Q4 2019 Earnings Call
Thursday Thursday
Good morning, and welcome to the American campus communities 2019 fourth-quarter earnings conference call and webcast. All participants will be in listen-only mode should need assistance. Please signal a conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions to ask a question. You may press * then 1 on a touch-tone phone to withdraw your question, please press * then two, please note this event is being recorded. I would now like to turn the conference over to Ryan Dennison senior vice president of capital markets and investor relations, please go ahead.
Thank you.
Good morning, and thank you for joining the American campus communities 2019 fourth quarter and year-end conference call press releases furnished on form 8-k to provide access to the widest possible audience in the release me is reconciled the non-gaap financial measures to those directly comparable gaap measures in accordance with Reggie requirements also posted on the company website in the investor relations section. You will find an earnings materials package which includes both the press release and a supplemental Financial package. We are 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 in our webcast presentation are one in the same webcast slides maybe Advanced by you to facilitate following along management will be making forward-looking statements today as rep in the disclosure and the press release in the supplemental Financial package and an SEC filings management would like to inform you that certain statements made during this conference call, which are not historical fact 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 statement are based on reasonable assumptions. They are subject to economic risks and uncertainties. I can provide no assurance that its expectations will be achieved an 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'd now like to introduce the members of Senior Management joining us with the call Bill Bayliss Chief Executive Officer, Jim hockey president is Jennifer B's Chief Operating Officer William Talbot Chief investment officer, Daniel Perry Chief Financial Officer and Kim Boss Chief accounting officer with that. I'll turn the call over to bill for his own remarks bill.
Thank you, Ryan. Good morning. And thank you all for joining us as we discuss our fourth-quarter and full-year 2019 financial and operating results. I'd like to start by thanking the team was another successful year for American campus. We had solid core operating performance throughout the year operating in the high end of our original expectations and allowing us to raise our earnings guidance, ultimately achieving 5% growth in earnings per share.
We sick.
How many records in total revenue third-party revenue and ffom per share and produced our 15th consecutive year of growth in same-store rental rate rental revenue and Thursday. We're also pleased with the execution and advancement of our Capital recycling activities with 248 million of dispositions complete or under contract to sell at a 4.1% economic cap rate enabling reinvestment into our high-yielding development pipeline at a creative spreads of two hundred to two hundred basis points to stabilize heels.
In addition to the strong pricing a transaction Market looking into twenty-twenty. We see additional positive fundamentals with off-campus new Supply in our markets near decades loge.
Are on campus development pipeline continues to expand with to award mandates in 2019, including a previously-announced multi-phase master development project with u c Berkeley dead and another with West Virginia University announced this quarter and as William will discuss the P3 pipeline continues to be as strong as ever and finally moving into 2012. We look forward to the delivery of our first phases of development at Walt Disney World, which we believe will be a transformational development for our organizations with that. I turn it over to Jennifer be sorry Chief Operating Officer to get us started.
Thanks Bill. As Bill mentioned. We are pleased to report or 15th consecutive year of same-store growth in rental rates rental revenue, and noi as seen on page six of the supplemental quarterly same-store property in increased by 1.3% on a 2.1% increase in revenue and an increase in operating expenses of 3.4% off for year 2019. Same store noi increased 2.7% on a 2.7% increase in revenue and a 2.7% increase in expenses.
We are pleased that our same-store Revenue expense and noi results came in at the high end of our revised guidance expectations for 2019 led by our asset management initiative surrounding utilities or annual expense expense growth for a controllable categories was approximately 2.4% We also saw close to a 7% grade in other income in Q4 due primarily to app and admin fee revenues coming from our strong early leasing velocity and our 2021 Academic Year Lisa.
Bring to our full-year 2020 Outlook. We are projecting same store noi to increase 0 to 1.7% based on total revenue growth of 1.4 to 2% of expense growth of 2.4 to 3.2% Our Revenue guidance takes into account or in place leases through the end of nineteen twenty academic year lease term as well as our objections for the 20 20 20 21 Lisa. We are projecting opening Falls same-store rental Revenue growth for the 2021 Academic Year of 1.5 to 3% off most of which is expected to be driven by rate since our 2020 same store portfolio achieved occupancy of 97.4% and fall of 2019.
As always the low and the high ends of our Revenue guidance reflect execution risk associated with the fall lease up backfilling short-term leases summer leasing office jobs and meeting other income growth projections.
On the expense side our same-store growth expectation for 2020 or inflationary in the majority of our categories, except for insurance and payroll. We expect a double-digit expense growth Insurance based on current market conditions and payroll expenses are expected to increase in the area 5% being influenced by changes to flsa exemption status off as well as statutory minimum wage increases in numerous States.
