Q1 2020 Earnings Call

Thursday

So pissed off lean on me.

Good day, and welcome to the American campus communities 2020 first quarter earnings conference call and webcast. All participants will be in a listen-only mode. Should you 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 a question to ask a question. You may press start then one on your touchtone phone to withdraw your question, please press star and then to please note this event is being recorded. I would now like to turn the conference over to Ryan dead senior vice president Capital markets and investor relations, please go ahead.

Thank you. Good morning. And thank you for joining the American campus communities 2020 first quarter conference call. The press release is furnished on form 8-k age provide access to the widest possible audience. In fact, the company has 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 the 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 1 month our supplemental analyst app on 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 referenced in the disclosure in the press release in the same 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 twenty years.

Pane 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 became the expectations reflected in any forward-looking statement 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 off 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 Senior Management are joined here together with us for this call and they're all socially distancing Bill Bayless chief executive officer.

Jim aapki president Jennifer B's Chief Operating Officer William Talbot Chief investment officer, Daniel Perry Chief Financial Officer Kim Boss Chief accounting officer, Jamie Wilhelm EVP of public-private Partnerships with that. I'll turn the call over to bill for his remarks bill.

Thank you, Ryan. Good morning. And thank all of you for joining us as we discuss our q1 2012 financial and operating results in more importantly provide a comprehensive update related to our respective activities and Thoughts with regards to the covid-19 pandemic and its potential impacts on our business the cause of the ladder our remarks today will be somewhat lengthy.

As you can see from last night's release and our q1 results 2020 was off to an excellent start prior to the coronavirus crisis the beat of our previously issued to one guy that was a result of exceeding our budget for each of the three months in the quarter in addition as we disclosed in our prior, press release as of March 24th. Our fall twenty-twenty. Leesburg was 3200 leases ahead of the prior-year with rental rate growth of 2.25% while it was early in the year all facets of our business were exceeding our internal expectations.

in late

You worry, we launched a covid-19 task force at that time our focus and planning revolved around activities and procedures to manage Active cases of the virus among our residents and our ACC off course, and what we thought at the time would still be normal and ordinary operating environments.

With regard to having to respond to actual cases of the virus today. We continue to be very fortunate as we have only been notified of nine confirmed cases of covid-19 among rm35 thousand student residence and only four confirmed cases among are more than three thousand employees to our knowledge all cases were mild and none required hospitalization month.

With the virus being officially designated as a pandemic on March eleventh and with federal state and local governments as well as colleges and universities soon. Thereafter taking unprecedented action resulting in this Black Swan event, our priorities and immediate Focus turned exclusively to implementing the CDC guidelines that our communities and managing the impacts related to the governmental actions taken in response to the covid-19 pandemic.

Immediately following that pandemic classification and with the early emergence of unparalleled action by governmental entities. I sent the following internal communication to members of the club Senior Management.

Team is we Embark into unprecedented territory with regard to the national response to covid-19. I feel especially blessed to have this leadership team guiding the company in the span of just a few days. The world has changed in the manner. None of us could have reasonably contemplated. And as I stated yesterday, it's likely to continue to do so, I'm very thankful and proud of how all of them responded in the days and weeks ahead we will continue to face many more challenges that will require making very difficult real-time decisions.

In times like these is when we should reflect on our values and let them guide our thoughts and our actions on the last employee quarterly update call. I was asked which of our values took my favorite or the most important. I responded ACC value number for do the right thing and I elaborated that if we follow that one ultimately we achieve all of them. Let's keep that in the back of our minds as we Face the days ahead on a daily basis put the health safety and well-being of our residence and the ACC Family First.

If you have to make a real-time decision on the spot let that be your guiding principle and three to six months. We will hopefully look back and take comfort that we all did the right things.

The team then got to work and face, the unprecedented challenges that were emerging daily in our attempt to do the right thing by all stakeholders. We adopted the following a principal objectives to guide us through this crisis.

Active one strive to maintain a healthy and academically oriented environment for our resonance by adopting and implementing all CDC guidelines with regard to cleaning sanitation and social distance long as we continue to deliver essential services and ensure that are state-of-the-art broadband service continues to be reliable to facilitate the delivery online education as universities moved to that Medium to deliver classroom lectures objective to be compassionate and provide financial assistance and support to patients and their families who suffered diminishment of income as a result of the covid-19 crisis objective three strive to ensure that all American campus team members have a safe healthy and productive work environment is they continue to deliver services to our residence and University partners and of these days as they continue to construct and deliver our development projects.

Objective for work with our public-private partnership University Partners to understand their individual unique challenges with regard to covid-19 and to assist them in implementing their plans and accomplishing their objectives. Anyone can be a good partner when things are going well. Our goal is to demonstrate that we are a good partner at times of Crisis such as this month objective 5 attempts to limit all negative financial and operational impacts to the. Directly associated with this crisis and work to prevent negative Financial impacts from carrying forward into our stabilized business model or from negatively impacting our long-term value for our portfolio.

Objective six adapt our marketing and leasing strategies to successfully complete the fall Lisa and collaboratively work with all the universities we serve and in the temperature return to state of normalcy stability and business as usual for the 20 20 20 21 Academic Year objective seven ensure that we have the necessary balance liquidity to withstand the duration of the crisis and objective eight reflect on all the challenges that we will face during this Black Swan event and take note of the lessons. We were both in an effort to be better prepared for future pandemics to improve our future products services and operational policies as well as to advance and refine our investment in capital allocation strategies transaction structures and underwriting standards.

During the first three weeks of the crisis. We were largely focused on Gathering and maintaining all the critical data. We needed in each of the 92 University markets. We serve to be able to take decisive action based on highly volatile and changing circumstances. We were supporting rp3 University Partners as they were responding to federal state and local shelter and life in public health decisions decisions. We are also implementing the evolving CDC guidelines in our company and that all of our communities and we were communicating and disseminating information to our residents and our employees and we were focused on developing a program to assist and provide relief to our residents and the families who may suffer financial hardship.

