American Campus Communities, Inc.
Q4 2014 Earnings Call Transcript

Published: 17 Feb 2015

[Operator:]

Good morning, and welcome to the American Campus Communities 2014 Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ryan Dennison, Vice President of Corporate Finance and Investor Relations. Please go ahead, sir.

[Ryan Dennison:]

Thank you, Laura. Good morning, and thank you for joining the American Campus Communities 2014 Fourth Quarter and Year End Conference Call. The press release is furnished on Form 8-K to provide access to the widest possible audience. In the release, the company has reconciled the non-GAAP financial measures to those directly comparable GAAP measures in accordance with Reg G requirements. If you do not have a copy of the release, it's available on the company's website at americancampus.com, in the Investor Relations section under Press Releases. Also posted on the company website in the Investor Relations section, you will find a supplemental financial package. We are also hosting a live webcast for today's call, which you can access on the website, with the replay available for one month. Our supplemental analyst package and our webcast presentation are one and the same. Webcast slides may be advanced by you to facilitate following along. Management will be making forward-looking statements today, as referenced in the disclosure in the press release, in the supplemental financial package and in SEC filings. Management would like to inform you that certain statements made during this conference call which are not historical facts, may be deemed forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities and Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, they are subject to economic risks and uncertainties. The company can provide no assurance that its expectations will be achieved and actual results may vary. Factors and risks that could cause actual results to differ materially from expectations are detailed in the press release, and from time to time in the company's periodic filings with the SEC. The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release. Having said that, I would now like to introduce the members of the senior management joining us for the call

[William Bayless:]

Thank you, Ryan. Good morning, and thank all of you for joining us as we discuss our Q4 and full year 2014 results. As you saw in our press release this morning, we completed 2014 and commenced 2015 with solid execution on all fronts. As you all know, our fall 2014 lease-up positions us well for growth moving into 2015 and the great start that we now have on the 2015 lease-up with fall rental rates currently projected to be at 2.9%, we have set the stage for continued growth into 2016. Also as you’ll see, our asset management initiatives are beginning to bear fruit as this year we expect our operating margins to improve above 53% for our total loan portfolio. We’ve also significantly strengthened our balance sheet executing on our disposition strategy, disposing of older non-core assets further from campus, while simultaneously being opportunistic in raising equity via our ATM. While creating this in excess of $500 million in additional capacity was dilutive to our 2015 guidance, it was essential in funding the plethora of highly accretive investment opportunities now before us as you’ll hear from Jamie and William in the form of the largest ACE development pipeline that we have ever had including five new awards that we announced in this release, a solid emerging pipeline of core pedestrian off-campus development opportunities, and numerous high-quality core pedestrian acquisitions. With that, I’ll turn it over to Jim to get us started.

[James Hopke:]

Thanks, Bill. We're pleased to report internal growth in both our fourth quarter and full year 2014 results, marking the tenth straight year of same-store growth and rental rates, rental revenue and NOIs since our IPO in 2004. On Page 5 of the supplemental package, you will see that our fourth quarter same-store property NOI increased by 2% over Q4 of 2013 on a 2.7% increase in revenues and an increase in operating expenses of 3.5%. For full year 2014, same-store NOI growth was 1.8%. The result of a 2.1% increase in revenues and a 2.5% increase in expenses. As outlined in the operating expense detail on page 6, the 2.5% increase in 2014 expenses is driven primarily by 5% growth in utilities due to the first quarter 2014 award tax and a 6.7% increase in property taxes. Excluding the tax increase on 2012 development deliveries experiencing their first full year at full assessment in 2014, real estate tax expense would have grown only 1% in 2014 and total expenses would have grown only 1.5%, which would translate into 2.7% NOI growth. Please note, our new disclosure on pages 7 and 8 of the supplemental providing a quarterly breakdown of the major line items for our same-store operating expenses as compared to the prior year. We will be providing these same-store comparisons quarterly throughout the year in 2015. Expenses for the annual same-store fourth quarter property are being reported on page 8 reflecting 11.4% increase in general and administrative expenses over fourth quarter 2013, which were primarily the result of investment in our next-generation operating systems development and increased incentive compensation due to our improved performance over 2013. The next-gen systems development includes the next evolution of our proprietary land system as well as the development of a fully customized residential management system designed to enhance our scalability, drive operating efficiency and further improve our customer experience. These systems are scheduled to be delivered in phases over the next one to three years, at which point we would expect G&A expenses associated with this effort to diminish. Maintenance expenses for the fourth quarter grew by 8%, primarily due to timing of various repair projects scheduled during the Thanksgiving and December holiday breaks when they would be least disruptive to our residence. For the year, maintenance expense growth was moderate at 2.1% compared to 2013. We were very pleased that our asset management focus on the effectiveness and efficiency of our marketing activities resulted in the continuation of a decline in the fourth quarter expenses of 19.9%. You may recall, that marketing expenses in the fourth quarter of 2013 had already been reduced to our long-term historical run rates making the reduced fourth quarter 2014 spend even more notable. Occupancy at our total wholly-owned portfolio updated on Page 11 of the supplemental was 97.7% as of December 31, compared to 96.8% at the end of 2013. The same-store wholly-owned properties were 97.6% compared to 96.8% for the same day prior year. On Pages 12 through 18, we update our leasing activity for fall 2015. As of Friday, February, 13th, our total same-store wholly-owned portfolio was 61.4% applied and 55.1% leased compared to 60.2% applied and 53.4% leased for the same date prior year. We are very pleased to be 170 basis points ahead of last year’s leasing base given that last year’s lease up was 640 basis points ahead of the 2013 same day. As always, we caution that pre-leasing velocity will narrow and could even begin to pace slightly behind last year as we have the ability to hold rental rates to maximize rental revenue. We are now projecting a same-store rental rate increase for academic year 2015-2016 of 2.9% versus our original increase of 2.8%. On Page 18, you will see that our fall 2015 development deliveries have been well received in their respective markets. These properties are 53.6% pre-leased with Phase 2 of our Tallahassee U Club on Woodward already 100% leased. The Auburn development at 63.6% is ahead of the market average and the Summit at Drexel University is 50% pre-leased. While the Eugene property is only 19.8% leased, this is traditionally a late market and we are comfortable with our progress at this time as it is consistent with the current market average. Our 2015 guidance for our annual same-store NOI growth is 2.3% to 4.7% with a mid-point of 3.5%. In addition, we expect our total wholly-owned portfolio to produce an operating margin north of 53% as we are already starting to see the benefits of some of our asset management initiatives. In addition to marketing efficiencies, our asset management activities are focused on all aspects of operations, including improvements to our collection process, refinements to our GM incentive comp program to better align our field staff with margin improvement, gaining operating efficiencies in multiple property markets through branding and staffing, and utilities management, including common area lighting, cable and internet pricing and water usage as well as other traditional asset management activities. In addition, our next-gen systems include budgeting and forecasting system upgrades, as well as charts of accounts adjustments to better evaluate operating performance and enhance real-time decision-making. We are also continually annualizing our development specifications and standards to enable more efficient operations in future properties. As noted, we are seeing immediate results from some of these initiatives, while others will have longer-term payouts. I will now turn the call over to Jamie to discuss our on-campus investment activities.