Why we expect marketing expense growth to be inflationary for the calendar year. We do expect some quarterly fluctuation to Prior your results due to the refinements of our social and Dish programs versus traditional mediums as Bill mentioned. We see a positive new Supply environment in a Cici's 69 own markets. We are tracking only 22,500 beds for fall twenty-twenty delivery a 20% decrease in new Supply compared to 2019 and the lowest amount since 2011 total Supply as they persist and are 69 markets is only 1% Also the lowest amount in nine years. The new Supply is occurring and only twenty-seven of our 69 markets down from thirty eight months in 2019. In addition only sixteen percent of our noi is derived from our assets within the top ten new Supply markets down from 22% in 2019 when exclude
putting our on-campus assets
Issue that do not compete with the off-campus market in addition our top ten markets only four of the ten markets have new competitive Supply with the average of New Jersey being delivered in those four markets being just 614 beds the trend of decreasing new Supply is largely driven by the natural barriers to entry that exists in armor is contributing to strong fundamentals. We currently see in the sector and with that I will now turn the call over to William to discuss our investment activity.
Thanks, Jennifer turning first to our Capital recycling activities. We completed the disposition of landmark serving the University of Michigan in Ann Arbor for $100 in Gross proceeds. In addition. We are under contract on the sale of the varsity serving the University of Maryland College Park at a sales price of a hundred Forty-Eight million dollars. The sale is scheduled to close in late first-quarter off both sales represent a 4.1% economic cap rate on in place revenue and projected operating expenses over the past two years. We have executed our Capital allocation strategy wage selling over $825 million dollars at a low 4% cap rate and recycling those proceeds into our highly accretive on developments at 6 to 6.8% stable.
with regards new development
We're excited to announce that we were selected through a competitive RFP process as a strategic housing master plan partner for West Virginia University. The award is anticipated to include multiple phases of on-campus housing including various renovation and Redevelopment projects the full scope transaction structure feasibility and timing have not yet been determined Mission. We executed a definitive agreement of Georgetown for a previously-announced third-party project and are progressing through pre-development activities. We continue to see a vibrant and steady flow of opportunities in our on-campus business as we are currently tracking more than 45 procurement processes and or direct negotiation opportunities.
With regards to own development. We are currently under construction on over $785 million dollars with three projects delivering in 2020 tooling 2483 beds and 280 million dollars of investment were especially excited that we are nearing completion on the first phase of Art in Phase 10440 bed, $615 based development office participants of the Disney college program at Walt Disney World the first phase consists of 778 beds of housing along with one of two twenty five thousand square foot community centers off and the 25,000 square-foot of Prentice Hall the education center developed by ACC but owned and operated by Disney. The grand opening is on April 30th. And the first scheduled move in is May 4th, which provides a touch of Disney magic with May the force be with you the second phase of 849 beds of residential housing will deliver in August of this year with a rainy phases delivering through May 2023.
finally turning to
The transaction Market 2019 produce another strong year of investment in the student housing sector according to cbre's year-end student housing report transactions told of 5.8 billion, which is only a slight decrease from 2018 volumes when excluding the Greystar Blackstone take private transaction of EDR. The slight decrease in volume is primarily driven by a lack of available product as institutional Capital now entering the student housing space is building portfolios with a longer-term investment Horizon versus in years past when volume was primarily driven by Merchants developers of shorter-term investment Horizons walk-ins cat breeds continue to compress in 2019 hitting their lowest quarterly average during the fourth quarter with corporate and assets serving power 5 conference schools containing the highest transaction volume down to lowest cap rates in the market. It is interesting to note that International Capital consisted of 39% of all buyers driven largely by portfolio Acquisitions investor interest remains, very strong for student housing project.
abundant financing
This is widely available. Now turn it over to Daniel to discuss our financial results for the quarter. Thanks William last night. We reported the company's final Financial results for 2019 including fourth-quarter ffom at $0.72 and full-year ffom of $2.42 per fully diluted share representing an annual increase of approximately 5% This was in line with the midpoint of our updated guidance and two cents higher than our original guidance midpoint for the year the outperformance from our expectations at the beginning of the year was driven by higher all around operating results in both are same store and new store properties at our same-store properties Revenue benefited from improved backfilling short-term leases during the spring and summer semester summer semesters and increased summer camp and Conference business at our at our residence Halls.
Also, it's Jennifer just discussed on the operating expense side. We saw a substantial benefits from our asset management initiatives to reduce energy usage at our properties.
Significantly outperformed to expectations this year primarily due to a better initial lease up than we underwrote. We raised the high end of new store in a wide guidance by 3.5% on the third quarter earnings call and those properties still produced in above the high end of our revised expectations.