With regard to Gathering and maintaining data our market research and training departments were immediately transformed into the covid-19 critical data group. They developed what came to be known as our University tracking information system where for the 92 markets we serve we continually monitored and updated all state and local governmental guidance and shelter in place orders. All University decisions related to curriculum delivery academic calendar changes housing closures and or housing policy changes refunds related to tuition room and board and fees and he confirmed covid-19 cases reported by the University's our communities and our staffs.

Supporting are numerous P3 University Partners during the first two weeks of the crisis was one of our most daunting challenges universities Across. The Nation were facing this unprecedented situation with evaluating the actual impacts of the virus and their own geographic region while simultaneously monitoring the actions being taken and the precedents being set by other institutions of higher education ultimately with evolving CDC guidelines limitations on group Gathering sites is decreasing frequently and social distancing standards being widely suck it nearly all of our universities canceled in person class instruction between March 16th and March 23rd moving to some form of online education or alternate form of curriculum delivery for the remainder of the spring semester.

In addition many universities closed or strongly urged the vacating of there on campus residence Halls. We believe in part due to the simple fact that it was a difficult to accomplish CDC guidelines and to meet social distancing standards in many of their nineteen forties fifties and sixties era residence halls with boughs Cab community restrooms and group bathing facilities. This is a meaningful fact that will touch on throughout this call.

In many cases universities made these on campus housing decisions under great pressure with an extreme sense of urgency as Governors and or local officials were about to issue a shelter-in-place orders an event which most universities nor we had contemplated in the early planning stages of managing the impacts of the coronavirus, even though most of our own no modern on campus residence hall products did enable CDC guidelines and social distancing as universities does not want to treat on campus residents differently by facility.

In meeting our established principle to be a good partner in a time of Crisis. We supported each University's decision and agreed to share in the financial losses of those decisions.

Because our modern residence Halls we're better suited to achieve CDC guidelines and social distancing properties. We're typically not required to be vacated. But ultimately students were given the choice in the option to vacate and to receive a prorated refund.

these on

Campus abatement and refunds of rent were not a substantial percentage of the overall 2019-2020 total contract Revenue given that all these residence Halls had met ending lease off. The total on campus updated refund of rent is expected to be in the range of 13 to $17.

The vacating of University campuses and the corresponding housing decisions. We discussed that again in many cases were made in crisis and with a great sense of urgency with little time to fully assess. The impacts had four primary unintended consequences one for many students. Their college housing is their only home and they had nowhere else to go to law students wanted to stay in their primary College residence and did not want to go home and risk exposing parents and grandparents who were likely in a higher risk category for complications from covid-19 bulb 3 the manner in which some universities as landlords required or highly suggested students leave their on-campus housing costs trial attorneys to claim a construction of them had occurred which fueled the demand for student refunds and for the universities requiring are strongly urging students to vacate on-campus housing and ultimately giving refunds put

Public relations media and at times political pressure on private off-campus landlords to consider doing the same.

In response to that last item, we issued a detailed statement on our covid-19 website page clearly explaining and delineating the differences between on campus residence halls and private off-campus apartment style housing with regard to the physical product differences and the ability to achieve CDC guidelines and social distancing.

The fact that most first-year students living in Residence Halls were required to live on campus where off-campus students made an open-market choice to lease an apartment.

The fact that private sector landlord tenant contract law governs us and our off-campus residents unlike the university on campus resident relationship that does not control by such contracts. The difference in lease term were off campus 12 month leases are unrelated to the universities nine-month academic year calendar.

And lastly and most importantly in our statement. We are now starting covid-19 resident hardship program and we made the following pledge to our residents.

Our pledge is that every American campus communities resident will continue to have a home during this crisis regardless of their ability to pay rent on the timely basis. We will act in good faith working with every student in family suffering financial hardship on a case-by-case basis to ensure our residents continue to have a home and complete there online instructions in an academically oriented environment at this difficult time. There will be no late fees no online payment fees and no Financial related evictions also wage. There will be no negative impacts to the credit reports of those suffering financial hardship related to the covid-19 pandemic.

The resident hardship program has been very well received by a residence and the universities we serve its Administration includes potential abatement of rent payment deferrals page plans and in all cases education and resources for students and parents on how to access the cares act assistance based on the specifics of their life situation.

At this time 2787 students have applied for assistance under the resident hardship program today. We have approved over 1.6 million in rent abatement birth month of April and over 400,000 for the month of May. We have also approved more than a thousand rent deferrals till May 15th for rent due May 1st until June fifteenth month rent due June 1st.

With many participants being residents who have renewed their lease for the next academic year or who are perspective renewals. We want to be compassionate and we want to put them in a position to return to normalcy and financial good standing as part of our guiding principles to return to normalcy for the fall twenty. Twenty Twenty One Academic Year and to limit the financial impacts off to this. Directly associated with the pandemic.

And with that I'd like to discuss our principal objective of a return to normalcy in the 20 20 20 21 Academic Year from our discussions life partner universities and with public statements made by other universities We Believe nearly all of the universities that we serve are working from a primary premise that they will be resuming in took some classes in the fall of 2020. Of course, they're making those plans under the assumption that some degree of social distancing and limitations on group Gathering sizes will likely continue to exist with shrinking in person class sizes alternating in person lectures with online lectures and other Creative Solutions are being discussed at American campus may have an extensive outreach program in formulation to make sure universities and all of our markets are aware of the amount and availability of private modern off-campus house.

All of which is well suited to achieve CDC guidelines and to facilitate social distancing. We want to ensure that universities look to all the modern housing inventory available to them both on and off campus for the fall, especially if they continue to have concerns regarding housing students in their older traditional dorms with group package and common bathing facilities. We hope this Outreach and information will age universities and being comfortable and making the decision to return to in-person classes in the fall.

Is it back up scenario?

Any case the pandemic continues to flare up into the summer and fall most universities back-up plan is to continue with online instruction in the fall and resume in-person classes in a spring semester in January. This is not their preference with regard to the quality of education and their own economic pressures, but as a back-up plan has to be in place at this time.

