.P.
 
70,944

 
28,779

Series A preferred unit distributions
 
(44
)
 
(45
)
Net income available to common unitholders
 
$
70,900

 
$
28,734

 
 
 
 
 
Other comprehensive loss
 
 

 
 

Change in fair value of interest rate swaps
 
(1,868
)
 
(993
)
Comprehensive income
 
$
69,032

 
$
27,741

 
 
 
 
 
Income per unit attributable to common unitholders – basic and diluted
 
 

 
 

  Income from continuing operations per unit
 
$
0.63

 
$
0.24

Net income per unit
 
$
0.63

 
$
0.27

 
 
 
 
 
Weighted-average common units outstanding
 
 

 
 

Basic
 
112,128,315

 
106,051,888

Diluted
 
112,864,146

 
106,787,052

 

See accompanying notes to consolidated financial statements.

6

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL
(unaudited, in thousands, except unit data)



 
 
 
 
 
 
 
 
 
 
Accumulated
 
Noncontrolling
 
 
 
 
 
 
 
 
Other
 
Interests -
 
 

 
 
General Partner
 
Limited Partner
 
Comprehensive
 
Partially Owned
 
 

 
 
Units
 
Amount
 
Units
 
Amount
 
Loss
 
Properties
 
Total
Capital, December 31, 2014
 
12,222

 
$
100

 
107,163,014

 
$
2,615,526

 
$
(6,072
)
 
$
5,729

 
$
2,615,283

Adjustments to reflect redeemable limited partners’ interest at fair value
 

 

 

 
(1,072
)
 

 

 
(1,072
)
Amortization of restricted stock awards
 

 

 

 
2,061

 

 

 
2,061

Vesting of restricted stock awards
 

 

 
116,166

 
(2,878
)
 

 

 
(2,878
)
Distributions
 

 
(5
)
 

 
(42,959
)
 

 

 
(42,964
)
Distributions to noncontrolling interests - partially owned properties
 

 

 

 

 

 
(394
)
 
(394
)
Increase in ownership of consolidated subsidiary
 

 

 

 
(208
)
 

 
(1,500
)
 
(1,708
)
Conversion of operating partnership units to common stock
 

 

 
76,183

 
2,578

 

 

 
2,578

Issuance of units in exchange for contributions of equity offering proceeds
 

 

 
4,933,665

 
212,741

 

 

 
212,741

Change in fair value of interest rate swaps
 

 

 

 

 
(1,868
)
 

 
(1,868
)
Amortization of interest rates swap terminations
 

 

 

 

 
102

 

 
102

Net income
 

 
8

 

 
70,189

 

 
323

 
70,520

Capital, March 31, 2015
 
12,222

 
$
103

 
112,289,028

 
$
2,855,978

 
$
(7,838
)
 
$
4,158

 
$
2,852,401

 
 

See accompanying notes to consolidated financial statements.

7

AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands) 


 
 
Three Months Ended March 31,
 
 
2015
 
2014
Operating activities
 
 
 
 
Net income
 
$
71,267

 
$
28,867

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Gains from disposition of real estate
 
(44,252
)
 
(2,843
)
Depreciation and amortization
 
50,273

 
48,222

Amortization of deferred financing costs and debt premiums/discounts
 
(1,540
)
 
(1,666
)
Share-based compensation
 
2,061

 
1,864

Income tax provision
 
311

 
290

Amortization of interest rate swap terminations
 
102

 

Changes in operating assets and liabilities:
 
 

 
 

Restricted cash
 
(2,971
)
 
(2,911
)
Student contracts receivable, net
 
1,585

 
1,211

Other assets
 
11,667

 
4,585

Accounts payable and accrued expenses
 
(21,509
)
 
(19,990
)
Other liabilities
 
7,240

 
3,437

Net cash provided by operating activities
 
74,234

 
61,066

 
 
 
 
 
Investing activities
 
 

 
 

Proceeds from disposition of properties
 
226,532

 
1,327

Cash paid for property acquisitions
 
(166,581
)
 
(9,117
)
Cash paid for land acquisitions
 

 
(2,952
)
Capital expenditures for wholly-owned properties
 
(11,495
)
 
(8,815
)
Investments in wholly-owned properties under development
 
(56,972
)
 
(59,990
)
Capital expenditures for on-campus participating properties
 
(333
)
 
(333
)
Investment in on-campus participating property under development
 
(448
)
 
(11,959
)
Decrease in escrow deposits for investment transactions
 
512

 
520

Change in restricted cash related to capital reserves
 
1,377

 
2,208

Increase in ownership of consolidated subsidiary
 
(1,708
)
 

Purchase of corporate furniture, fixtures and equipment
 
(2,213
)
 
(878
)
Net cash used in investing activities
 
(11,329
)
 
(89,989
)
 
 
 
 
 
Financing activities
 
 

 
 

Proceeds from issuance of common units in exchange for contributions, net
 
213,416

 

Pay-off of mortgage and construction loans
 
(125,370
)
 
(68,574
)
Proceeds from revolving credit facilities
 
172,200

 
143,400

Pay downs of revolving credit facilities
 
(282,800
)
 
(22,400
)
Proceeds from construction loan
 
258

 
12,162

Scheduled principal payments on debt
 
(3,841
)
 