[James Wilhelm:]

Thanks, Jim and good morning. As you saw in our press release, we announced seven new P3 initiatives further strengthening ACC’s position as the industry’s leader, more significantly we have been awarded or are presently in negotiations on five new ACE projects, totaling nearly 4000 beds. These opportunities include two developments at Arizona State University that have the potential to increase our total own beds at ASU from 5000 to nearly 7000 by the fall of 2018. In addition, we are working on two new projects with the University of Louisville, and the development of a second phase of ACE at Butler University. We are presently targeting project deliveries in 2017 and 2018 with the potential for 2016 delivery provided the pre-development activities could be completed on an expedited basis. Including the four ACE projects currently under construction or in the final stages of pre-development, we have 21 ACE communities totaling 15,630 beds and a total investment of approximately $1.2 billion. Based on a market cap rate of 5% to 5.25%, the total asset value of the 21 communities is approximately $1.6 to $1.7 billion. Assuming the successful structuring commencement of our five new ACE awards, with a total estimated development cost of $345 million going in yields ranging between 6.5% and 7% and a 5% to 5.25% economic cap rate for valuations, these projects will increase our ACE investment total between $430 million and $460 million to a total valuation of our 26 ACE investments to $2.1 billion to $2.2 billion. In addition to our five ACE awards, we’ve also been awarded the right to negotiate on two additional on-campus development projects at Northeastern Illinois University and the University of Vermont. Both of these projects are in the conceptual planning stages. With regard to our current ACE developments, our total, our fall 2015 delivery at the Summit on University City, a $170.7 million project at Drexel University, remains on time and on budget. We also have finalized all of our design plans and over the summer of 2015, we will complete the extensive renovations of our University Crossings project at Drexel, which has been converted to an ACE transaction. Also during the quarter, we commenced construction on our University of Southern California Health Sciences Campus project. The 456 bed, $50.4 million development is scheduled for occupancy in the fall 2016. Construction is expected to commence on our 632 bed initial phase on the campus of Butler University during the first quarter of 2015 for fall 2016 delivery. And finally, our 379 bed, $44.6 million, second phase of faculty and staff housing at Princeton University is expected to commence construction in the second quarter of this year with phase delivery in the fall of 2016. Now turning to the third-party developments, during the quarter, we received a mandate from Northeastern Illinois University. NEIU located in Suburban Chicago proposes to develop approximately 500 beds in new on-campus apartment communities. The projects’ timing commencement are subject to feasibility and the timely receipt of the necessary municipal and state approvals. Our estimated fees for the project are approximately $2 million. We’ve also been selected by the University of Vermont for a potential 600 bed on-campus development that is in the early stages of conceptual planning. With regard to fall 2015 third-party deliveries, t he 492 bed Honors residence hall at the University of Toledo and the 482 bed, Texas A&M University Corpus Christi Apartment Community remain on schedule. The 715 bed Lakeside Graduate Community of Princeton University is scheduled to be completed and placed in service this June. Beyond the seven new P3 transactions announced this quarter, we remain very active and more than a dozen formal procurements or direct negotiations and continue to track a substantial number of future on-campus opportunities. We have discussed on recent calls, we believe the breadth of the opportunities in our on-campus business segment is stronger than it’s ever been in our time and our history. I’d like to turn the presentation over to William to discuss our overall investment activity.

[William Talbot:]

Thanks, Jamie. Turning first to dispositions, we completed our 2014 sales program in January, the sale of seven non-core assets consisting of 4107 beds for a total sales price of $173.9 million. The total sales price at $42,300 a bed represents a 6.3% economic cap rate on in-place revenue with trailing 12 other income and expenses grown at 2% and assuming a portfolio average capital reserve at $215 per bed. The assets average 1.5 miles a campus with an average age of over 14 years allowing us to not only accretively recycle capital into our higher yielding core development pipeline, but also improve the overall quality of our core portfolio by selling older assets from campus that have a lower future NOI growth profile in our new developments and core acquisitions. Our total 2014 disposition program included nine properties with 5071 beds at a sales price of $197.5 million. For the remainder of 2015, we expect to sell an additional $36 million at the high end of our guidance range and $230 million at the low end of our guidance range. It is anticipated that future dispositions will be older non-core properties. We will update the market as we make progress in these areas. Turning now to development, we are excited to have made significant progress in all areas of our own development activity. In addition to the five newly announced ACE projects Jamie covered, during the quarter, we also expanded our owned off-campus development pipeline with a 720 bed project immediately adjacent to the campus of the University of Missouri, as well as a 530 bed project pedestrian to West Virginia University on the side of our existing Sunnyside Commons which will be taken offline this summer. Both projects are currently slated for a fall 2017 delivery. In addition, we continue to make progress in our fall 2015 own deliveries totaling 3188 beds and $314 million in development. With the seven previously unannounced own developments totaling $460 million in current estimated cost that we announced this quarter are owned and ACE developments that we will place into service for fall 2015, 2016 and beyond currently total 10,293 beds and $961 million in development costs. All of these developments are located either on-campus or immediate pedestrian to core campus and with development nominal yields of 6.5 to 7 representing a 100 to 170 basis point premium to current market economic cap rates for core pedestrian product of 5% to 5.5%. In addition to the growth previously mentioned, our shadow pipeline of off-campus development opportunities is vibrant with numerous transactions having the potential to be added to our pipeline for a fall 2017 delivery. Lets now turn to acquisitions. As disclosed in the supplemental, we closed on the acquisition of two core pedestrian assets during and subsequent to the fourth quarter. The standard, a new development delivered in fall 2014 with 610 beds and 25,000 square feet of retail is located in downtown, Athens Georgia, a few blocks from the campus of the University of Georgia. Park Point was developed in 2010 with 226 beds and is located on the campus of Syracuse University on a long-term ground lease. The two core assets average 0.2 miles to campus with an average age of 1.5 years and were acquired for $94 million which represents a 5.5% nominal and 5.3% economic cap rate on first year pro forma, however, FFO in for 2015 will be approximately $4.64 million due to timing of acquisitions and GAAP accounting adjustments. As we discussed on the last call, the overall transaction market remained strong for student housing products. As detailed on the CBRE year-end 2-14 overview of student housing call that occurred last week, 2014 represented a record year for both number of transactions and dollar value with over a 134 properties trading for more than $3 billion with REITs only accounting for 3% of all transactions, while over 30% of private capital were new entrants to the sector. We have already seen another new high profile institutional fund into the student housing sector in early 2015 with Starwood acquiring two portfolios, including one portfolio from ACC. Overall pricing per bed in 2014 increased by over 5% versus 2013 and 31% over the past five years. The overall cap rate for student housing compressed by 47 basis points over 2013, while multi-family only saw a reduction of 12 basis points. The cap rate spread for student over multi-family was reduced to only 13 basis points for 2014 representing the continued maturation of our sector and a strong demand from investors for student housing. CBRE reported cap rates for core pedestrian products have been as low as sub-5%. ACC will continue to selectively pursue core acquisition opportunities that fit our acquisition criteria and may elect to increase disposition volume to match fund the acquisition to core pedestrian products that have stronger projected NOI growth. With that, I will now turn it over to Jon to discuss our financial results and 2015 guidance.