For American campus, we're going to attempt to give students comfort that they should continue leasing for fall and that they should be comfortable and returning even if the universities decide to deliver lectures online our discussion and rationale as to why students should and we believe will return to campus in the fall, even if lectures continue to be online is as follows, Our modern communities do facilitate implementation of CDC guidelines and social distancing to our properties offer state-of-the-art Broadband technology with service rep from 200 megabits to 1 gig per resident 3, they'll be living in an academically oriented environment conducive to academic achievement and success for home with many experiencing depression and anxiety associated with the current isolation or return to college and seeing colleagues and friends even in a social distancing environment will be a

Positive impact to mental health it's predicated on actually living at college and our return to normal activity among this young and healthy demographic of traditional wage college students appears to be desirable to them and their parents.

We'd also like to address the question some have asked regarding whether the covid-19 shift online classes will ultimately lead to a permanent replacement of on-campus in a person education at large public universities. We believe the answer is an emphatic. No.

Lectures are only a small part of the personal growth experience and education students receive in person on campus the active learning engagement that takes page cannot be achieved online mentoring from instructors tutoring from graduate assistants collaboration with other students in labs and group projects the exposure of debate and collaboration that takes place both academically and socially with students from different cultures different belief systems different socio-economic backgrounds different values different perspectives. It's all part of the critical personal growth that takes place in the college experience the process of having your own views beliefs and thoughts challenged life. I'd or evolving change if they don't hold up is again essential of the personal growth. It takes place in person on campus this Active Learning in person on campus engaging

Is what prepares us for Life After call?

It all goes far beyond a classroom lecture not to mention the lifelong relationships pride and sense of belonging with your college peers that evolved in each University culture for me. That's what's going Mountaineers for others. It's roll tide roll Hook, em Horns Giga more go Tigers personal growth in education occurs far beyond lectures in the classroom. The reality is that the broader on campus in person experience prepares us to evaluate. Learn Mentor collaborate rationalize to logical conclusions wage to overcome challenges and to seize opportunities for the rest of our lives.

For me personally my business and life success just simply would not have happened without my in person on campus education at West Virginia University as we now talk to students professors in University officials. This Hiatus to on-campus learning is only making it abundantly clear to all that in person on campus instruction is the preferred and most effective medium for the delivery of higher education now and in the future,

A return to normalcy will occur. Hopefully this fall with the commencement of in-person classes, but almost certainly some some time during the 2020-21 academic year off and we believe American campus will continue to be the industry's best-in-class company the university partner of choice and the group that institutional Capital desires to partner with if given the opportunity that we also importantly believe that the stability of cash flow investment thesis and the recession resiliency that our space is always provided will continue to prove out over the long-term when compared to the broader residential sector and other areas of Real Estate.

And while we may not be immune from the short-term Financial impact packs of a Black Swan event as has been demonstrated by the covid-19 demek. We and our University partners are much better prepared to complete the process of withstanding this event and in facing similar ones in the future.

And ultimately as I've referenced numerous times in my comments We Believe universities have realized through this pandemic that many of their older facilities with group restrooms and community-based facilities are less than ideal with regard to pandemic demux spreading communicable illnesses or even managing a flu outbreak as they looked to potentially could take these facilities out of service in the years of head and replace them with modern housing products such as those we have been developing on campus for decades. No one is better positioned than American campus to assist them in carrying out that objective.

And closing my remarks. I'd like to thank the American campus team for their incredible dedication and hard work throughout this crisis. Especially our on-site teams who are coming to work every day to provide essential services to our residents. I'd also like to thank our corporate team members who putting countless hours in dealing with this unique and complicated situation to give a special shout-out to those working from home without childcare. We've had quite a few infants and toddlers make appearances on a cc video calls in the last several weeks.

And Senior Management team. I have never been more proud than I am of the work that you have done over the last month.

Want to thank our independent board of directors who have made themselves available throughout this crisis and devoted significant time and contributed greatly in assisting the executive team as we approach the challenges would like to thank our University partners for working with us hand-in-hand as together. We faced an unprecedented situation from which we both learned valuable lessons month. We'd like to thank you our shareholders who believed in us and supported us over the years throughout this crisis the decisions that we have made and will continue to make money based on maximizing maximizing earnings for any given quarter or for the current year. But rather in making sure that the decisions we make at this time of national crisis are based on our values and our culture of doing the right thing for our student residents our University Partners the ACC team members and all stakeholders.

Which will enable us to emerge from this crisis poised to create stable and long-term value for years to come.

And lastly and most importantly I want to thank our student residence and their families for their patience their understanding and their continued patronage while we haven't been able to honor every request. We do renew our pledge that every American campus communities resident will continue to have a home during this crisis regardless of their ability to pay rent. And now we will acting good faith working with every student family suffering financial hardship on a case-by-case basis to ensure our residents continue to have a home and to complete their online instructions in an academically oriented environment.

With that, I'll turn it over to Jennifer to discuss operations and Leasing.

Thanks, Phil. I've seen on page five of the supplemental quarterly same-store property in early. I increased by 1.2% on a 7% increase in revenue and operating expenses coming in flat to Prior year quarter related to our ongoing Asset Management initiatives. We exceeded our expectations for the quarter and while we certainly saw call Savings in March it our operations and business-focused to meet pandemic protocols. We had also performed well in the first 2 months of the quarter from an expense perspective during the social distancing faith covid-19. We have and will continue to evaluate opportunities to mitigate costs where possible including elimination of non-essential travel expenses reductions in a related and promotional marketing costs.

Controllable utility expenses and most non-essential repairs and maintenance and capital items as we continue to provide essential services at our properties and move our business forward. We had not laid off or furloughed any of our corporate or property staff at our own communities, which largely remain fully staffed while our payroll growth for the first quarter was 6.9 per month. It came in four percentage points below our original expectations for the quarter as we discussed on the last call payroll growth. This quarter was expected to be elevated due to a combination of a difficult comp and the prior-year quarter and increases in flsa minimum exempt status salaries and statutory minimum wage increases in numerous States.

moving into

Even if we continue to provide essential Services, we expect our payroll expenses to moderate or decline as they will reflect the result of a hiring freeze allowing natural attrition to create efficiencies and limited overtime amounts.