(4,221
)
Debt issuance and assumption costs
 
(196
)
 
(396
)
Distributions paid on unvested restricted stock awards
 
(334
)
 
(321
)
Distributions paid to common and preferred unitholders
 
(43,094
)
 
(38,210
)
Distributions paid to noncontrolling partners - partially owned properties
 
(394
)
 
(57
)
Net cash (used in) provided by financing activities
 
(70,155
)
 
21,383

 
 
 
 
 
Net change in cash and cash equivalents
 
(7,250
)
 
(7,540
)
Cash and cash equivalents at beginning of period
 
25,062

 
38,751

Cash and cash equivalents at end of period
 
$
17,812

 
$
31,211

 
 
 
 
 
Supplemental disclosure of non-cash investing and financing activities
 
 

 
 

Loans assumed in connection with property acquisitions
 
$
(11,623
)
 
$

Issuance of common units in connection with property acquisitions
 
$
(14,182
)
 
$

Change in fair value of derivative instruments, net
 
$
(1,868
)
 
$
(993
)
 
 
 
 
 
Supplemental disclosure of cash flow information
 
 

 
 

Interest paid
 
$
21,151

 
$
24,300

 

See accompanying notes to consolidated financial statements.

8

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. 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.  Through ACC’s controlling interest in American Campus Communities Operating Partnership, L.P. (“ACCOP”), ACC 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’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “ACC.”
 
The general partner of ACCOP is American Campus Communities Holdings, LLC (“ACC Holdings”), an entity that is wholly-owned by ACC.  As of March 31, 2015, ACC Holdings held an ownership interest in ACCOP of less than 1%. The limited partners of ACCOP are ACC and other limited partners consisting of current and former members of management and nonaffiliated third parties.  As of March 31, 2015, ACC owned an approximate 98.6% limited partnership interest in ACCOP.  As the sole member of the general partner of ACCOP, ACC has exclusive control of ACCOP’s day-to-day management.  Management operates ACC and ACCOP as one business.  The management of ACC consists of the same members as the management of ACCOP.  ACC consolidates ACCOP for financial reporting purposes, and ACC does not have significant assets other than its investment in ACCOP.  Therefore, the assets and liabilities of ACC and ACCOP are the same on their respective financial statements.  References to the “Company,” “we,” “us” or “our” mean collectively ACC, ACCOP and those entities/subsidiaries owned or controlled by ACC and/or ACCOP.  References to the “Operating Partnership” mean collectively ACCOP and those entities/subsidiaries owned or controlled by ACCOP.  Unless otherwise indicated, the accompanying Notes to the Consolidated Financial Statements apply to both the Company and the Operating Partnership.
 
As of March 31, 2015, our property portfolio contained 164 properties with approximately 100,000 beds in approximately 32,500 units.  Our property portfolio consisted of 139 owned off-campus student housing properties that are in close proximity to colleges and universities, 20 American Campus Equity (“ACE®”) properties operated under ground/facility leases with ten university systems and five on-campus participating properties operated under ground/facility leases with the related university systems.  Of the 164 properties, seven were under development as of March 31, 2015, and when completed will consist of a total of approximately 4,700 beds in approximately 1,200 units.  Our 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”), we also provide construction management and development services, primarily for student housing properties owned by colleges and universities, charitable foundations, and others.  As of March 31, 2015, also through one of ACC’s TRSs, we provided third-party management and leasing services for 39 properties that represented approximately 30,100 beds in approximately 11,700 units.  Third-party management and leasing services are typically provided pursuant to management contracts that have initial terms that range from one to five years.  As of March 31, 2015, our total owned and third-party managed portfolio included 203 properties with approximately 130,100 beds in approximately 44,200 units.
 
2. Summary of Significant Accounting Policies
 
Basis of Presentation
 
The accompanying consolidated financial statements, presented in U.S. dollars, are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires us 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. Our 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, per share, unit and per unit amounts, are stated in thousands unless otherwise indicated. Certain prior period amounts have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2015-03 ("ASU 2015-03"), "Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt rather than being recorded as a deferred charge and presented as an asset. ASU 2015-03 is effective for interim and annual periods beginning after December 15, 2015, with early adoption

9

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


permitted, and retrospective application required. The Company plans to adopt ASU 2015-03 as of January 1, 2016 and does not expect it to have a material impact on its consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update 2015-02 ("ASU 2015-02"), "Amendments to the Consolidation Analysis.” ASU 2015-02 changes the analysis a reporting entity must perform to determine whether it should consolidate certain types of legal entities. ASU 2015-02 modifies whether limited partnerships and similar entities are variable interest entities ("VIEs") or voting interest entities and eliminates the presumption a general partner should consolidate a limited partnership. ASU 2015-02 is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted.  The Company plans to adopt ASU 2015-02 as of January 1, 2016 and is currently evaluating the potential impact of the new standard on its consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update 2014-09 (“ASU 2014-09”), "Revenue From Contracts With Customers". ASU 2014-09 provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries. ASU 2014-09 requires an entity to recognize revenue to reflect the transfer of goods or services to customers at an amount the entity expects to be paid in exchange for those goods and services and provide enhanced disclosures, all to provide more comprehensive guidance for transactions such as service revenue and contract modifications. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016 and may be applied using either a full retrospective or modified approach upon adoption. The Company plans to adopt ASU 2014-09 as of January 1, 2017 and is currently evaluating the potential impact of the new standard on its consolidated financial statements.