[Jonathan Graf:]

Thanks, William. For the fourth quarter of 2014, we reported total FFOM of $75 million or $0.70 per fully diluted share, a 6.1% increase over the comparable quarter in 2013, a $70.7 million in FFOM of $41.5 million and $0.66 per fully diluted share. Full year 2014 FFOM of $254.4 million or $0.2.38 per fully diluted share exceeded the high end of our 2014 FFOM guidance range with a 7.2% increase over 2013’s FFOM of $236.6 million or $2.22 per fully diluted share. As compared to the prior year, the 2014 results benefited from our previously discussed strong same-store operating results; the 19 growth properties placed into service since the fall of 2013; and the timing of payoffs of maturing property mortgage loans. This was partially offset by an increase in corporate level interest expense, primarily from the timing of various capital market activities, including our June 2014 $400 million bond offering and our December 2013 $250 million term loan. Additionally, annual FFOM comparability between 2014 and 2013 was impacted by the timing of the six dispositions in 2013 whose operations contributed $6.9 million in FFOM in 2013. Total third-party revenues were at the mid point of our 2014 guidance range of $11.1 million to $12.4 million as we earned $11.7 million in third-party revenues during 2014 with 66% of this consisting of management fees. Remaining development service fees of $1.6 million are expected to be recognized during 2015 on the three third-party development projects in progress as of year-end. Corporate G&A for the year of $18.9 million was within our communicated guidance of $18.2 million to $19 million. As expected and previously communicated, corporate G&A in 2014 increased over the prior year due to increased payroll and benefits expense including cash incentive compensations and restricted stock award amortization, cost associated with the system enhancements that Jim discussed, increased public company costs and increased property taxes on our land held for future development. As of December 31, 2014 the company’s debt-to-total asset value was 44.4% and the net debt to run rate EBITDA was 7.6 times. Considering ATM activity and asset dispositions completed today, our debt-to-total asset value is approximately 39.7% and the net debt to run rate EBITDA is 6.9 times. As of quarter end, we had approximately $4.3 billion in unencumbered asset value which was almost 65% of the company’s total asset value. Within the last 12 months, we completed a $400 million bond offering of ten year notes, we raised $301 million in net proceeds under our ATM with issuance of $7.1 million shares to common stock, we completed $197.5 million in property dispositions and we paid off $242 million of maturing fixed rate debt and construction loans. This allowed us to fund our 2014 growth opportunities while maintaining strong credit ratios and creating significant capacity for our future growth pipeline. Additionally, the average term to maturity of our outstanding debt went from 4.8 years to 5.5 years. Fixed rate debt maturities for 2015 are $182 million or 6.2% of the company’s total indebtedness. Management believes that between the current capacity on our revolving credit facility and cash generated from operations, as well as the ability to match fund via our dispositions and/or ATM programs, that we have ample capital for our wholly-owned development projects being delivered in 2015. Our total interest expense for 2014 excluding $5.1 million from the on-campus participating properties was $85.4 million compared to $72.6 million in 2013 and the company’s cash interest coverage ratio for the year was 3.3 times. Interest expense for 2014 includes a net increase of $12.6 million from our unsecured notes issued in April of 2013 and June of 2014, as well as $4 million from our December 2013 $250 million term loan. This was slightly offset by a $5.9 million reduction in interest expense from the timing of maturing property mortgage loan pay-offs. Additionally, interest expenses net of approximately $13 million and debt premium amortization an $8.1 million in capitalized interest related to own projects and development. We are providing guidance for 2015 FFO in the range of $2.33 to $2.45 per fully diluted share. 2015 FFOM excluding the impact of anticipated transaction cost in the range of $2.30 to $2.42 per fully diluted share. In 2015 per share net income in the range of $0.54 to $0.60 per fully diluted share. Pages 24 and 25 of the supplemental details the components of 2015 guidance. When comparing the 2015 per share FFO and guidance range to the $2.38 per fully diluted share achieved in 2014, it should be noted that approximately $0.15 of per share dilution has occurred from the $7.1 million shares of common stock issued under our ATM in late 2014 and early 2015. In addition, NOI is expected to be reduced by approximately $15.3 million in 2015 as compared to 2014 as a result of the timing of 2014 and 2015 dispositions which impacts fully diluted share FFOM by $0.13. Some of the major 2015 guidance assumptions to note are; for total owned property NOI excluding on-campus participating properties, our guidance includes a range of $370.1 million to $389.1 million. Acquisitions of $223.5 million are assumed at the low end and $418.5 million are assumed at the high end. Additionally, 2015 dispositions of $230.7 million are assumed at the low end and $36.1 million are assumed at the high end. Same-store NOI growth is expected to be between 2.3% to 4.7%. For interest expense excluding the on-campus participating properties we are projecting $81 million to $88.1 million net of capitalized interest. The interest expense range is primarily driven by our assumptions with regard to interest rate fluctuations, the timing and size of dispositions and acquisitions, and a possible mid-year unsecured bond offering. For G&A, we are projecting $20.9 million at the midpoint for 2015, compared to $18.9 million incurred in 2014. This increase is related to increased payroll and benefits expense including restricted stock award amortization and increased public company costs. Additionally, G&A and other segment expenses will be impacted by approximately $0.01 to $0.02 per fully diluted share related to increased cost from enhancements to our operating platform in terms of system development. Primarily as a result of our fall 2014 delivery of our WBU project which is accounted for as an on-campus participating property, we are expecting an increased FFOM contribution from these properties which is reflected in the range of $4.3 million to $4.9 million. Based on our current shares, units, and stock awards outstanding, we assume a weighted average share count of 114 million shares. With that, I will turn it back to Bill.