Nearly all of the universities we serve have moved to some form of online education to deliver their spring and Summit Summer academic curriculums permitting students to complete and earn full credit app. It is our goal to ensure that all of our residents can continue to receive an academic instruction complete their course work and have a home conducive to their academic success as Bill mentioned off part of the unintended consequences of universities closing their on-campus housing was was the displacement of students that wanted to remain in their respective markets during the months of March and April. The off-campus market has seen an increase in movements largely due to these displaced students. In fact, she has welcomed over nine hundred new residents to our modern purpose-built facilities during this time.

Also during the month of April we have seen approximately 93% of our student residence and make their April rent payments.

As detailed in our March 26th, press release are pre-leasing for the fall semester without facing prior-year Pace by 330 basis points at that time as expected since the pace of our activity has slowed during this crisis. We will periodically update the market regarding our leasing status for the 2020 and 2021 Academic Year.

As you can see on page S8 of our supplemental our 20 21 same-store properties are 76.6% leased for Academic Year, 2020 and 2021 compared to 76.2% least in the prior-year this chart reflects the slower pace of applications and leases over the last 3 days last 10 days off and cinch March 16th or leasing velocity is that approximately 60% of normal pays a slow down which was expected we take comfort in the fact that this time our community that are maintaining comparable market share to last year's lease up and have not experienced elevated levels of least cancellations for the upcoming Academic Year. We are utilizing a variety of pollen life and social tools and our leasing activities including virtual tours chat functionality and social media marketing to continue to build traffic to your applications and execute leases.

We believe that the leasing velocity going forward will heavily be influenced by the timing of universities providing Clarity on the reopening of in-person classes on campus.

Daniel will cover broader Revenue impacts resulting from covid-19 and his prepared remarks with that. I'd like to thank the entire team and particularly our on-site team this unprecedented times and now a return the call over to William who will discuss your Investments activity.

Thanks, Jennifer beginning first of our Capital recycling activities. We completed the disposition of the varsity serving the University of Maryland on March 20th at a sales price of $148,000 the transaction close that contract pricing in the midst of the covid-19 crisis and represents a 4.1% economic cap rate on in place revenue and projected operating expect moving to our 2020 development deliveries. I'm pleased to report that all housing projects are still ongoing and under construction as housing has been deemed in the central service within each applicable jurisdiction, including our own projects are in San Francisco State University and the University of Southern California Health Sciences Campus labor on site remains strong and our general contractor Partners have implemented guidelines completely on each development site despite the disruption across the country are 20 20 deliveries continue to track on time and on budget circumstances a municipal jobs.

Since can change daily in each of these markets and we continue to carefully monitor the situation as it relates to our development serving the Disney college program. We expect to receive all necessary certificates for occupancy this week for the entire first phase which includes the three residential buildings totaling 800 beds as well as the community center and the Disney education center and work still continues on All Phases under construction as has been reported Walt Disney World is currently closed due to the covid-19 pandemic and Disney has suspended the college program temporarily Disney has not announced a date for the reopening of parks and Resorts, but we would expect a phased approach to reopening with a similar phase recommencement of the Disney college program as a reminder. We expect to deliver an additional eight hundred beds in August bring the total amount of beds to 1600 delivered in 2020 a modest amount compared to the historical participant levels prior to the suspension of the program.

Per the terms of the ground lease and didn't Disney's continued commitment to the partnership. All participants will occupy. Our beds first with additional participants being housed in the existing communities that will go off. We deliver additional beds. Our project will be ready for immediate occupancy. When Disney elects to restart the program and our beds will be filled with the first arriving participants Disney is maintaining a strong of interested applicants for the intern programme. And although the ultimate timing related occupancy of the project is unknown. We remain in constant regular contact with our partners at Disney if the intern program is suspended for a prolonged period of time we have the right in the ground lease to open the project to all of Walt Disney World's more than 75,000 orlando-based employees along with additional backup Provisions home where we have the right to convert the project to a hotel in which Disney has the right to offer and manage as part of their Hospitality portfolio. Each of these alternate uses have pro forma returns equal to or greater wage.

the developments intended primary use

moving to our on campus development Pursuits. We are extremely pleased to announce to new on campus development initiatives on March 27th. We enter into a pre-development agreement with m i a t

Other development of a graduate student housing community expected to consist of approximately 650 beds. In addition. We are awarded a second development project on the campus of Virginia, the university the full scope transaction structure feasibility fees and timing for both projects has not yet been finalized.

We continue to pursue numerous active procurements that are continuing throughout the covid-19 crisis and remain active and continue to work of our University Partners on pre-development activities surrounding our previous life sorted projects as Bill mentioned this pandemic has highlighted universities limitations to operate with him CDC guidelines, including social distancing and older nineteen forties fifties and sixties style residence Halls that consists primarily of small dorm-style double occupancy rooms and Community rest rooms and baths. We believe that many universities will now seek to replace these older facilities with new developments that are better suited to comply with CDC guidelines and social distancing requirements during a pandemic type situation ACC is uniquely positioned to act on this opportunity.

I'll now turn it over to Daniel to discuss our financial results.

Thanks William as we reported last night total ffom for the first quarter of 2020 was ninety-seven point six million dollars or $0.70 per fully diluted share wage, which was a penny above the high end of our expectations prior to the impacts of the unprecedented actions taken by federal and local governments in response to covid-19. American campus was performing well relative to our plan for the year. We had completed a four hundred million dollar ten year bond issuance at a record rate and redeemed the bonds due to mature in October that completed the $148 disposition of the varsity and been awarded to new on campus development projects as William discussed. Even after the effects of the government on shutdown had started to take effect.

And our lease up for the 2020-2021 academic year was trending ahead of expectations further same story and growth was better in all three months of the quarter than we anticipated primarily due to good operating expense control more specifically we were able to maintain operating expenses lower than our budget for each line item in each of the three months of the quarter other than in the uncontrollable area of insurance.

It's Jennifer described through the coming months and quarters. We will continue to lean on expense control measures to somewhat offset any potential negative Revenue impacts. We experience to the pandemic. We have also deferred most non-essential Capital Improvement projects at this time.