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 Securities and Exchange Commission.  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 these interim periods 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, 2014.
 
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
 
Investments in Real Estate
 
Investments in real estate are recorded at historical cost.  Major improvements that extend the life of an asset are capitalized and depreciated over the remaining useful life of the asset.  The cost of ordinary repairs and maintenance are charged to expense when incurred.  Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets as follows:
Buildings and improvements
 
7-40 years
Leasehold interest - on-campus
   participating properties
 
25-34 years (shorter of useful life or respective lease term)
Furniture, fixtures and equipment
 
3-7 years
 
Project costs directly associated with the development and construction of an owned real estate project, which include interest, property taxes, and amortization of deferred finance 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 $2.5 million and $2.2 million was capitalized during the three months ended March 31, 2015 and 2014, respectively.
 

10

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


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 it is probable that a property will be sold prior to the end of its estimated useful life, 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. The Company believes that there were no impairments of the carrying values of its investments in real estate as of March 31, 2015.

The Company allocates the purchase price of acquired properties to net tangible and identified intangible assets based on relative fair values.  Fair value estimates are based on information obtained from a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio, and other market data.  Information obtained about each property as a result of due diligence, marketing and leasing activities is also considered.  The value allocated to land is generally based on the actual purchase price adjusted to fair value (as necessary) if acquired separately, or market research/comparables if acquired as part of an existing operating property.  The value allocated to building is based on the fair value determined on an “as-if vacant” basis, which is estimated using an income, or discounted cash flow, approach that relies upon internally determined assumptions that we believe are consistent with current market conditions for similar properties. The value allocated to furniture, fixtures, and equipment is based on an estimate of the fair value of the appliances and fixtures inside the units. We have determined these estimates to have been primarily based upon unobservable inputs and therefore are considered to be Level 3 inputs within the fair value hierarchy.

We record the acquisition of undeveloped land parcels that do not meet the accounting criteria to be accounted for as business combinations at the purchase price paid and capitalize the associated acquisition costs.

Long-Lived Assets–Held for Sale
 
Long-lived assets to be disposed of are classified as held for sale in the period in which all of the following criteria are met:

a.
Management, having the authority to approve the action, commits to a plan to sell the asset.

b.
The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets.

c.
An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated.

d.
The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year.

e.
The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value.

f.
Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
  
Concurrent with this classification, the asset is recorded at the lower of cost or fair value less estimated selling costs, and depreciation ceases.

Discontinued Operations

A discontinued operation represents (i) a component of an entity or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or will have a major effect on an entity's operations and financial results, or (ii) an acquired business that is classified as held for sale on the date of acquisition. A strategic shift could include a disposal of (i) a separate major line of business, (ii) a separate major geographic area of operations, (iii) a major equity method investment, or (iv) other major parts of an entity. The Company classifies disposals of real estate that do not meet the

11

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


definition of a discontinued operation within income from continuing operations in the accompanying consolidated statements of comprehensive income.

Loans Receivable
 
Loans held for investment are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan purchase discounts, and net of an allowance for loan losses when such loan is deemed to be impaired.  Loan purchase discounts are amortized over the term of the loan.  The Company considers a loan impaired when, based upon current information and events, it is probable that it will be unable to collect all amounts due for both principal and interest according to the contractual terms of the loan agreement.  Management’s estimate of the collectability of principal and interest payments under the company’s loans receivable from CaPFA Capital Corp. 2000F (“CaPFA”), which mature in December 2040 and carry a balance of approximately $55.0 million as of March 31, 2015, are highly dependent on the future operating performance of the properties securing the loans.  As future economic conditions and/or market conditions at the properties change, management will continue to evaluate the collectability of such amounts. The Company believes there were no impairments of the carrying value of its loans receivable as of March 31, 2015. Loans receivable are included in other assets on the accompanying consolidated balance sheets.
 
Intangible Assets
 
A portion of the purchase price of acquired properties is allocated to the value of in-place leases for both student and commercial tenants, which is based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued “as-if” vacant.  As lease terms for student leases are typically one year or less, rates on in-place leases generally approximate market rental rates.  Factors considered in the valuation of in-place leases include an estimate of the carrying costs during the expected lease-up period considering current market conditions, nature of the tenancy, and costs to execute similar leases.  Carrying costs include estimates of lost rentals at market rates during the expected lease-up period, as well as marketing and other operating expenses.  The value of in-place leases is amortized over the remaining initial term of the respective leases.  The purchase price of property acquisitions is not expected to be allocated to student tenant relationships, considering the terms of the leases and the expected levels of renewals.
 
In connection with the property acquisitions discussed in Note 3 herein, the Company capitalized approximately $2.1 million and $-0- for the periods ended March 31, 2015 and 2014, respectively, related to management’s estimate of the fair value of in-place leases assumed.  Amortization expense was approximately $0.6 million and $0.9 million for the three months ended March 31, 2015 and 2014, respectively.  Accumulated amortization at March 31, 2015 and December 31, 2014 was approximately $28.5 million and $27.9 million, respectively.  The value of in-place leases, net of amortization, is included in other assets on the accompanying consolidated balance sheets and the amortization of in-place leases is included in depreciation and amortization expense in the accompanying consolidated statements of comprehensive income.  