[William Bayless:]

Thank you, Jon. In closing, as you can hear from all the details that we provided, we are pretty excited here at American Campus. From an industry perspective, if you recall the Axiometrics data that we shared on the last call, where we highlighted strong national occupancies above 95% for the 2014-2015 academic year, coupled with the absorption of new supply and you couple that with what William just discussed in terms of CBRE’s overview of the transaction environment and cap rate compression, we believe we are at a point in our industry’s history that it’s the strongest as it’s ever been. Also, the company is experiencing significant tailwinds related to internal growth. We see excellent operational results, our asset management efforts starting to come to fruition, and also the early lease-up progress that we made for fall 2015 and where we are projecting rental rates to be, gives further indication of continued internal growth. And of course, what we are most excited about is the highly accretive growth opportunities that are before us, especially in the new announcements related to five new ACE developments as well as progress in the off-campus development pipeline. With that, we’ll go ahead and Dan and I will lead you through the Q&A.

[Operator:]

[Operator Instructions] And our first question will come from Karin Ford of KeyBanc Capital Markets.

[Karin Ford:]

Hi, good morning. My first question is on the new five ACE deals, you mentioned that, depending on how pre-development goes that some of them may fall into 2016, may be pulled into 2016. Can you just talk about how many of those, that could possibly be and just give us a little more color on how that would work?

[William Bayless:]

There is two – Karin, this is Bill. Good morning. There is two that have an outside chance, so one of the ASU transactions and one of the Louisville transactions, that would represent a fast track development timeline, pre-development would have to go perfectly, they are very comfortable 2017 deliveries, but there is an outside chance they could fall in, and at this point, it’s honestly a little bit too early to handicap it.

[Karin Ford:]

Okay, thanks, that’s helpful. And, can you just talk about your decision to do some pre-funding here and just talk about how you thought about the FFO dilution that you mentioned versus the NAV creation that you are expecting for the project?

[Daniel Perry:]

Yes, hi, Karin, this is Daniel. One of the things that we talked about at NAREIT and certainly is a part of this discussion is, how we look at our leverage statistics and our desire to bring those down. We don’t really target specific leverage levels, but rather a range of levels and as long as we are within that range, we are comfortable. Beyond that, we are always looking at the different forms of capital available to us and what we think will provide the most accretion to value to NAV. Obviously, with the stock trading above consensus NAV and a very good ACE development pipeline and some additional on-campus awards starting to come together, we thought it was appropriate to go ahead and pre-fund those transactions. Obviously, trading below NAV and funding 6.5 to 7 yield type developments is going to be very accretive to NAV and the short-term impact to earnings we thought was worthwhile.

[Karin Ford:]

Thanks for the color. And my last one is a question for Bill on Campus Crust, they announced they were pursuing strategic alternatives after some in-bound inquiries, can you just talk about what might be ACC’s interest in Campus Crust?

[William Bayless:]

We certainly wish those folks well and think they’ve done a lot of good things over there to go in the right direction. We are focused on – as you look- listen to what we talked about the day, the accretive development pipeline we have before us and also when you look at our investment criteria and what we’ve always looked for in acquisition targets, we are focused on core pedestrian close to campus. So, obviously, there is a lot of that portfolio that was developed not quite in the line with our long-term investment strategies.

[Karin Ford:]

Okay, thanks. That’s helpful.

[Operator:]

The next question comes from Nick Joseph of Citigroup.

[Michael Bilerman:]

Hey it’s Bilerman here with Nick.

[William Bayless:]

Hello Michael.

[Michael Bilerman:]

Hi, sort of on the ATM, and I understand trying to keep leverage metrics in check and I understand trading above consensus NAV, but I guess, when you sit back and you think about the magnitude of the ATM and I recognize you have a $500 million authorization, but doing $300 million or 7% of your equity base in the shadow market without sort of full disclosure, I guess, how did you think about that versus doing a overnight transaction where you can sort of come out and educate the market in terms of the opportunities for that capital rather than bleeding it out over time and then sort of coming and said, hey, we just issued 7% of our equity base in the last two months.

[Daniel Perry:]

Yes. Mike, a lot of it had to do with how the timing of these opportunities have come about and that the ACE pipeline while we’ve been working these transactions for numerous months, at the end of last year and really it was – well into January that they fully got – fully back to the point where have deals to announce. And so we didn’t feel that we are in a position that we had these things far and off along more toward the end of the year or very, very - or the first week of the year to where we could announce and come out with them. At the same time, we are sitting here knowing we have a very, very good probability that they are going to come to fruition, we see the market price where it is and at the same time we watch the same evening news all of you all do where we just don’t know how long those stock price is going to hang up – hang in there for us, and so we felt that it was prudent to raise that equity. Certainly, it’s been the company’s history whenever we have had a large growth portfolio, certainly from an acquisition perspective that we have always come and told that investment story to the market as we raise that equity. I think that what we have heard from our shareholders over the years and everybody loves ACE. I mean, if you look at the quality of the location, the value that we create as William talked about where we have 6.5% nominal development yields and translating into immediate NAV at the 5% to 5.5%, we really felt that it was the prudent long-term value creation strategy to take advantage and raise that equity while it was there, knowing that while it wasn’t fully back to the point that we could announce and tell the story that we felt there was a high probability that was coming into play which, thank goodness it all did which we are pretty darn excited about sitting here at this moment. And certainly from – I know there is probably some investors out there that are saying, well, we’d love to have got a piece of some of that equity with the growth that’s coming, at the same time the cost of that ATM is very beneficial to us in terms of the arrangement for those that are current shareholders certainly benefit from the accretion that will be created from that decision.

[Michael Bilerman:]

Were any of the slugs of equity done on a direct basis than any large chunks or was it all dribbled out under normal sort of ATM issuance?

[Daniel Perry:]

It was all under normal flow issuance, Michael, this is Daniel. We historically have not done a lot of – or any directs, just because we get a lot of request form and we can’t satisfy all of them, so.

[Q –Nick Joseph:]

Thanks, and then – this is Nick here, you talked about the Arizona State ACE opportunity and given the exposure you already have to that university, how do you think about the optimal amount of exposure or risk to any one university?