Due to uncertainty about the length of time governmental shelter-in-place orders will continue. We are unable to predict the full magnitude of the pandemic and its effect on our results of operations for the remainder of twenty-twenty. Therefore. We are not issuing new earnings guidance at this time.

as for

Reported in the last night's press release at our properties in off-campus Residence Halls today. We have agreed to refund approximately 13 to $17 in rent to students who have elected to return to their permanent residences for the remainder of the spring semester at the urging of their universities.

We realize this will have a significant negative effect on 2020 ffom absent any potential government stimulus offset.

That's part of our value set Bill discussed. It is imperative that we act as a good long-term housing partner to the universities we serve.

At our off-campus properties and 12-month apartment-style on campus Ace properties. We've been monitoring rent collections for April closely and at this time approximately 93% of residence have made April rent payments which translates into approximately 3.7 million dollars and delinquent rent at this time. We will continue to pursue collection of outstanding April rent payments, but we are also working on a case-by-case basis with students and parents who have endured financial hardship doing due to covid-19.

Based on request received today, we expect to provide approximately 1.6 million dollars in rental assistance for the month of April related to financial hardships.

Finally given the uncertainty most of the countries expecting with regards to Summer Camps this year. We expect that most of the summer camp and Conference business at our residence. All properties will be canceled which typically generates approximately 4.5 million dollars in other income per year.

American campus is fortunate to have a strong and healthy balance sheet in substantial liquidity to allow us to absorb the disruption covid-19 has caused we have approximately $570 million dollars in liquidity on our balance sheet between a cash on hand and availability under our revolving credit facility. We have no remaining debt maturities in 2012 and a manageable 168 million dollars in secured Mortgage Debt maturing in 2021 with the completion of the four hundred million dollar Bond offering in January and the $1,000 million-dollar disposition of March. We have no other Capital events to complete that were part of our Capital plan for 2020.

It's detailed on page fifteen of our earnings supplemental including all projects currently under development for delivery through 2023. We have only $355 million dollars in remaining development Capital needs as of March 31st. The company's debt to total asset value net of $177 in cash in hand was 39.7% and net debt-to-ebitda was 6.9 times.

with that

I'll turn it back to the operator to start the question and answer portion of the call.

Thank you. We will now begin the question-and-answer session to ask a question. You may press star and then one on your touchtone phone. If you were using a speaker phone, please pick up the handset before pressing the key is that anytime your question has been addressed and you would like to withdraw your question, please press * then two at this time. We will pause momentarily to assemble our roster.

The first question today will come from Alexander Goldfarb with Piper Sandler, please. Go ahead. Hey, good morning morning down there morning a few questions re uh, you know for for you guys, you know first. Can you just give some more perspective on how the schools are thinking about opening for the fall? Clearly, you know, there's it would seem pretty tough for them and Out full tuition, you know, expect full tuition and a lot of these guys have big football programs that are financially important. So is he School sort of making its own decision are they may be governed by the state legislature? Are they all looking to the I mean, what are your what your contact they're telling you about about their ability to open and what steps are taken right now to explore how to open for the fall. Yes and is is we talked about in our comments Alex most schools. And the those are we partner with directly in those. We're we're off campus and following their

Statements are all planning on having in-person classes in the fall. That's their goal, which their objective they all plan on the one thing that we saw consistently there have been no refunds Uptown even as they moved online and there have been no discussions whatsoever of any type of tuition relief current or going forward and that that's a critical source of revenue for the institutions. And so they have a pretty stalwart from that perspective. I think everyone is we all are as a nation are being very practical and realistic at the moment. Everybody is watching and tracking what the governmental actions are the pandemic a month how America may attempt to open back up in the universities certainly consider themselves part of that. They're all very optimistic, but they all have backup plans. Everyone is being realistic to make sure that if they're not able to implement that they they can continue the online portion in the fall. I would also say you may see a lot of variation geographically, you know, ultimately when you look at the coastal

Areas in the highly urbanized areas versus your large rural land grant institutions. You could see some differentiation. They're based on how the the virus plays out as a relates to college sports. That's something that everybody's watching. The biggest challenge is that you know, typically for the football season and the football players come back very early to start training camp. And so, you know, we took that there could be a delay in the opening of the Season or maybe even a pushing till spring or compressing it somewhat, you know, it typically have all those weeks between the end of the season and the bowl games. And so we believe most institutions certainly want that to continue to take place how they regulate crowds and whether it's everybody back in the stadium or there's some variation of that is all to be determined but universities just like every business in America. Look at this crisis from the perspective of they want to make sure they're sound coming out of the other side. And so they do look at their sources of revenue that how they may be in Jeopardy. Yep.

how they can preserve whatever they can while continuing deliver a quality product and service to

residents

Okay, and then Jennifer you mentioned that pre-leasing is at the pace of 60% of last year. So it seems like to some degree the the students are more than half optimistic. That school is starting. So can you just give a little bit more color and the recent three-day data seems to be a pick-up, but maybe that's just three days but can you sort of give a color on what the Pistons are feeling for their incentive to be back on campus and then are you guys is your view that whatever is signing up right now has the right to you know to cancel no questions asked or if the students are signing up now, they're financially committing just like they did this prior-year Alex. Let me go ahead and take some of that is that when you look at the the thought we put in there and this is how we started measuring the the leasing velocity when the pandemic began as we started internally looking at that everyday currently three days 10 a.m.

He's 20 days and then your today and I'll be candid. I mean when when this all first started three weeks ago and the shelter-in-place orders were put in and the universities haven't provided a lot of clarity on definitive Mistral ball, and we had commented in our press release that we expected a slow down and velocity. I personally thought it would be much greater than it is and you look, you know, we've had 5,000 a lease is signed since March 16th through today and sixty percent of the normal activity is you know, pretty solid activity. The other thing that we have seen with these leases that we have in place is our cancellation rate is actually down 200 less than our usual Trend through this time this year. And so we see students continuing to make decisions and also all of those that previously made decisions, there's no acceleration whatsoever in request for any cancellations, and so I think we and stood yep.