For acquired properties subject to an in-place property tax incentive arrangement, a portion of the purchase price is allocated to the present value of expected future property tax savings over the projected incentive arrangement period. Unamortized in-place property tax incentive arrangements as of March 31, 2015 and December 31, 2014 were approximately $42.1 million and $36.7 million, respectively, and are included in other assets on the accompanying consolidated balance sheets. Amortization of in-place property tax incentive arrangements is included in wholly-owned properties operating expense in the accompanying consolidated statements of comprehensive income.
 
Mortgage Debt - Premiums and Discounts
 
Mortgage debt premiums and discounts represent fair value adjustments to account for the difference between the stated rates and market rates of mortgage debt assumed in connection with the Company’s property acquisitions.  The mortgage debt premiums and discounts are amortized to interest expense over the term of the related mortgage loans using the effective-interest method.  The amortization of mortgage debt premiums and discounts resulted in a net decrease to interest expense of approximately $3.0 million and $3.2 million for the three months ended March 31, 2015 and 2014, respectively.  As of March 31, 2015 and December 31, 2014, net unamortized mortgage debt premiums were approximately $58.6 million and $60.6 million, respectively, and net unamortized mortgage debt discounts were approximately $0.7 million and $0.9 million, respectively.  Mortgage debt premiums and discounts are included in secured mortgage, construction and bond debt on the accompanying consolidated balance sheets and amortization of mortgage debt premiums and discounts is included in interest expense on the accompanying consolidated statements of comprehensive income.
 

12

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Unsecured Notes - Original Issue Discount
 
In April 2013 and again in June 2014, the Company issued $400 million of senior unsecured notes (see Note 8) at 99.659 percent and 99.861 percent of par value, respectively, and recorded an original issue discount of approximately $1.4 million and $0.6 million, respectively. The total unamortized original issue discount was approximately $1.7 million as of both March 31, 2015 and December 31, 2014, respectively, and is included in unsecured notes on the accompanying consolidated balance sheets. Amortization of the original issue discounts of approximately $41,000 and $29,000 for the three months ended March 31, 2015 and 2014, respectively, is included in interest expense on the accompanying consolidated statements of comprehensive income.
 
Pre-development Expenditures
 
Pre-development expenditures such as architectural fees, permits and deposits associated with the pursuit of third-party and owned development projects are expensed as incurred, until such time that management believes it is probable that the contract will be executed and/or construction will commence.  Because the Company frequently incurs these pre-development expenditures before a financing commitment and/or required permits and authorizations have been obtained, the Company bears the risk of loss of these pre-development expenditures if financing cannot ultimately be arranged on acceptable terms or the Company is unable to successfully obtain the required permits and authorizations.  As such, management evaluates the status of third-party and owned projects that have not yet commenced construction on a periodic basis and expenses any deferred costs related to projects whose current status indicates the commencement of construction is unlikely and/or the costs may not provide future value to the Company in the form of revenues.  Such write-offs are included in third-party development and management services expenses (in the case of third-party development projects) or general and administrative expenses (in the case of owned development projects) on the accompanying consolidated statements of comprehensive income.  As of March 31, 2015, the Company has deferred approximately $2.5 million in pre-development costs related to third-party and owned development projects that have not yet commenced construction.  Such costs are included in other assets on the accompanying consolidated balance sheets.

Earnings per Share – Company
 
Basic earnings per share is computed using net income attributable to common shareholders and the weighted average number of shares of the Company’s common stock outstanding during the period.  Diluted earnings per share reflect common shares issuable from the assumed conversion of Operating Partnership units ("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, 2015 and 2014, 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,
 
 
2015
 
2014
Common OP Units (Note 10)
 

 
1,230,219

Preferred OP Units (Note 10)
 

 
112,628

Total potentially dilutive securities
 

 
1,342,847

 

13

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. 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,
 
 
2015
 
2014
Numerator – basic and diluted earnings per share:
 
 
 
 
Income from continuing operations
 
$
71,267

 
$
26,147

Income from continuing operations attributable to noncontrolling interests
 
(1,070
)
 
(435
)
Income from continuing operations attributable to common shareholders
 
70,197

 
25,712

Amount allocated to participating securities
 
(334
)
 
(321
)
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
 
69,863

 
25,391

Income from discontinued operations
 

 
2,720

Income from discontinued operations attributable to noncontrolling interests
 

 
(34
)
Income from discontinued operations attributable to common shareholders
 

 
2,686

Net income attributable to common shareholders
 
$
69,863

 
$
28,077

 
 
 
 
 
Denominator:
 
 

 
 

Basic weighted average common shares outstanding
 
110,955,099

 
104,821,669

Unvested Restricted Stock Awards (Note 11)
 
735,831

 
735,164

Common OP units (Note 10)
 
1,173,216

 

Preferred OP units (Note 10)
 
110,359

 

Diluted weighted average common shares outstanding
 
112,974,505

 
105,556,833

 
Earnings per share – basic:
 