[William Bayless:]

Yes, typically, what we are – if you look at the portfolio as a whole, we always talk about kind of a tolerance of 10% of market share. Now when we say that, we are talking about traditional investment in terms of off-campus development 10% of beds as a percent of total enrollment. However, as you all heard us talk about over the last several years, when you look at the various tranches of products that exists in each university market, on-campus housing typically accommodates between 20% and 25% of beds to enrollment. At ASU, that’s still relatively low at about 11,000 beds on 70,000 students. Also, we then look at the off-campus market, which typically represents about 75% of that, what gives us comfortable with ASU with 70,000 beds and that includes our holding at ASU or 7,000 beds that also include ASU versus the satellite Kansas there were about 70,000 students is that the majority of our holdings. And one of the projects we are talking about here is a targeted 1600 bed facility that is taking an existing residence hall out of service that’s about – is that 600 beds Jamie?

[James Hopke:]

Just under.

[William Bayless:]

Just under 600 beds, so we are adding net of 1000 bed of residence halls for students who are covered under the university’s housing requirement. And so, just like Barrett, just like Manzaneda, it’s not really open market risk and that we’re just re-modernizing the existing university stock to meet that based on campus needs. And then the apartment beds that we are talking about, relatively small about another 400 to 500 beds of apartment housing that would be consistent with Vista del Sol. And so it is a very, very comfortable percentage of overall beds and actually even further enhanced given the amount that a residence hall is under the university housing requirement.

[Q –Nick Joseph:]

Thanks.

[Operator:]

And our next question is from Alexander Goldfarb of Sandler O'Neill.

[Alexander Goldfarb:]

Good morning.

[William Bayless:]

Good morning, Alex.

[Alexander Goldfarb:]

Hey, how are you? Just going back to the ATM issuance and just to make sure I understand that, so basically, if I did the math correctly, you’ve about just over $300 million of development spend, possibly more ones the remaining projects get outline, but basically the ATM takes care of all of that. The acquisitions and dispositions are basically offsetting each other, right? So, is that – I mean, I am just trying to think as we head into next year, we should expect more capital raising next year or the ATM basically satisfied your development spend for this year and next?

[William Bayless:]

When you talk about the development spend remaining of $300 million, Alex, that is accurate if you are talking about what’s remaining to be funded on our 2015 and 2016 development deliveries. In terms of acquisitions at our midpoint, we’ve got about $270 million of acquisitions anticipated for the year. So that will be $560 million of total capital need. With the ATM proceeds subsequent to quarter end of $213 million, and then our anticipated dispositions for the year ranging from $214 million that includes the $174 million we closed in January to just over $400 million, you are looking at anywhere from $430 million to $630 million of total capital raised this year. So, plenty to fund that $560 million in needs and potentially created an additional – a little additional capacity. As you look into the future years, obviously, we will continue to look at what growth opportunities continue to arise as well as what capital cost look like on all the different options available to us between disposition – additional dispositions, ATM match funding, even joint ventures is something we constantly look at as a kind of another way to approach dispositions. So, we would certainly – if we have additional growth opportunities look to match fund those, if it’s appropriate, and maintain leverage levels where they are, but in different capital cost environments we use up some of our capacity in other environments, we create capacity. So, we’ll just kind of – react as the market provides different environments.

[Alexander Goldfarb:]

Okay, let me ask – and because you guys brought up the CBRE call, part of that presentation they talked about a widening gap between pedestrian and non-pedestrian. You guys are talking about a lot of acquisitions, presumably those are pedestrian acquisitions, just given the value creation or the wider yields that you are getting on development, can you just talk a little bit about why you think right now it was the right time to be buying pedestrian if the gap seems to widening between pedestrian and non-pedestrian?

[William Bayless:]

Certainly, Alex, and certainly the thing that we look at is always in answering that question on an investment-by-investment basis, is the future growth rate of that asset. And so, when we are doing one-off core acquisitions, we are looking at what do we believe based on our operational platform, our value that we can bring above and beyond just the continued cash stream in place, and make a – what is a very highly accretive investment, even though you maybe paying a 5.25 cap, if we can drive an initial pop of 5% to 7% in NOI for a few years and then stabilize at a 3% they are highly accretive. And in many cases, those are in markets that we want to be in or we may already be in, we want to build scale and efficiency based on some of our other objectives and we can’t get in through development. And so, the one thing that we always do that we’ve talked about for years, is that, how we enter a market may vary in terms of what offers us the best opportunity in that regard.

[Alexander Goldfarb:]

Okay, and then just finally on expenses, you guys gave the same-store expense guidance which is sub-2%, you talked about some G&A spends, just how we think holistically about expenses, should we expect growing expense pressure in 2015 or all the initiatives that you spoke about should start to lessen in 2015 as far as the pressure on expenses?

[Daniel Perry:]

Alex, let me make sure I understand your question. When you say growing pressure in 2015…

[Alexander Goldfarb:]

You talked about G&A comp, you talked about new systems, there were some platform initiatives and then the R&M which seem to be seasonal. So, I am just trying to get the total expense picture, obviously, marketing expense has been coming down, you’ve got no control over property tax or insurance. So I’m just trying to understand the controllable expenses if the same-store expenses are sub-2%, are we going to see expense pressure elsewhere or everything should start to mitigate in 2015?

[Daniel Perry:]

No, what I would say is that, in 2015, in that guidance for 2015 expense growth, we are including those expected spends and systems development and those kind of things. Now one of the things you have to take into consideration is we started that in late 2014. So, as you move into later 2015, the comp or associated increase is not as notable as it was as you saw in late 2014. You might see a little bit of growth in earlier quarters associated with that. But, definitely within our range.

[Alexander Goldfarb:]

Okay, thanks, a lot.

[Daniel Perry:]

I think one detail, I get there, Alex is, we are going to be disclosing the operational expenses by line items that you can see the different areas where growth is in each area. While you may see a little higher growth in G&A, some of the asset management initiatives that Jim is talking about we are expecting to continue to drive benefits in the areas of marketing, in repairs and maintenance and some other controllable areas to offset that.

[Alexander Goldfarb:]

Okay, thanks, a lot.

[William Bayless:]

Thank you.

[Operator:]

And next, we have a question from Dave Bragg of Green Street Advisors.

[Dave Bragg:]

Thank you. Good morning.

[William Bayless:]

Good morning.

[Dave Bragg:]

Hi, in light of the new developments added that you announced today, what’s the total capital cost of the entire development pipeline when you fill in some of the numbers that are missing on Page 20 and on Page 21?

[William Bayless:]

Hey, Dave. This is William and I covered that briefly in my script. When you look at 2015 that’s being delivered, in August of this year and in 2016 what’s for 2017 and beyond, that totals about $961 million, a little over 10,000 beds.