We're all working from the perspective of that scenario one that universities are going to be uh going back and session as I mentioned in our comments, you know, we we still have properties off campus activities where students are online as high as in the nineties and occupancy where students are staying there and taking their classes. And so with all the the things we talked about with our technology infrastructure. Am not many students have a gig of delivery of broadband in their homes. And so there's a lot of reasons for students to want to be in their college towns in an academic environment to wear off the schools. Don't open up in-person classes in the fall. I don't think that necessarily speaks to a student may not want to be at their college town taking those classes online. And so from our perspective that all needs to play out the way that we look at our contracts that are that are currently in place that have been pre-signed for fall. Certainly. We are going to honor those contracts we would wage.

Many and most students would move in in just in full Candor for student never takes possession of an apartment.

Unit that's typically a situation where a normal ordinary circumstances. It's very difficult to collect her hold them to that rent. But those are all bridges we will cross and manage through and keep communicating with you all we go through but at this point we continue to be optimistic and what we're seeing from student behavior in terms of not seeking cancellation of the existing leases continue to sign leases football and prepare his though. Everyone's hoping that those fall in our in our on-campus openings will take place and the other thing I mentioned also invite repaired marks and I really think it's something that that

Could be for long term for americamps positive impact and that is that the universities and and the reason we have our outreach program now that we're we're formulating an undertaking but if you're a college and university and you're someone that has a modernized your housing and your stock does consist primarily of older traditional residence halls with group package in restroom facilities. That's a a product that you know, just think of yourselves as parent your kids in this type of environment. You may have a little bit of apprehension. And so that's where we're making sure all the the the universities understand all of the product available to them and you know, even to the point where multi-family in proximity to universities we want to make sure they understand it's available. So they know there are products that students can achieve all the government guidelines near their campuses.

Thank you, Bill.

Our next question will come from Nicholas Joseph with City, please go ahead.

Thanks, just on the pre-leasing that amount this morning. So you're forty Paces over here in terms of occupancy. What is the rent growth for those leases wage where they are its current Academic Year.

Yeah, I covered that in my script neck. We are at 2.25% rental rate growth at this moment.

And is there been any change over the last three weeks versus what you signed pre-fill know? It actually ended up slightly about ten bits off and we get our velocity was excellent going into this and so we did have pricing power going in and as I've the thing that we monitor most closely at this point in time, and we took our velocity being 60% when we look at it market-by-market. We're always measuring. What is our historical velocity compared to our velocity prior year, but then more important than what is the market velocity this year compared to Prior year, and as long as we see parallel in in in relativity in terms of market shares Jennifer mentioned in her script, then we we have not seen major decreases in rent in any of the markets where people were panicking. I think the industry all acknowledges that some students are just being prudent and waiting to hear what the University gym.

Altima taxes are going to be what?

Start dates are going to be in delaying that decision. So we we have not seen pricing diminishment at this point in time certainly as we look at finishing the lease up in the office of we do think it's going to be later. You know, we think this philosophy slow this will continue at least until you know, everything's being done virtually and online. We're doing Facebooked or FaceTime tours all the technology. There's no one coming in the physical models. And so when the shelter-in-place orders are lifted and students are you know, some students got caught a lot of this happened over spring break and then the universities extended spring break week and so a lot of residents got caught at home when the shelters in place were ordered and they're waiting for them to be lifted to come back. And so there's a potential in the shelters in place geographically or lifted that will see some uptick in velocity, but we think it is going to be later in June July and August and that's where if there's any volatility and pricing that we home.

Won't happen, but you know, we'll monitor it closely as when it could.

Thanks, that's helpful. Just one more in terms of off-campus rent collection 93% in April. What are your current expectations for made to to July 8th. You would think it would be above or below what you saw in April, you know, it's just too hard to tell and I'm I'm sure as you ask all the residential multi-family companies this question to we're all dead. Everybody's going to answer is just so much of a degree of uncertainty. The one thing that we are attempting to do in one we we we we do want to help the students and families who are suffering at this time Financial the other thing that I mentioned in my comments and and Brian Winger our Council and they're in a team that he's leading. We have gone through that cares backwards forwards and Sideways from the perspective of our faith in our parents. And so when we're collecting their hardship applications, we're getting the details of them losing their part-time jobs or Mom and Dad independent contractors or small business owners and wage.

Spawned we're sending them what we believe are the most direct Avenues available to them in the cares act. And so we're attempting with the people that are having hardship now in addition to providing them or life to make sure they know all the resources available to them. So hopefully that will change their situation. So theoretically could people be better than they were in April. Yeah, theoretically but obviously more people with their job some people even the carriage that may not be enough. So at this point, there's just really too many unknowns as we go into those months, but you know, we're hopeful we I'll bring it again and you know, when there's three three or four weeks ago the world was pretty scary and when I sat around and thought what April collections maybe they weren't 93% So I will tell you I'm very happy to see the level of continued rent payments that are taking place and I think the multifamily folks would say the same as I understand it. We're right in line with the rest of the the residential sector and those percentages.

Thanks.

Our next question will come from Neil Mulligan with Capital One Securities, please go ahead.

Hey everyone. Good morning.

Good morning. My first question was about the 8th Community you get the number thirteen million to 17 million is what you believe about the potential Revenue loss for April and May would be but you know, I think about 25% of your your total bed, uh are a so, um off to me that number would be much higher for the both month. So is there a difference between the ten months and twelve months? I just could you explain how you get to that thirteen to Seventeen? You know, like I said, it it does seem like it would be home.

The the large majority of that thirteen and Seventeen million is in first-year Residence Halls where the leases in those residence halls and in May and so the. For which students moved out ranged anywhere from April 1st to April 20th. And so the pro rata refunds are on the tail of the Academic Year leases. You may remember those residential's are performing and invested in based on virtually all of their contract Revenue comes from August through May. And so those leases are are small impacts in terms of the total contract revenue and why it's a smaller percentage that when you think up the over broader all Ace Revenue thinking about it on a 12-month basis. We we do have some 12-month on campus properties that are up in apartments and for the most part those continue to be treated as off-campus in that while the residence hall properties that we have on campus. Yep.