 
 
 
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
 
$
0.63

 
$
0.24

Income from discontinued operations attributable to common shareholders
 
$

 
$
0.03

Net income attributable to common shareholders
 
$
0.63

 
$
0.27

Earnings per share – diluted:
 
 

 
 

Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities
 
$
0.62

 
$
0.24

Income from discontinued operations attributable to common shareholders
 
$

 
$
0.03

Net income attributable to common shareholders
 
$
0.62

 
$
0.27

Distributions declared per common share
 
$
0.38

 
$
0.36


Earnings per Unit – Operating Partnership
 
Basic earnings per OP Unit is computed using net income attributable to common unitholders and the weighted average number of common units outstanding during the period.  Diluted earnings per OP Unit reflects the potential dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units or resulted in the issuance of OP Units and then shared in the earnings of the Operating Partnership.



14

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


The following is a summary of the elements used in calculating basic and diluted earnings per unit: 
 
 
Three Months Ended March 31,
 
 
2015
 
2014
Numerator – basic and diluted earnings per unit:
 
 
 
 
Income from continuing operations
 
$
71,267

 
$
26,147

Income from continuing operations attributable to noncontrolling interests – partially owned properties
 
(323
)
 
(88
)
Income from continuing operations attributable to Series A preferred units
 
(44
)
 
(42
)
Amount allocated to participating securities
 
(334
)
 
(321
)
Income from continuing operations attributable to common unitholders, net of amount allocated to participating securities
 
70,566

 
25,696

Income from discontinued operations
 

 
2,720

Income from discontinued operations attributable to Series A preferred units
 

 
(3
)
Income from discontinued operations attributable to common unitholders
 

 
2,717

Net income attributable to common unitholders
 
$
70,566

 
$
28,413

 
 
 
 
 
Denominator:
 
 

 
 

Basic weighted average common units outstanding
 
112,128,315

 
106,051,888

Unvested Restricted Stock Awards (Note 11)
 
735,831

 
735,164

Diluted weighted average common units outstanding
 
112,864,146

 
106,787,052


 
Earnings per unit - basic and diluted:
 
 
 
 
Income from continuing operations attributable to common unitholders, net of amount allocated to participating securities
 
$
0.63

 
$
0.24

Income from discontinued operations attributable to common unitholders
 
$

 
$
0.03

Net income attributable to common unitholders
 
$
0.63

 
$
0.27

Distributions declared per common unit
 
$
0.38

 
$
0.36

 
3. Property Acquisitions
   
During the first quarter of 2015, the Company acquired the following wholly-owned properties containing 2,298 beds for approximately $195.3 million:
Property
 
Location
 
Primary University Served
 
Units
 
Beds
Park Point (1)
 
Syracuse, NY
 
Syracuse University
 
66
 
226
University Walk (2)
 
Knoxville, TN
 
University of Tennessee
 
177
 
526
1200 West Marshall
 
Richmond, VA
 
Virginia Commonwealth University
 
136
 
406
8 1/2 Canal Street (3)
 
Richmond, VA
 
Virginia Commonwealth University
 
160
 
540
Vistas San Marcos
 
San Marcos, TX
 
Texas State University
 
255
 
600
(1) 
As part of this transaction, the Company assumed approximately $11.6 million of fixed rate mortgage debt.


15

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


(2) 
University Walk opened for operations in August 2014 and was purchased by the Company in February 2015. This property was consolidated for financial reporting purposes prior to the acquisition date because the entity that owned this property was deemed to be a variable interest entity (“VIE”) and the Company was determined to be the primary beneficiary of the VIE. 

(3) 
As part of this transaction, the Company issued 343,895 common OP Units to the seller, valued at $41.24 per unit.

The acquired property’s results of operations have been included in the accompanying consolidated statements of comprehensive income since the respective acquisition closing dates.  The following pro forma information for three months ended March 31, 2015 and 2014 presents consolidated financial information for the Company as if the property acquisitions discussed above had occurred at the beginning of the earliest period presented.  The pro forma information is provided for informational purposes only and is not indicative of results that would have occurred or which may occur in the future:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
Total revenues
 
$
195,732

 
$
186,921

Net income attributable to common shareholders
 
$
73,076

 
$
26,595

Net income per share attributable to common shareholders, as adjusted - basic
 
$
0.66

 
$
0.25

Net income per share attributable to common shareholders, as adjusted - diluted
 
$
0.64

 
$
0.25

4. Property Dispositions and Discontinued Operations
 
During the first quarter of 2015, the Company sold the following wholly-owned properties containing 6,001 beds for approximately $231.0 million, resulting in proceeds of approximately $226.5 million. The combined net gain on these dispositions of approximately $44.3 million is included in income from continuing operations on the accompanying consolidated statements of comprehensive income for the three months ended March 31, 2015.