[Daniel Perry:]

And I think the additional detail, Dave, that William gave is the new announcements that we gave on this call being the 5A still and two off-campus stills were estimating development budgets of about $460 million in total.

[Dave Bragg:]

So, that’s on top of the $960 that William mentioned or that’s included in it?

[Daniel Perry:]

That’s in that $960 million.

[Dave Bragg:]

Okay, Daniel, the $960 million as a percentage of the enterprise, has the pipeline ever been larger relative to the size of the company?

[Daniel Perry:]

Yes. Definitely, in earlier days much larger, up over 20% and the way that we look at our development pipeline as a percentage of assets especially when we are talking about this with the rating agencies and our fixed income investors is that the projects that we are committed to, meaning, we have commenced construction or we are eminently commencing construction. So usually, you are looking at two year window. So you’d look at the 2015 and 2016 pipeline which is about 10%. Obviously, if you go beyond and look at these builds that are a little further out into the pipeline, that’s going to increase it, but you are still sub015% which we think is a comfortable level.

[Dave Bragg:]

Okay, that’s helpful and then just going back to the leverage discussion. In November, you put out a pretty wide range in terms of your comfort leverage range, I think it was 35% to 50% and the question is, with the development pipeline ramping back up, what that caused you to want to get down towards the low end of the range and if so, how do you plan to get there? What’s your year end leverage target?

[Daniel Perry:]

Well, we certainly have made moves to move that towards the lower end of the range, as Jon said in his prepared remarks, we are in the 39% range right now on debt-to-assets. As we move forward, we expect that that will continue to – some of the funding through free cash flow from the company, obviously, over the next couple of years, we continue to have an active disposition program, hopefully match fund some acquisitions with that, that will all lead to continued reduction and effectively additional capacity for that development pipeline.

[Dave Bragg:]

Okay, and so, under the plan that you outline on page 25 of the supplemental, where do you expect the leverage to be at the end of the year?

[Daniel Perry:]

If you look at Page 25, we include all of the acquisitions at the midpoint and all of the dispositions we probably be in the mid of 40% or maybe slightly above 40% debt-to-asset.

[Dave Bragg:]

Okay, thank you.

[Operator:]

And next we have a question from Ryan Meliker of MLV & Company.

[Ryan Meliker:]

Hey guys. Most of my questions have been answered, one that I was hoping to follow-up with you guys on. You guys obviously were able to raise a significant amount of capital via the ATM, obviously, probably in the past something a component of use with the ATM, I guess, I am wondering, if you are able to raise so much capital via the ATM over the past few months, and on the accretive stock over that time reacted relative – or performed relatively well, aside from a large portfolio transaction, what would get you to go back to the market for a traditional overnight offering. It seems like you’d be able to fund future developments by continuing to triple out the ATM plus, asset sales et cetera. Aside from the portfolio, is there anything that would cause you to go back to the market for an overnight?

[William Bayless:]

You know, Ryan, very consistent with we were talking to Mr. Bilerman’s question, we always want to be thoughtful in terms of analyzing whatever the opportunities are before us and what is the best means to do it. And certainly, we have always consistently – whenever we have had large acquisitions as you said have come to the market. And so depending upon the size and then how quickly the development pipeline comes upon you would really dictate what is the best means to do it. And as we’d answered to Michael’s question, we were – there was a point in time where coming to the market in overnight deal was something we thought might be possible if the deals that come together quickly to where we had the opportunity to do so, but it just didn’t lined up that way in this case, and so, we always, we do love the ATM to match fund development, that’s been part of the history of what we have always done. We have always come and told the story of large investment acquisitions, but we’ll always look at a case-by-case and try to be as thoughtful as possible as it relates to dilution and what the market expectations are and how we manage the balance sheet.

[Ryan Meliker:]

Thanks, Bill. That’s helpful. And then, just a quick follow-up, you guys announced five new ACE developments or at least potential developments that you guys are in primary negotiations with right now, that’s a lot in a given quarter. How does the ACE pipeline looks through the rest of the year? Do you think that this is pretty much what’s going to play out throughout the next six or twelve months or do you think that there is still some more things in the pipeline that might materialize throughout – or end of this year?

[William Bayless:]

You know, as Jamie said, there is still another dozen active procurements are in negotiations taking place and he made the statement, and in the twenty years we’ve been doing the on-campus development. This is a strong of an environment as we have seen. And so, I think there is more opportunity in terms of other procurements that are out there in terms – now, as you all have seen, we talked about the last dozen for about 18 months. And so, sometimes those things can have a little bit of a gestation period, but there is a lot of opportunity.

[Ryan Meliker:]

And out of that opportunity are there several projects that are farther along the line than others where you could see something announced in the next few months or most of them still in the early stages where we could…

[William Bayless:]

There will be – again, American Campus competes with great companies like EDR and other folks that are also in the running for these, but there are definitely universities that will be making decisions in procurement processes in the next three and six months.

[Ryan Meliker:]

Great, it’s helpful. Thanks, Bill.

[Operator:]

The next question comes from Paula Poskon of D.A. Davidson.

[Paula Poskon:]

Thanks. Good morning everyone.

[Daniel Perry:]

Good morning.

[William Bayless:]

Hello, Paula.

[Paula Poskon:]

Just to follow-up on Ryan’s question, how much – how many more projects or how many more beds could you commit to – for this next academic cycle before your own platform is tapped out and I don’t mean that from a capital constrain, I mean that more from a personnel and capacity constrain?

[William Bayless:]

And Paula, this is where the company’s history – we are very, very skilled and the story I would like to remind people and that when we were a small $250 million company going public in August of 2004, we delivered nine projects the week of our IPO. And certainly when you look back at 2012, I think on our third-party we delivered 16 projects simultaneously over $650 million of product and all of that on-time, on-budget. And so, we have a very, very scalable development platform. Actually, over the last two years, we’ve actually made some structural changes internally in terms of the on-campus division and the off-campus division having separated more resources, we’ve also added field ACC personnel on each project and so we are very comfortable with our scalability from a development perspective and have – we can handle more.

[Paula Poskon:]

Okay. And then, just a follow-up question on the transaction environment and your outlook, there was a lot of discussion in the last couple of years around some markets getting overbuilt with too luxury of a product relative to the student population and the income distribution in that market. Are those are kinds of the opportunities that you are seeing coming to market now or is it completely – just something other than that?