Most cases are administered under the University's housing requirements and their actual direct management and policy is consistent with their own where we have a small apartment properties. Typically we leased to the students again in an open market environment open choice where they're covered by tenant landlord law under normal leases and then we administer in and so for example, when we give our rent delinquency number those 12 month apartments on campus are typically covered in the same category as all the off-campus are included in that delinquency percentage of wage.

Okay, so okay sir. Sounds like it's the former not the ladder to think about that. Yeah. Yeah, it's really think of it predominantly as the nine-month residence Home Products.

Got it. Thanks. And then just in terms of your hardship program. Just wondering if you've talked internally about how will you demarcate or or what sign language you used to say like we're not going to be you know, giving age anymore. Is it a is it a federal thing, uh, a majority of space, you know, uh, having the shelter-in-place with fire what you know, what would you use that? And this is where as we have said we are going to administer this on a case-by-case basis and we have set up and get the amount of work. She has done in 30 days to prepare for these unique situations that administer and process this but as I mentioned right now, we have two thousand nine hundred eighty-five applicants in the hardship program. We have administered that program for them. And as you heard in my comments, we've made adjustments for them for April in May in the numbers that I gave and we provided deferments and as I just

matching them pointing them to hear

Sources of the stimulus available for you will now work with those residents in the program literally on a case-by-case basis in terms of what they can afford to pay whether it's partial or nothing or what other forms of deferral we may need if they're a graduating senior and they're going to have a hopefully a job. It may be a little harder for me. They're going to have a job than we may have a payment plan for them that extends beyond the end of this Academic Year for them by contrast if they're returning resident and on their new leases in the fall, they're going to have to pay rent in April or August 1st or September 1st. We're going to work with them to try to give them as much relief as we can to put them in a financial position that they can become a paying tenant in return to normalcy and so administrative Lee. I mean, this is a lot of work and we've got about twenty five people that have been re dedicated solely to administering the hardship program with the the site Personnel. Also, we are booked.

Directors isn't involved through all this and so, you know as we look at know some companies have announced here's the size of the pool. We felt it was better for us to attempt to administer on a case-by-case basis and to be flexible as we roll it out to see what the impacts are and to make decisions based upon the scale and the cost and so we'll continue to do that.

Okay, great. And then last one I know you know early on but just given the the sort of older vintage of traditional on-campus housing and the name, you know, the non bed disparity. Have you seen any new universities start to reach out to you just kind of regarding that that would be any indication of you know, how long it'll be for directory of private Public Partnerships would would grow. Yeah. No, it's still too early. And again, we we and our University Partners have absolutely no gone through a a bit of a crisis in the last week's and they're just catching our breath from having to get administration of all this behind and as I mentioned our first conversations with them on this subject matter is first revolving around re opening this fall and making sure that if they have any concerns relating to that product in the context of their reopening plans that we make sure that there's no

Really thinking about everything available to them in the off-campus housing market so that they think about all the product that can can achieve the CDC guidelines those conversations are then naturally going to evolve into the graduation of those discussions. I'll tell you also, you know, we we talked about one of the things when we when we went into this one of them as I mentioned was let's pay attention to the lessons we learn in this and so, you know, we we have two properties where we have actually designed what we at the time thought we're just absolutely the best compartmentalised group bathing in restroom facilities in a modern fashion, and we thought that maybe a big part of our future because that really allows you to create great efficiencies and to get your cost per resident at your rent per resident down. And so we look at that. You know, we say, okay, we we now the three think where we were evolved.

Some of our product design. The other thing we're looking at is is there a way the to think about Santa?

Station and sterilization in those type of products as modern technology improves. And so I think all of higher education coming out of this is really going to be doing a lot of reflection over the next six twelve eighteen months and I do think what we have all just experience is going to be a big driver of future design and program on campus and we will you know, the average age in the sixty eight markets. We serve of on-campus housing is fifty-two years old and so we're talking about a lot of product that may need to be recycled. The other thing that I'll say is that off camera purpose-built apartments with their full kitchens and living rooms. Typically never more than one the two people per bathroom are an absolute product of choice in this environment month. And so again, that's where we're going to have the Outreach to make sure universities are thinking about all that may be available to them.

Our next question will come from Austin where Smith with KeyBank, please go ahead.

Hi, good morning. Everybody as it relates to the pre leasing detail. Would you be willing to break out specifically what off-campus pre-leasing is for the fall off seems like maybe that would provide a better sense of the potential downside risk to the extent that schools, you know aren't able to reopen come fall.

Yeah, Austin we had not specifically broken that broken that out in in the total figures that we have given I don't know we want to get into those levels of the tail page in terms of the disclosure, I'll actually you know, the the one thing that we do want to do through this process and certainly will take into consideration the question they they did just act we want to provide us with transparency is possible as it relates to delinquency and Lisa all the way through this unique. And so it it's something that will continue to do throughout this time

For certain I will say I don't believe there's any material differences between the total numbers. We're showing you and the off-campus on campus segmentation. It's minimal.

Okay, I understood and then just a quick clarification with respect to the the two million a rental assistance is that figure captured in the three point seven million of of April or is that separate know that that is within so when you look at that the the 7% delinquency the amount being awarded under the hardship program is two people that are a part of that delinquency. So that's not on top of that is within yeah. One thing I will clarify on that is Bill said in his prepared remarks Austin is that two million is comprised of wage some amount related to folks who are asking for hardship for the month of April which is 1.6 million of the two million and some amount which is the remaining for month and is related to folks who paid the rent in April but have submitted a financial hardship form for the month of May. So the 1.6 is what's specifically a supplement of the three point seven million.

Appreciate the thoughts and then just just last one for me is I'm curious what the contingency plan is, I guess again to the extent that the universities don't reopen come fall and wage what that may mean for your Capital plan, uh, you know impact to the balance sheet and then you know, ultimately how you're thinking about the dividend.