Property
 
Location
 
Primary University Served
 
Units
 
Beds
The Highlands
 
Reno, NV
 
University of Nevada at Reno
 
216
 
732
The View
 
Lincoln, NE
 
University of Nebraska
 
157
 
590
Chapel Ridge
 
Chapel Hill, NC
 
University of North Carolina
 
180
 
544
Chapel View
 
Chapel Hill, NC
 
University of North Carolina
 
224
 
358
The Village at Alafaya Club
 
Orlando, FL
 
University of Central Florida
 
228
 
839
University Place
 
Charlottesville, VA
 
University of Virginia
 
144
 
528
University Greens
 
Norman, OK
 
University of Oklahoma
 
156
 
516
University Meadows
 
Mt. Pleasant, MI
 
Central Michigan University
 
184
 
616
The Outpost San Marcos
 
San Marcos, TX
 
Texas State University
 
162
 
486
Eagles Trail
 
Hattiesburg, MS
 
University of Southern Mississippi
 
216
 
792

In February 2014, the Company sold Hawks Landing, a 122-unit, 484-bed owned off-campus property located near the campus of Miami University of Ohio for a sales price of approximately $17.3 million, including the assumption of an existing $15.6 million mortgage loan by the purchaser, resulting in net proceeds of approximately $1.3 million. Because Hawks Landing was classified as held for sale as of December 31, 2013, the resulting gain on disposition of approximately $2.8 million is included in discontinued operations on the accompanying consolidated statements of comprehensive income for the three months ended March 31, 2014. Below is a summary of the results of operations for Hawks Landing: 

16

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


 
 
Three Months Ended March 31, 2014
Total revenues
 
$
279

Total operating expenses
 
(239
)
Depreciation and amortization
 

Operating income
 
40

Total nonoperating expenses
 
(163
)
Net loss
 
$
(123
)

5. Investments in Wholly-Owned Properties
 
Wholly-owned properties consisted of the following: 
 
 
March 31, 2015
 
December 31, 2014
 
Land (1)
 
$
575,879

 
$
571,242

 
Buildings and improvements
 
5,033,845

 
4,937,345

 
Furniture, fixtures and equipment
 
290,592

 
289,168

 
Construction in progress 
 
237,877

 
185,414

 
 
 
6,138,193

 
5,983,169

 
Less accumulated depreciation
 
(708,474
)
 
(674,462
)
 
Wholly-owned properties, net
 
$
5,429,719

 
$
5,308,707

(2) 
 
(1) 
The land balance above includes undeveloped land parcels with book values of approximately $40.6 million as of both March 31, 2015 and December 31, 2014.  Also includes land totaling approximately $30.6 million and $30.2 million as of March 31, 2015 and December 31, 2014, respectively, related to properties under development.

(2) 
The balance above excludes the net book value of seven wholly-owned properties classified as held for sale in the accompanying consolidated balance sheet as of December 31, 2014 (see Note 4). These properties were sold in January 2015.

6. On-Campus Participating Properties
 
On-campus participating properties are as follows: 
 
 
 
 
 
 
Historical Cost
Lessor/University
 
Lease
Commencement
 
Required Debt
Repayment
 
March 31, 2015
 
December 31, 2014
Texas A&M University System / Prairie View A&M University (1)
 
2/1/1996
 
9/1/2023
 
$
43,115

 
$
43,036

Texas A&M University System / Texas A&M International
 
2/1/1996
 
9/1/2023
 
27,008

 
6,937

Texas A&M University System / Prairie View A&M University (2)
 
10/1/1999
 
8/31/2025
 
6,975

 
26,828

 
 
8/31/2028
 
 
University of Houston System / University of Houston (3)
 
9/27/2000
 
8/31/2035
 
36,635

 
36,606

West Virginia University Project / West Virginia University
 
7/16/2013
 
7/16/2045
 
43,643

 
43,636

 
 
 
 
 
 
157,376

 
157,043

Less accumulated amortization
 
 
 
 
 
(64,617
)
 
(62,915
)
On-campus participating properties, net
 
 
 
$
92,759

 
$
94,128

 

17

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


(1) 
Consists of three phases placed in service between 1996 and 1998.

(2) 
Consists of two phases placed in service in 2000 and 2003.

(3) 
Consists of two phases placed in service in 2001 and 2005.

7. Investments in Unconsolidated Joint Ventures
 
As of March 31, 2015, the Company owned a noncontrolling interest in one unconsolidated joint venture that is accounted for utilizing the equity method of accounting.  The Company discontinued applying the equity method in regards to its investment in this joint venture as a result of the Company’s share of losses exceeding its investment in the joint venture.  Because the Company had not guaranteed any obligations of the investee and was not otherwise committed to provide further financial support to the investee, it therefore suspended recording its share of losses once the investment was reduced to zero.  The Company also earns fees for providing management services to this joint venture, which totaled approximately $0.3 million and $0.4 million for the three months ended March 31, 2015 and 2014, respectively.