[William Bayless:]

No, it’s some of that, now there is some of that still emerging, the one market that comes to mind right off the top, Minneapolis right now is where Austin was in 2009. Lots of development taking place, the developments that were delivered last year we are seeing rates adjusted down by as much as 15% as those development pro formas were all of that very high levels. And so, you are seeing those opportunities in some markets of smaller scale, it’s asset-by-asset. Minneapolis was kind of across the board, it very much was reminiscent of Austin in that period. In other cases, we can see great, the standards in Athens is a great example, that is just an irreplaceable site in a fantastic market that we think had the long-term significant NOI growth potential. So, it’s a mix bag. Some core with just great upside in terms of their asset quality and location and others that do have some of that repositioning opportunity.

[Paula Poskon:]

Okay. And then, just finally on dispositions, with cap rate compression still occurring, why not consider selling or recycling more of your older assets or do you feel like the portfolio quality mix is where you want it and now it's just going to be a function of being able to match fund your development spend, as opposed to the thought of just recycling a certain amount of capital every year?

[William Bayless:]

Yes, and if you look at what we – if we add up what we have done now including what we just recently close, I think we’re close about $725 million over the last couple of years. And for the most part is all the non-core dry properties, large leftover from the GMH era or couple of the larger M&A deals that had a portion of those, we still have a little bit left and that certainly, they continue to be – there is lot of folks out there looking for those value-add opportunities, non-core product as you saw in this visible package and so when you look at our guidance this year, it very much as William said, is intended to be that type of product from the portfolio. And so, we do looked at the acquisitions at this point as an opportunity to match funds some of our core acquisition opportunities that have more of the 5% to 7% NOI growth opportunities with assets from our perspective maybe less than that and it might provide others an opportunity to do something else with.

[Paula Poskon:]

So, would you consider then, selling a core pedestrian access to campus that you would, under your investment parameters want to hold onto for the long-term, but because you thought you had a better use of proceeds for an ACE development project as an example, would you sell a core asset like that?

[William Bayless:]

We’ve done it in the past, if you look at Arizona State University, we had two core off-campus assets, the Village on University and Commons on Apache, that we sold, Commons on Apache, we sold at a sub – it was about a forecast.

[Paula Poskon:]

Yes, but that was 20 years old, wasn't it, at the time you sold it?

[William Bayless:]

Yes, 20 years old, but for those of you that toured the property, it was probably one of the best built and we have refurbished it. It was truly in fantastic condition. It was bought off of an in-place income stream, not a repositioning. We had already repositioned. And so, we’ve done it in the past and certainly, there is especially if we are looking at an ACE opportunity, when we go into a market, just like we did with Arizona State, like we did with Drexel, Drexel University Crossings off campus, when we are working with the university on ACE and it’s looking at – it’s going to be a longer program to just one property, we always going in and our proposal say, hey, you know if you are willing to enter into a long-term partnership with us and there is more than one transaction opportunity here. We will commit to you to dispose of our off-campus assets even if they are core. Now Drexel was very astute – hey, wait a minute, the off-campus property you have is the most strategically located asset we would rather, you roll it in and reinvest in it, we do it with you. In the case of ASU, we sold the two assets that we own there. And so, we always take that into consideration on an ACE transaction.

[Paula Poskon:]

That's helpful. Thanks, guys.

[Operator:]

The next question comes from Nick Yulico of UBS.

[Ross Nussbaum:]

Hey guys, it's Ross Nussbaum here with Nick. Thanks for squeezing us in at the end. I think one of the reasons you have gotten a number of questions around the equity isn't so much because you needed it - because I think it's clear why you needed it from a funding and a balance sheet perspective. But I think there is something that - maybe the prior questioners haven't quite come out and said which is, issuing several hundred million dollars of equity in such a short timeframe and then after the fact coming out with lower than expected guidance that suggests basically no earnings growth this year, I think there is a contingent of people out there frankly myself included, who might find that slightly disingenuous in terms of how that information was communicated and perhaps might have been better if you had pre-released perhaps your guidance or your development pipeline rather than selling a lot of equity and then telling people afterwards that it was going to have such a dramatically negative effect on your earnings this year.

[William Bayless:]

And Ross, we went into the pretty great detail and certainly, I hope no one on the call thought that was disingenuous but rather very thoughtful on us to answer in terms of how these opportunities came about and where we were positioned with our balance sheet and what we felt was the best for our shareholders on a long-term value creation perspective to ensure that we do what is more accretive in the long-term. And so, by no means, was that do feel was characterized that way and we certainly don’t – or we hope that others on the call don’t feel that way.

[Ross Nussbaum:]

Yes, I think - look, ATM equity sometimes rubs people the wrong way, because if you are an investor buying shares in the open market, right, you don't recognize at the time that you are actually buying it from the company. So I think this raises one of the sore points that the market sometimes have - has with the manner in which this program kind of works. But, I appreciate your answer.

[William Bayless:]

And I appreciate your question as always. We have a – on the screen here it shows we have four more questions left, operator?

[Operator:]

Yes, we do. Our next one will come from Jana Galan of Bank of America Merrill Lynch.

[Jana Galan:]

Thank you. I guess, just very quickly, if you could clarify with the same-store NOI range at the low end of 2.3%, I think previously you spoke to a floor of 3% for same-store NOI growth. I understand the midpoint is now 3.5%, but just operating trends seem to be very positive. You’ve increased your outlook for rate growth. Just what’s gotten you to be a little bit more conservative at that low-end?

[Daniel Perry:]

Yes, the way we always look at our guidance is that our midpoint is certainly what we think is the most likely level we’ll achieve and the high end is always what we are shooting for. And so when we talked about 3% plus same-store NOI growth, that’s really what’s in our guidance. The 2.3% is more – it’s really the kind of downside scenario where we don’t achieve. It’s kind of – what we have slippage in our rental rate increase from where we are currently projecting rates to be from the 2.9% down to 2.6% as we’ve shown in the assumption. And then reduction in occupancy down 60 BPS from where we currently sit. So, it’s really more of a downside scenario and our expectation is that we are going to be above that 3% that we are targeting.

[William Bayless:]

And also, like – the blessing and curse of being American Campus, if you look at the occupancy assumption we have at the low end it’s about 150 basis points above of the industry average. So, it’s pretty much exceptional performance at the low and the high as it relates to what you have to do in terms of leasing beds each and every year.

[Jana Galan:]

Thank you.

[Operator:]

And then next question will come from Vincent Chao of Deutsche Bank.