Moving to our Capital allocation long-term funding plan as you will see on page Seventeen of our earnings supplemental including all the developments now under construction for delivery through 2023 and one remaining pre-sale development funding requirement. We have $516 in remaining Capital needs which we continue to expect to find through a mix of money on hand cash available for reinvestment and approximately $100 to $150 per year and disposition joint venture and or Equity capital.
This will allow the company to Target a debt to assets ratio in the mid-30s and a net debt-to-ebitda ratio and the high fives to low 60s.
Am discussed we expect to close on a $148 million-dollar disposition in the first quarter, which will address our Capital needs for 2020.
Performance for the completion of that transaction. Our current debt to total asset value would be 38.5% and net debt to run a run-rate. Ebitda would be 6 and 1/2 *
As always we will continue to monitor monitor market conditions and access the most attractive sources of capital relative to our investment pipeline throughout the next four years.
Finally turning to our 2020 earnings Outlook. We have provided an f f o m guidance range of $2.41 to $2.51 per share for the year wage are also introducing for the first time ffom per share guidance for the upcoming quarter for the first quarter of 2020. We have provided an f f o m guidance at $0.67 sixty nine cents per share. You can turn the pages s eighteen and nineteen of the earnings supplemental to get complete details on each of the components of our guidance, but the major assumptions are as follows.
well, the
Here same store property and why is expected to increase zero to 1.7% driven by 1.4 to 2% Revenue growth and 2.4 23.5 operating expense growth.
Our same store noi results for the first two quarters of 2020 will primarily be impacted by the results of the Fall 2019 Lisa and difficult times in operating expenses, Georgia generated by strong expense control in 2019.
We also expect the first two quarters to be impacted by lower same-store other income resulting from two factors one, we experienced outperformance and application and admin fees during the fourth quarter 2019 driven by strong early leasing velocity in several markets, which we expect pulled forward some other income. We would normally receive in the first half of 2028 and two changes in New York and Texas state laws have impacted our ability to charge certain types of fees commencing with the 2021 lease up as we move into the second half of the the same store gross statistics are expected to benefit from the projected rental Revenue growth for the fall two thousand twenty Lisa and more normalized levels of operating wage growth.
Same-store expense growth range is primarily driven by property taxes and salaries benefits which to salaries and benefits which together represent over 40% of our total operating expenses off in 20 20 property taxes are expected to increase approximately 4% as we continue to see moderation relative to 2018 and years prior.
Salaries and benefits are expected to increase in the area of 5% due to statutory increases in wage rates for 2020 in many states is Jennifer discussed also as long as you have heard from many other operators, the insurance environment is currently very difficult and while only represents 2% of our overall operating expenses, we are expecting significant premium increases in both property and liability insurance and finally third-party management and development fee Revenue in the range of 23 to $29 is included in guidance for the Year. This is seems to of are currently awarded third-party development projects commence construction at the low end of guidance for projects commence at the midpoint home and six projects commence construction at the high end of guide.
as noted on page s
13 of our supplemental commencement of these projects and the associated fee recognition is not anticipated to occur until Q3 or Q4 of 2012.
While the third party fee income assume for 2020 net of the Disney revenue and expense gross-up represents a 1% decline in ffom contribution versus 2019, but it's worth noting that 2019 was a new record in third-party income for a cc by approximately 10% more than the highest level achieved in any prior year with that off turn it back to the operator to start the question and answer portion of the call. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you were using a speaker phone, please pick up your handset before pressing the keys. If at anytime your question has been addressed and you would like to withdraw your question, please press * then two months at this time. We will pause momentarily to assemble our roster.
The first question comes from Alexander Goldfarb with Piper Sandler, please. Go ahead.
Hey morning morning down there morning Alex Hey, so two questions first Daniel on the guidance from you know, how long the mid-to-upper end. That sounds understandable reasonable. Just want to understand better what gets you to the low end and then you mentioned some change in in fees that you can charge in Texas. I don't know if you also said California, but you mentioned a few markets. So if you could just provide a little perspective on that and then you know, is that what's causing the low end or what's really driving the low end of the wage and Gardens sure, you know, when you look at the range on the low end we're obviously assuming that we come in at the low end of the 1 and 1/2 to 3% wage for the fall other income is a variable that we take into consideration where we have seen uh-uh munition in our ability to charge certain types of a pin.
I'm in fees during the lease.
Ah pizz in New York that started with the 1920 Academic Year when we were as we started leasing up for the 2021 Academic Year, so it'll flow through the rest of this Academic Year with represents, you know, the first two quarters of the Year primarily on the expense side, obviously the primary thing that we have at least amount of control over in want both sides some some range on his property taxes and where those ultimately come in. Of course. We we also allow for some variability and payroll in terms of where we have vacancies and where we don't serve and then on other other uncontrollables like insurance and utilities to a certain extent. I also talked about in my prepared remarks on third-party. We assume only two new projects commence during the year at the low-end. We're at the midpoint. We assume for and at the high end we assumed birth.