8. Debt
 
A summary of the Company’s outstanding consolidated indebtedness, including unamortized debt premiums and discounts, is as follows: 
 
 
March 31, 2015
 
December 31, 2014
Debt secured by wholly-owned properties:
 
 
 
 
Mortgage loans payable:
 
 
 
 
Unpaid principal balance
 
$
1,022,304

 
$
1,094,306

Unamortized debt premiums
 
58,582

 
60,586

Unamortized debt discounts
 
(662
)
 
(895
)
 
 
1,080,224

 
1,153,997

Construction loans payable
 

 
63,637

 
 
1,080,224

 
1,217,634

Debt secured by on-campus participating properties:
 
 

 
 

Mortgage loan payable
 
30,315

 
30,553

Bonds payable
 
39,785

 
39,785

Construction loan payable
 
44,200

 
43,942

 
 
114,300

 
114,280

Total secured mortgage, construction and bond debt
 
1,194,524

 
1,331,914

Unsecured notes, net of unamortized original issue discount
 
798,347

 
798,305

Unsecured revolving credit facility
 
131,900

 
242,500

Unsecured term loans
 
600,000

 
600,000

Total debt
 
$
2,724,771

 
$
2,972,719

 
Pay-off of Mortgage and Construction Debt     

During the three months ended March 31, 2015, the Company paid off approximately $61.4 million of fixed rate mortgage debt secured by three wholly-owned properties (Newtown Crossing, Olde Towne University Square and Peninsular Place). In addition, the Company paid off approximately $19.3 million of fixed rate mortgage debt prior to the sale of The View and University Meadows in January and February 2015, respectively.

During the three months ended March 31, 2015, the Company also paid off approximately $44.6 million of variable rate construction debt secured by two owned on-campus ACE properties (The Suites and Hilltop Townhomes). The remaining decrease in construction loans payable of $19.0 million is related to our purchase of University Walk in February 2015, as the seller/developer paid off the outstanding construction loan balance with sales proceeds.


18

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Unsecured Notes
 
In June 2014, the Operating Partnership issued an additional $400 million in senior unsecured notes under its existing shelf registration.  These 10-year notes were issued at 99.861 percent of par value with a coupon of 4.125 percent and a yield of 4.142 percent, and are fully and unconditionally guaranteed by the Company.  Interest on the notes is payable semi-annually on January 1 and July 1, with the first payment beginning on January 1, 2015. The notes will mature on July 1, 2024.  Net proceeds from the sale of the unsecured notes totaled approximately $395.3 million after deducting the underwriting discount and offering expenses. The underwriting discount and offering expenses were capitalized to deferred financing costs and will be amortized over the term of the unsecured notes.  The Company used $340 million of the offering proceeds to pay down the outstanding balance on its revolving credit facility in full.  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, 2015, the Company was in compliance with all such covenants.

In connection with the issuance of unsecured notes discussed above, the Company terminated two forward starting interest rate swap contracts with notional amounts totaling $200 million, resulting in payments to both counterparties totaling approximately $4.1 million, which were recorded in accumulated other comprehensive loss and will be amortized to interest expense over the term of the unsecured notes. When including the effect of these interest rate swap terminations, the effective yield on the unsecured notes is 4.269%. Refer to Note 12 for more information on the interest rate swap contracts mentioned above.
  
Unsecured Credit Facility

The Company has an aggregate unsecured credit facility totaling $1.1 billion which is comprised of two unsecured term loans totaling $600 million and a $500 million unsecured revolving credit facility, which may be expanded by up to an additional $500 million upon the satisfaction of certain conditions. The maturity date of the unsecured revolving credit facility is March 1, 2018, and can be extended for an additional 12 months to March 1, 2019, subject to the satisfaction of certain conditions. The maturity date of the $350 million term loan facility ("Term Loan I Facility") is January 10, 2017 and can be extended to January 10, 2019 through the exercise of two 12-month extension options, subject to the satisfaction of certain conditions. The maturity date of the $250 million term loan ("Term Loan II Facility") is March 1, 2019.

Each loan bears interest at a variable rate, at the Company’s option, based upon a base rate or one-, two-, 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. As of March 31, 2015, the Term Loan II Facility bore interest at a variable rate of 1.68% per annum (0.18% + 1.50% spread). The Company has entered into multiple interest rate swap contracts with notional amounts totaling $350 million that effectively fix the interest rate to a weighted average annual rate of 0.89% on the outstanding balance of the Term Loan I Facility. Including the current spread of 1.50%, the all-in weighted average annual rate on the Term Loan I Facility was 2.39% at March 31, 2015. Refer to Note 12 for more information on the interest rate swap contracts mentioned above. Availability under the revolving credit facility is limited to an “aggregate borrowing base amount” equal to 60% of the value of the Company’s unencumbered properties, calculated as set forth in the unsecured credit facility.  Additionally, the Company is required to pay a facility fee of 0.25% per annum on the $500 million revolving credit facility.  As of March 31, 2015, the revolving credit facility bore interest at a weighted average annual rate of 1.73% (0.18% + 1.30% spread + 0.25% facility fee), and availability under the revolving credit facility totaled $368.1 million as of March 31, 2015.
 
The terms of the unsecured credit facility include certain restrictions and covenants, which limit, among other items, the incurrence of additional indebtedness, liens, and the disposition of assets.  The facility contains customary affirmative and negative covenants and also contains financial covenants that, among other things, require the Company to maintain certain minimum ratios of “EBITDA” (earnings before interest, taxes, depreciation and amortization) to fixed charges and total indebtedness.  The Company may not pay distributions that exceed a specified percentage of funds from operations, as adjusted, for any four consecutive quarters.  The financial covenants also include consolidated net worth and leverage ratio tests.  As of March 31, 2015, the Company was in compliance with all such covenants. 
 