[Vincent Chao:]

Hey everyone. Just a question on the financing plan for the year, I think the guidance does include potentially a mid-year bond offering similar to what we had in 2014. Just given the amount of discussion on the equity side today, but also understanding that leverage is sort of in the middle of the range that you’ve outlined, is there any possibility that some of that $400 million comes out of the equity, given that shares are still above consensus NAV today. So a lot of the things that you outlined as reasons why you might have done the ATM issuance still exist here?

[Daniel Perry:]

Yes, as we said, we certainly always look at all the options available to us in terms of capital and what we think is the best for the long-term NAV accretion and for the long-term health of the balance sheet. Right now, our assumption is that we would go out and do a shorter term bond offering, maybe a 5 year or 7 year type deal, that’s something that we’ve seen a lot of demand in the fixed income market for, which would be a cheaper cost of debt and the traditional ten year deal. So that would make obviously, that very compelling. But, as always, we will look at all the options and consider what we think is the most appropriate.

[Vincent Chao:]

Okay, thanks, and then just one other question. On the margin outlook, over 53% for 2015, just curious if there is much impact from the investment activities that you are planning via dispositions and acquisitions. Presumably you’d be selling lower margin and buying higher margin?

[Daniel Perry:]

Yes, I mean, there is a certainly a little impact from the 53%, does not have the impact of the additional dispositions we are considering at this time. So to the extent those come to fruition that would even potentially improve that beyond what we are currently anticipating.

[Vincent Chao:]

Okay, thanks.

[Operator:]

And the next question is from Jeffrey Pehl of Goldman Sachs.

[Jeffrey Pehl:]

Hi, thanks for taking my question. Just real quick, just I want to go back to your development projects. Just on 2016, your owned development projects, how much larger do you think this could potentially get and what's the last date or month you could potentially start these this year?

[William Bayless:]

2016, it becomes – as we talked about relate to the couple of the ACE transactions that have an outside opportunity based on pre-development, ACE is a little easier because typically you are not going through the municipality’s entitlement process in the university has jurisdiction which gives you the ability to fast track those. In an off-campus perspective, there is still some potential, but it’s limited really to two opportunities, places in the southeast and the southwest where from a climate perspective you can’t break ground as late as late July and August and still have opportunities safely be delivered the following year or the mezzanine development program that we’ve talked about. There have been years when William has gone to the big guys, student housing conference coming up in April and left that conference with deals in hand ready to kick up that fall. And so, at this point in time, we would not guide people that we expect it to be increased by beyond what Jamie’s comments were with the potential for ACE, which again, everything would have to go perfect, but it’s not out of the realm of possibility.

[Jeffrey Pehl:]

Okay. Great, thank you.

[Daniel Perry:]

Thanks, Jeff.

[Operator:]

And our next question is a follow-up from Karin Ford of KeyBanc Capital Markets.

[Jordan Sadler:]

Hi, gents, it’s Jordan Sadler with Karin here. Just a comment and a question, as far as the ATM issuance goes, there are lots of folks who have taken one view. I think, in my opinion, you have de-risked the pro forma development pipeline, which is $460 million, by quite a bit by doing the ATM in advance and I think you offered a pretty good rationale. So, I understand some of the sentiments that some folks may have had, but I think you have done the right thing, you have done it at the right price, you are also selling assets at a low cap rate that is below the potential stabilized cap rate that you are expecting from these new developments that are higher quality assets. So, I think, you have earned your capital allocation stripe, so you get the rope here. It sounds like you are rookies at this point. So that's my comment. And separately, I’m curious on the new ACE deals that you have teed up here. Is there a specific catalyst that has caused the environment to be where it is or is this just the secular trend finally taking hold after investing sort of 10 years trying to get this off the ground?

[A –Daniel Perry:]

Sure, and first, thank you for your comment and it very much does reflects what our internal thoughts were in terms of how we were approaching and appreciate you are stating that. Really, this is what we have been talking about for four years starting to come to fruition. I do think it’s astounding when you look in William and Jamie’s script and they were talking about with these awards, ACE now has the potential to be 26 projects in our portfolio, approaching $2.2 billion on a market cap approaching $8 billion to close 25%. So, while they seem to come at a slower pace, we are really gaining scale. But, as we have said, a university or public university environment, don’t forget, you are typically dealing with state bureaucracies and they don’t move quickly. And so these processes and this philosophical discussion at the board of regions and board of trustee levels has been taking place now for four to five years. And these processes now that were started 18 to 24 months ago are now really coming into the hopper. And so, I would categorize it as a continuing secular growing trend and utilizing P3 structures to preserve your own debt capacity and deliver product as cost-effectively as possible. And so we are very pleased with where it is at this moment in time and as we’ve said, it’s as great as we have seen in all the years we’ve been doing this.

[Jordan Sadler:]

Okay, and then, just to follow-up on that, any changes in the terms that you are seeing or what's sort of average ground lease term looking like these days, is that a curiosity?

[A –Daniel Perry:]

Yes, and we have been pretty successful in holding our standards. Typically, we are in the area of a low of a 60 to an 85 year ground lease usually consists of a 45 year base lease within two to three extension, 10 year extension at our option. There is a little pressure on that and a lot of the schools are coming out wanting 50 years and what we convey to them, we look at those ACE transactions on a net present value of cash flows for the life of the transaction. And so we are not changing our return criteria from an IRR or an MPV perspective and so that impacts how much ground rent you can pay in items of that nature. The other thing that we continually stress is, we – and remember, when we go to an institution, we are not pushing ACE. We show them, here you can have a 30 year lease on a 501(NYSE

[Jordan Sadler:]

Okay, that's helpful. Last one, maybe for Mr. Talbot. On the sales side, the upper end of guidance was $230 million, you said it could get a little bigger. What is a little bigger? How big could you go on the asset sale realm?

[William Talbot:]

Yes, what we are looking as far as acquisitions is that pipeline maybe grow as we could elect to grow it and really it depends on how we look at that growth profile. There is a lot of demand for that value-add product that Bill mentioned. And so, we do think there is deep demand if we wanted to expand it, but we are really going try to look at it and match fund it as we look at different acquisition opportunities throughout the year.

[Jordan Sadler:]

Okay. Thank you.

[Operator:]

And this concludes our question and answer session. I would like to turn the conference back over to Bill Bayless for any closing remarks.

[William Bayless:]

No, and we would like to thank you for joining us today. As I mentioned in my opening remarks, we are very excited here at American Campus. We think the sector as a whole as it’s strong as it has ever been. We are very pleased with where we are operationally and where we are heading from an asset management perspective and we are most excited about the highly accretive growth opportunities that we have. We’ve got some great investor conferences coming up that we’ll see many of our shareholders at and we look forward to visiting you – with you when we talk about Q1 results. Thanks so much.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.