So those are the real.
primary drivers of of the range
Okay, and then that gets me to the second the second point you guys introduced quarterly guidance, you know for the upcoming quarter, but you know a few years ago. You guys took it back from quarterly updates on pre-leasing and if we look at your results, you know using last year's as an example, you know, it's a noisy year over the year but yet at the end you guys finish ffom towards the upper end of your guidance range. So as you guys thought about providing quarterly guidance, it would almost seem like your business is more is better suited to an annual like you guys today on the call talk about, you know, better Ops better expense control and all lead you to to a better annual. So as you think about getting the street to think quarterly does that take away from you know, the ability that you guys have to drive, you know full year out performance or how do you wait? How do you balance what's due to that market is a short-term versus the annual
yeah, so
You know, obviously we're always thinking about disclosure best practices when we elected to not provide that leasing velocity disclosure each quarter. That was because we were seemed very little correlation between those leasing updates and the ultimate outcome and we felt like that piece of disclosure was creating noise that wasn't really consisted our performance. You know, we have never given quarterly guidance since we went public, you know, when we started out a bigger piece of our ffo was from a third-party fee income and obviously that can range from one quarter to the next from a timing standpoint very easily. Now with that being a smaller piece of the total pie. It can be creates less volatility. And when we looked at some difficulty for the street to be able to properly model and anticipate the seasonality of our business we thought
at the district additional
Closure in terms of a 1/4 look for it would help alleviate some of that so that's why we decided to add that piece of guidance.
Okay. Thank you.
Sure thing. The next question is from Nick Joseph with City, please go ahead thanks previously talked about the Outsourcing of the payment process and took the negative impact on Revenue growth within a positive impact on expenses net neutral to noi so just wondering if we could get an update on that and any impact on twenty-twenty numbers. They yeah, so if you want to remember over the last year we had talked about our anticipation of the implementation of that new portal causing a you know, a kind of paper change in the rental Revenue growth and the rental expense or the operating expense growth, but net neutral to walk in a y at the time, you know with the full implementation of it. We expected it to make our Revenue growth look forty bit slower and our expense growth look eighty bucks higher or lower.
I should say.
For for net noi neutral as we've been working on our next-gen system and preparing to implement that we really wanted to make sure that we rolled it out gradually so that wage didn't create too much disruption to the customer experience and we're customer service. So we've decided to more to roll that out in a more staggered fashion, which we will think will cause and much more muted and unnoticeable change in those revenue and expense growth metrics. So you you shouldn't notice it as much we really don't have a whole lot of variability associated with that in the guidance figures that were given for 2020.
Thanks, maybe just on that GNA guidance. Looks like it's up about 19% in 2020 versus last year if you talked about what's driving that yeah, so, you know wage we said, uh, as you saw in mentioned about 18.7% growth is what we're showing in the gene a line item for 2020 and that is primarily driven by investment in our next-gen operating system, which you've heard is talk about for a while, but we're also have a lot of investment into our privacy initiatives in our ASG platform along with that. It's really, you know Incorporated to into and part of the next-gen system when you look at how that hits our ffo a lot of the dollars that you're investing in the next gen or it platform get capitalized during the development of those systems some of those capitalized costs our actual development of a software package.
Program others are influence.
Patient cost to get a crude to expenses and then when you start to deploy those next-gen systems, they get amortized to your expenses. And so that's what we're seeing in 2012-13. A lot of next-gen is starting to be deployed. And therefore you're getting the amortization of all of those accrued costs now starting to hit our our financials. We also are dead operating a portion of a SAS or component of sass to our next-gens a platform SAS is when you are actually licensing software from third-party developers instead of developing an in-house. We are developing some of our systems in house, but there are others that we decided it would be much more efficient for us to go ahead and license those off and so those fees hit immediately and and with the move to some portion of next-gen being sass based, you know, you have a little bit of the compounding Factor there.
So that's really the driver of it. It's about 4 and 1/2 million dollars in 2020. If you were to exclude that four and a half million GNA growth would look more like about 4.2%
Thanks. That's very helpful. Thank the next question is from John pawlowski with Green Street advisors, please go ahead.