19

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


9. Stockholders' Equity / Partners' Capital
 
Stockholders' Equity - Company

In March 2013, the Company established 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.  Actual sales under the program will depend on a variety of factors, including, but not limited to, market conditions, the trading price of the Company’s common stock and determinations of the appropriate sources of funding for the Company.  

The following table presents activity under the Company’s ATM Equity Program during the three months ended March 31, 2015:
 
 
Three Months Ended March 31, 2015
Total net proceeds
 
$
213,416

Commissions paid to sales agents
 
$
3,250

Weighted average price per share
 
$
43.92

Shares of common stock sold
 
4,933,665


The Company did not sell any shares under the ATM Equity Program for the comparable three month period in 2014. As of March 31, 2015, the Company had approximately $194.0 million available for issuance under its ATM Equity Program.

Partners’ Capital – Operating Partnership
 
In connection with the ATM Equity Program discussed above, ACCOP issued a number of common OP units to ACC equivalent to the number of shares issued by ACC.

In connection with our purchase of 8 1/2 Canal Street during the first quarter of 2015, we issued 343,895 common OP units to the seller, valued at $41.24 per unit. See Note 3 for more details.

During the three months ended March 31, 2015, 76,183 common OP units were converted into an equal number of shares of ACC’s common stock.

10. Noncontrolling Interests
 
Operating Partnership
 
Partially-owned properties: As of March 31, 2015, the Operating Partnership consolidates three joint ventures that own and operate University Village at Sweet Home, University Centre and Villas at Chestnut Ridge owned-off campus properties.  The portion of net assets attributable to the third-party partners in these joint ventures is classified as “noncontrolling interests - partially owned properties” within capital on the accompanying consolidated balance sheets of the Operating Partnership.  Accordingly, the third-party partners’ share of the income or loss of the joint ventures is reported on the consolidated statements of comprehensive income of the Operating Partnership as “net income attributable to noncontrolling interests – partially owned properties.”

As discussed in Note 3, the Company entered into a purchase and contribution agreement with a private developer whereby the Company was obligated to purchase the property (University Walk) as long as the developer met certain construction completion deadlines and other closing conditions.  The $1.5 million equity contribution from the developer is reflected as noncontrolling interests - partially owned properties within capital on the accompanying consolidated balance sheets of the Operating Partnership as of December 31, 2014. The Company purchased University Walk in February 2015 and paid approximately $1.7 million in cash consideration for the remaining noncontrolling interest and recognized the $0.2 million excess of consideration paid over the carrying amount of the noncontrolling interest acquired as an adjustment to additional paid in capital in the accompanying consolidated statement of changes in capital.

OP Units:  For the portion of OP Units that the Operating Partnership is required, either by contract or securities law, to deliver registered common shares of ACC to the exchanging OP unit holder, or for which the Operating Partnership has the intent or history of exchanging such units for cash, we classify the units as “redeemable limited partners” in the mezzanine section of the

20

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
AMERICAN CAMPUS COMMUNITIES OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


consolidated balance sheets of the Operating Partnership.  The units classified as such include Series A preferred units as well as common units that are not held by ACC or ACC Holdings.  The value of redeemable limited partners on the consolidated balance sheets of the Operating Partnership is reported at the greater of fair value, which is based on the closing market value of the Company's common stock, or historical cost at the end of each reporting period.  Changes in the value from period to period are charged to limited partner’s capital on the consolidated statement of changes in capital of the Operating Partnership.  

Below is a table summarizing the activity of redeemable limited partners for the three months ended March 31, 2015
December 31, 2014
$
54,472

Net income
747

Distributions
(464
)
Redeemable limited partner units issued as consideration (see Note 3)
14,182

Conversion of redeemable limited partner units into shares of ACC common stock
(2,577
)
Adjustments to reflect redeemable limited partner units at fair value
1,072

March 31, 2015
$
67,432

 
During the three months ended March 31, 2015, 76,183 common OP units were converted into an equal number of shares of ACC's common stock and during the year ended December 31, 2014, 50,000 common OP units and 2,269 Series A preferred units were converted into an equal number of shares of ACC's common stock. As of March 31, 2015 and December 31, 2014, approximately 1.4% and 1.2%, respectively, of the equity interests of the Operating Partnership were held by owners of common OP Units and Series A preferred units not held by ACC or ACC Holdings.
 
Company
 
The noncontrolling interests of the Company include the third-party equity interests in partially-owned properties, as discussed above, which are presented as a component of equity in the Company’s consolidated balance sheets.  The Company’s noncontrolling interests also include the redeemable limited partners presented in the consolidated balance sheets of the Operating Partnership, which are referred to as “redeemable noncontrolling interests” in the mezzanine section of the Company’s consolidated balance sheets.  Noncontrolling interests on the Company’s consolidated statements of comprehensive income include the income/loss attributable to third-party equity interests in partially-owned properties, as well as the income/loss attributable to redeemable noncontrolling interests (i.e. OP Units not held by ACC or ACC Holdings.)
 
11. Incentive Award Plan

Restricted Stock Awards (“RSAs”)
 
A summary of ACC’s RSAs under the American Campus Communities, Inc. 2010 Incentive Award Plan (the "Plan") as of March 31, 2015 and activity during the three months then ended, is presented belo