Thanks, Daniel at current share prices is equity issue and still off the table. Yeah, I mean, you know, we're still trading at a good 10% discount to nav right now. And so, you know, we've certainly don't think it makes sense right here, you know, we like our current capital allocation strategy of you know, using our page will Recycling and taking advantage of the private Market valuations in these low for cap rate ranges to to fund the development pipeline very creatively, you're looking at an economic cap rate in the low 40s relative to the nominal yields in the in the six and a quarter and above range. So, you know still really good spread there. So we think it makes sense to fund with capital Recycling and or joint ventures Partnerships like we did with Allianz. Um, and until we see a change in the valuation of the public Equity. That's the model will use
Okay, great.
And for a Jennifer or Bill I was hoping you could contrast the ability to push rent on this upcoming fall lease up versus 2011. The last time you saw a picture at a similar level back then you're you're sub market location. Your Market selection was a bit weaker than your portfolio today. So it seems that demands should be stronger than 2011 and if Supply is similar, why wouldn't we expect a plus 3% Academic Year rental Revenue growth like you achieved in 2011. Yeah. If you go back to 2011, I think rental rate was about 3% Total revenue was three $2 in that year and a similar Supply Dynamic certainly a little bit of comparing apples and oranges in that off the portfolio at that point in time. As you mentioned was very different in terms of the refinement that's taking place in the amount of ACC developed properties exists in the portfolio today that are better positioned even than that portfolio wage.
certainly while the new Supply
Dynamic is down. You know, if you if you do look at the amount of existing Supply in the market back, then we're probably about 13% purpose-built beds as a percent of enrollment wear today that has matured advance to closer to 20 mm. The 23% The one thing we look at John and when you look at the metrics of driving rental revenue and ultimately driving same store noi when you go back 2005 to 2013 includes that. That you're discussing our average rental rate growth in those first eight years of public company was only actually only 213 dips and a lot of our Revenue driver came out from the upside in occupancy and performance through m&a where we were averaging during that period $109 annually contribution to rental revenue. And when you fast-forward to today as you look over the last five years, we've actually increased the rental rate ability to push and we've gone from $213 to $260. But because we have large
Only been growing growing.
Through development and selling off assets to recycle into that development. We basically basically have been delivering fully stabilized assets with no upside on the occupancy. And so are you a gypsy contribution to rental Revenue growth has actually been negative to bits on an annual basis. And so pricing power were better today in terms of the quality of the portfolio bag and where it is positioned to grow versus where it was in 2011. Well again without as much upside in the occupancy component of that now the the one thing that we point too when you could take that statement and go one step further in terms of how to drive, you know, 3 to 6% same store noi growth versus 1 to 3, then you also get into the dynamic package creating efficiencies through scale and growth. We're in in the first eight years of the company. We typically had forty to fifty basis points of scalability through efficiency of the growth of the organization which in the last five years.
So that Capital Recycling and the investment in next-gen that Daniel mentioned up to cost and your overall g n a g and a contribution is actually been a drag on the earnings per share growth by about forty to fifty years. And so as we look at the last five years compared to that earlier. You reference but more importantly think about it in the go forward, you know, we've really weathered 5-year. We're walk-in only contribution to our rental Revenue growth profile has been ranked which again over five years is average to 6 and when you look at the potential contribution from Aqua see Improvement by bringing other assets in the portfolio operated by others and then having scale contribution as you grow those as we look to the future, you know, when we say, okay the dynamic environment of our industry long-term, we've gone through a five year period where we for all intent and purposes been completely out of the acquisition and merger game and have taken advantage of that. Yep.
To improve the quality of the portfolio greatly.
As we look at the billions of dollars of global investment that is taking place right now. And it's William mentioned that that Capital that is coming into the space is more focused on longer-term holds virgin development. They are building and investing in much better quality in terms of product quality location to campus and it's mostly all class a core pedestrian development. That's true. And the one thing that we would point out is, you know, we we in tracking the axio metrics 175 data, which is your tier-one markets pedestrian properties from an occupancy perspective. We continue year-in and year-out to track between 250 to 280 basis points better than the rest of the market and so as we look at the long-term strategic plan the company and the long-term growth profile where the early years you saw four to 6% same store noi growth in the first eight years driven by the metrics. We were talking about and over the place.
Five years. You've seen the slow down in that group.
Because the only lever that is driving that growth is rental rates, which is improving the real return to Value creation long-term growth for us comes as we you know, eventually the cycle will change we will be back in the m&a game. And when we're back in that m&a game on a long-term basis, the quality of products is better the location of those products is better and the upside down exist for us to harvest more value from those assets as we continue to perform at that 250 to 280 basis point better. And so, you know, it's hard to move the needle Beyond a 3% in the current environment that we are we're the only variable is rental rate, but we don't think that is a long-term systemic condition for the industry or given our position is hopefully the long-term consolidator of the space going forward.
Sure, I appreciate all the caller. I just want to go back to the 2011 case study because it is a year where occupancy was quite cool and you had to rely on rental rate Supply wage same so your comments. I interpret it that it's just a percentage of student purpose-built student housing and the maturation that can't allow you to push rate again, you're a better school. So I guess a naive question is why can't you do three and half percent rate growth this year if Supply is is is down similar to 11:00 and your schools are better part of that in in in a way. I would point to as a general statement as I did in my prior remarks. We have better pricing power in the supply environment that existed in the last five years and we did back in 2011 and we have improved that about 50 bibs. When you look at our portfolio one of the dynamic changes John from 2011 is now you know, we're approaching a third of our portfolio being on campus H transactions and as we've wage
About those as you all think about rental rate.
Groupon Ace products. It is more coupon clipping Revenue growth and that you're looking at that 3% that we can't price our University Partners out of the market. And so while there's no downside you're hardly ever insist. We're going to have negative Revenue growth on campus. You are limited in terms of that 3% kind of being your your governor and so a much higher percent of the portfolio today falls into Thursday reduced risk coupon clipping type properties that we see in Ace vs. We're in 2011. It was virtually all off-campus versus the early phases of ASU.
Yeah, okay, you know if I can add on to that real quick, you know, if you lay out all of the rental rate growth going back to the IPO. You can really clearly see it off cuz when you look at the first, you know five years of the life as a public company when less of our portfolio was Ace the range of was kind of one-to-one to 4% off with a two and half percent being the pretty much the average. If you look today it ranges more like one and half to three and a half percent so still a two and half percent average increase wage, but just a tighter band and so, you know at the end of the day, we're still seeing similar rate growth, but because of the influence of the ace it just tends to be more consistent and you took one last name code in terms of new Supply. So, you know this year when you look at the new Supply in our markets, the number one Supply Market is Gainesville, Florida, and we actually have 4 p.m.
A Tree Grows in Gainesville this year and this lease.
Yep, that's underway is where we're currently priced. And so, you know new Supply in and of itself it certainly Gainesville is a market that has seen significant Supply over the years and is beyond that average of 23% chance to talk about but in this case the assets that we own there which are all off-campus know on that are extremely well positioned. But at price points that are on average 200-250 below new Supply pedestrian product coming on we still continue to have rental rate pricing power in that particular Market Dynamic. And so that that just kind of demonstrates how it is so much money market by market product positioning strategy that drives that ability to push rate versus being able to roll up a very diverse portfolio over forty two states and kind of generalize the thought processes on it off.
All right, great. Thanks Bill. Thanks Daniel. Thank you. The next question is from Drew baby, please go ahead. Hey, good morning.
Good morning. Morning on for itself. It looked like pure rent growth was 1.7% Whereas the final leasing results or the wage opening leasing results indicated pure rank growth of about one four. So I know other income was up, but I guess what on top of that kind of helped rate in the fourth quarter relative to be articulated final taste in October. Yeah. This is the usual deal Drew where remember whenever we're giving you the results of the lease up. We're always giving it to you on the Ford calendar year same store group. So for phone nineteen, you know, those those lease up results that we were porting were reporting were on the 2020 same store group because it impacts eight months 8 and 1/2 months of 2020. So we took to make sure that we're you know, giving you the group that the really covers the longest period of time
fourth quarters
Still obviously we're reporting on the 2019 same store group. So you had two differences between that fourth-quarter group and and the group that we reporting on for the lease up one with the rising 2020 same-store properties not in there yet and also Landmark was pulled out because it was a disposition in both landmark and that Rising twenty-twenty same-store group took the fall nineteen Lisa actually resulted in a little more occupancy growth for those properties and a little less rate growth. So that's why you see when they're not in their wage rate growth at 1.7% and a little less occupancy pick up at twenty bibs versus the the full group for 2020 having 1.4% rate growth in a pick up an occupancy.
I appreciate the clarification there and just one more for me and and kind of a housekeeping item. It looks like the third party development project Texas state it was in the disclosures is no longer in their wage curious what's going on? There is it's sort of a a regrouping or a delay or how do you think about that project? Yeah, that one's a regrouping at the university is looking at potentially funding and doing it themselves off just giving board discussions and cost of capital other mediums available tune from a funding perspective. So that's when there may be future phases. We see that come back. We don't expect the first phase to be on the time line. We walk over to be involved with it.
Okay, and is there anything else sort of in the current for you?
Third-party development disclosures were similar discussions may occur or there's anything that you sense coming down the pipe or should we just assume you know, this this happens once awhile and it's not really it it happens once in a while when you know in the company's history. I think there have been this would be the third one that in twenty-five years ends up going a different route after award and in some cases, you know, the university just gets further ahead than the Strategic thinking sometime the governing boards in terms of how they ultimately think Capital allocation on their own front and so it is rare, but occasionally it does happen.
Okay, great. That's all for me. Thanks. Thank you. The next question is from Shirley. Woo with Bank of America, please. Go ahead.
Hey guys. Thanks for taking the questions. So thank you. So my first question is on UT Austin just curious as to how that work is currently performing and where your expectations are for the upcoming school. Yeah in Austin again continues to be in the top ten Supply markets currently are leasing progress is going well. We are a little bit ahead of where we were last night the the market overall the the two new developments that have come in place are virtually already pre-leased which has been the trend that new and everything new immediately lease is up. We do sell the overall Market the same store properties throughout this point in lease up being about a thousand beds behind and as I mentioned we are running ahead. So we are successfully capturing market share loss. And so we we certainly believe we're in a position to build off of where we were last year. And at this point in time in the implementation of our lease up and marketing plan. We are pasting to do that, but it is still early.
and it takes execution through to the very end but overall human continued new Supply there and where we are we're pleased with our
Seeing progress today.
Got it. So I'm just curious in terms of getting to that low end of the Fall leasing that one five. Are there any schools that you are more cautious of that could potentially see cracks? Not that there are now but if it were to happen What would the what would the schools they you, you know at this point in time and we you know without giving any specific broader at leasing guidance as to where we offer a little bit of color that with that we have when you look at that low end of the range typically as we underwrite it and think about it. It's not all a hiccup at two schools. But but rather just look at the overall performance of like oil finishing out the year strong and all of the markets that we are and so when we look at the markets, you know into where we are the Dynamics really lay out well for us this year, especially our supply was laid out that especially from our major noi contributing markets again only four of those have new Supply coming in and it's relative modest Supply the birth
So we talked about was just over six hundred beds and that included Austin which is about driving that average up where I mentioned that we're doing well and pacing ahead. And so this year it the the overall Market.
Environment lays over for us pretty well, not that we're not concerned. You know, we look at a couple of markets where we're pacing behind in the new Supply top and we're we're just slightly behind, you know, Fort Collins Corvallis hospital and all those are markets where you have less than one, you know half a percent of Noy and so don't have you know, where where last year we had clearly laid out some Marco this year is we started the lease up Gainesville was where we saw the largest Supply. We felt good about our product pricing position. As I mentioned. There were we have 4% rate growth through the lease up in Gainesville Georgia or so so far. We're very pleased with how things lay out from a risk and exposure perspective too large contributors in the company and to how that matches up with Supply and how our current balance is going.
Great. Thank you for the color.
The next question is From Austin Schmidt with keybanc capital markets, please. Go ahead.
Good morning, everybody. Just curious from your prepared remarks. You mentioned pretty significant increase in application fees and just wondering if if you view that as being a demand-pull 4 a.m. Any impact from from some of the changes you've made in in marketing expenses and then also curious how concessions have trended relative to last year across, you know, some of those larger markets. Yeah, and as we you know, and again, we're not giving leasing guidance, but obviously we had to discuss velocity in the context of the fee volume a Q4 made it evident in terms of that. It was kind of a very good success in terms of the velocity of early Leasing and so that is is Daniel met, you know, as a pool forward some of the revenue that you would typically see in q1 and Q2 of next year and now this year two thousand and that the the kickoff to leasing certainly did start off strong as evidenced in the increased app and admin fees that you saw hit that line item there. There's not any correlating authors.
to marketing expense
It's related to that. Certainly I would say the social media and digital efforts that we undertake. We think indeed did have a role in helping drive that stronger belong to the early on and to the extent obviously that you're able to drive a loss of the early that does help you to manage marketing expenses later in the leasing season, if the opportunity provides a self to Thursday, and so the, you know something we feel feel good about but you know, if we got a long way to go and we'll finish out the lease up strong, hopefully.
Appreciate it. And then and then Daniel, you know, your Capital needs today are fairly limited the next several years, but you know William certainly laid out a vibrant P3 pipeline wage. It sounds like there's some off-campus opportunities that you'll evaluate over time. So, you know despite the fact you don't have any dispositions. I believe beyond the hundred and fifty million, that's that's pending. How should we think about, you know asset sales as it relates to backfilling the development pipeline in 2021 and Beyond
yeah, so
You know as as you see in our supplemental on our Capital allocation funding page, you know, we give through 2023 given the $560 million left to fund that we have off. Once you complete or once we complete the varsity disposition this quarter that leaves us with about $175 to $375 million left funny needs over the next four years as we've talked about. We really want to try to match time knows as much as we can with the delivery of the the development so that we're not disrupting the flow of ffo growth, you know, the one the 148 248 million dollar disposition for this year with pretty much address our needs so you should look 2021 through 2023 for the remainder of those which would be in the range of a hundred million dollars a year. Obviously as I said, you know if we have as we have additional dead.
Transactions come up that we want to pursue. We will look at all sources of capital for funding that you know in a way that maintains the health of our balance sheet, but also found, you know generates the most creative return we can
and
Just last one for me. Is it is it relates to the update or progress, you know in in your your conversations with UC Berkeley any sense of the timing of when that first phase could be completed and you know, the probability that that you do get an ace transaction out of that. Yeah, and it's still in the long-term pre-development phase and so don't have a definitive shovel in the ground for the first phase and it's still completely wide open in terms of third-party Ace. And again, it's such a large initiative with multiple phases that we would not be surprised. If you sort of a saint third party in the ultimate equation of that
Thanks both. Appreciate it.
Again, if you have a question, please press * then 1 the next question is from Neil Mark in with Capital One Securities, please go ahead. Hey guys. Good morning.
Morning morning. My first question is serviced about the overall landscape in terms of risk seems like you know, sometimes you guys are subject to the whims of universities and be it changing live on requirements or rerouting demand or you know, anything like that can that can sort of hit you off unexpectedly from an an operating perspective that can have an impact on the current year or even you know, what you previously under wrote on a long-term basis. So what do you kind of do to minimize or get ahead of those potential risks that that universities could throw you at a moment's notice? Yeah, and the the good news is those risks are also what creates opportunities for us in terms of how we approach the business and especially our race program and and usually they're not thrown at you quickly and the universities, you know, then typically where we deal especially are off.
Campus where there's open market risk. We do all your large public land.
Great institutions and we look at those large public land land grant institutions within our portfolio. They only Supply 21% beds as a percent of enrollment month. And so none of those public universities are looking to provide student housing for the large majority of students. But rather only for the first year incoming students and in most situations, the the name is the only reason they do not have a first-year housing requirement is because they don't have enough vets to house all of the first year students and so a Big Driver of our on-campus housing program, and then the transactions were talking about is when colleges universities who who do prefer and we prefer for them all so that students live in a residence hall environment in their first choice here next to the classroom so that they have an advantage of getting the class and being immersed in that living learning environment. That is something that is a positive on all fronts whether we're off campus are on campus for a unit number.
Should be have as good of an opportunity as possible to have successful students in their first year to continue on and so the on-campus Supply and ensuring that first-year students are living in it one that is what drives our Ace Program and opportunities and secondly, even when we are off campus privately not in partnership with the university. We look at them having a strong on campus program housing as many students as possible as a positive for us and they creates a theater system. And so for example, let's assume a university announced that they were going to build a thousand on campus first-year beds to house more first-year students while that may take a thousand students out of the market for the one year of delivery. We look at that as an absolute positive in that there's now a thousand more students that are being successful in a living learning environment that are moving off campus where we position our properties to correct.
And so we almost never look at the University as creating risk, or as they competitor but rather understanding them and aligning our objectives with their success is what allows them to have success and opportunity with them. And so it's it's really not as great of a risk as as you may think and first looking at the industry and is actually a driver where we create a competitive advantage and along with their success.
Okay, great. Next one for me. I think you guys have like fifty six million of land on your on the balance sheet any of those likely to start near-term or those, you know Parcels adjacent to current assets, you know, and any any color there would be great. Yeah in in the the lamb Bank you see there in numerous of those are again contiguous land Parcels to project and none of them are in the immediate pipeline. Of course, though, the being privately owned land their off-campus transactions is so we look at when is the proper time to execute on those bulbs and none of the on-campus transactions would fall into that category and that those are always the Atlanta leases.
Okay, and the last one for me, do you guys baked into your guide?
successful appeals to real estate tax assessments
Yes, and no, I mean at the end of the day we try to look at where we believe our targets are for final outcomes of property tax assessments. Sometimes that does involve an appeal. Sometimes we are we have a little conservatism versus we're we're appealing cuz we're not, you know real calm and where that might come out a lot of it. We are advised by Tax Consultants that are experts in the different regions that we're in and so, you know, there's a variety of of levels that we are currently projecting appeals to come out at it all depends on where we how we feel about our current process.
That living learning environment very similar to the university.
Okay, so seems like maybe you do a little bit but kind of conservative just we do on the ones we feel really confident about and we don't on the others.
Okay. Thanks.
Thank you. This concludes our question-and-answer session. I would like to turn the conference back for any closing remarks.
Thank you. And again I want to end by where we started thinking the American campus team for all of their efforts and hard work and producing another great year. We look forward to seeing many of you at the upcoming investor conferences and look forward to updating later in the years. We continue and give you an update on. How are Disney opening is coming in May. Thanks so much.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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