So several big topics, they're obviously as we start to look into the fall and think about you know, what what could happen in terms of occupancy. And what would that mean for us wage? Right now we make about $76 million dollars a month in Revenue. So if you just start to do the math on it and you say okay, you know about 10% of reverie 10% of occupancy is about 7.66 dollars of Revenue that would tell you that around 60% occupancy would be about $130 million dollars of Revenue over those four and half months of the phone know if if we went to an extreme of a scenario of schools not recommencing in person learning until the spring semester and and and said, you know that combined with the current revenues that were talking about with regards to the refunds rent delinquencies in the lot lost summer camp and Conference business would put us off.

160 to $170 range so, you know, we have plenty of capacity and liquidity to absorb that we talked about we have $570 of cash on hand or availability on our line of credit. We have about two hundred thirty million and development funding needs for the rest of this year. And then we would obviously have bought some level of free cash flow generation, uh that you would normally consider as part of that. So, you know plenty of liquidity to absorb it and get us through this time. Obviously, you know, the other the other topic you mentioned is the dividend that is something we always discuss in great detail with our board obviously as you can imagine, you know, it will be discussed in more detail than normal at our upcoming board meetings. You know, we've talked a lot in the past about the value age.

Our dividend the value of the stability of our dividend, you know, we maintained our dividend throughout the Great Recession in 08 and 09 and that was something that we were very proud of our investors placed a lot of value on and and we are Coggins is cognizant of that. But also we are obviously an unprecedented times and want to make sure that we are healthy as we can be and so all of those things will be taken into consideration as we continue to assess a dividend not just this quarter, but throughout the rest of the year.

I appreciate the thought there and hopefully, you know, it doesn't come to any of that.

Yeah, we certainly hope so as well.

Our next question will come from Jeffrey Specter with Bank of America, please go ahead.

Disrespect of your line is now live.

Can you hear me now? Yes, sir. Great. Thanks for the opening remarks and in particular all you're doing a few questions on the the back up and discussed. Let's say, you know fall lectures online. Is there a scenario where even the on-campus dorms, you know using CDC guidelines could actually be off.

Yeah, I mean there's and when you look at the the modern products that we have built on campus and the residence hall products that we've built the large majority of what we've constructed over the past ten years all have in unit bathing in restrooms. And so you you are able to achieve that there where where the universities are working their plan is how they make sure they don't deliver the Food Service portion of students living in facilities without kitchens to make sure they meet the CDC guidelines as it relates to that particular Arena, but a lot of the modern residence hall product indeed do provide for better ability to do this at the social distancing even in the residence Halls. Also that maybe older I'm sure another consideration in Jamie will home just actually let me know one of the things they're doing is they're looking at reducing density to get it to more manageable numbers within the guidelines some of their older products dead.

And so these aren't again when you ask us, you know, the the the last 30 days have been around managing. The the impacts of the crisis has an emerge the next 30 days for us is having dialogues with the universities where we all think out-of-the-box to make sure we create the most acceptable modern social distance products available that they have available to think about what they want to do with all the other thing. I will mention again that I answered the previous question you very well may see Geographic differences on how this occurs again when you think about a large Urban University in Boston New York versus Tuscaloosa, Alabama or Lawrence, Kansas, you have completely different environments and and and different trends of the viruses that people may be dealing with so this will not be a one size fits every universe.

Okay, that's an encouraging I was thinking about.

Jeff we lost you there. Can you hear me? Yeah, you got your bad. Your last word was I was thinking about just your comment. So that's encouraging that there there. There's a scenario, even if it's online learning potential even on campus dorms opening based on the CDC guidelines and and your comment on Food Services. That's exactly I was thinking about whether it's on campus or off-campus in terms of food services or your 24/7 gyms or the study lounges can all of that be done based on Thursday guidelines. Now, here's what we have done. And so our Jim's is a great example all of our gyms in our facilities are closed at the moment. And so it part of implementing the seeds guidelines is making sure with an areas of the building where you would not be adhering to the standards that we take the operational actions to do so and I want to put this in perspective. I'm looking at our universe.

tracker that I mentioned earlier right now today with

fall classes online

25 of the universities we serve continue to have on campus occupants that they are providing modified food services to right now and so universities are already doing that in this session.

So it is something and again in many cases.

If if they you know, and again all take it, you know our products at Arizona State which are all modern design the students at ASU were given the option to vacate versus boss told you have to leave and so we would expect universities in the fall to continue that thought and and let's universities need this income. Also, you know, they're already strapped for cash in their budget and said they look at their sources of income tuition fees room and board. Those are things that to the extent that they can safely accomplished the reopening of those items. They're heavily motivated to do something.

Okay, thank you. That's very interesting and helpful and then Bill based on your your comment about geographic diversity. I guess, you know, even the statue provided the three-month 10-day leasing stats. Is there any are there any differences based on you know geography where you are seeing, you know strength verse weakness or is it totally across your portfolio? It does vary somewhat we were you know, the the first call that I had with Jennifer and the leasing marketing director team took three weeks ago at that point in time. They said you know Boston had greatly slowed down but in at the University of Kentucky was almost as though nothing was happening in terms of the pandemic and things were North So based on how the virus is behaving in various places and that that's when all the shelter-in-place orders were yet in place.

And so where there weren't shelter-in-place orders, we were still seeing a lot of walk-in traffic. And so that's one of my comments where I mentioned as we geographically see the company implement the plan of reopening America and stay in place orders taken out in certain places. We think we'll probably see earlier pickups in velocity than where those orders are back in place longer.

Okay, thank you. And then my last question on a positive note the as you mentioned one Q results, you know, very strong as mentioned all facets, exceeded expectations off. Let's think of how hopefully a normalized world in the coming ones. Can you just you know talk a little bit more about you know, the different facets and and what attributed to the beat sandbox what was working, you know right before all this started?

Yeah Jeff, this is Daniel, you know really as we talked about across the board. We had seen good controls, you know, when you look at certainly in the areas of Mark, you've heard us talk, you know, we were down 10.6% year-over-year and marketing we have talked about that. We are in the process of transitioning from you know, primarily in a traditional marketing medium to really a much greater percentage of our marketing being done via social media marketing and online Mark. We are seeing good progress with weaning off those traditional methods which tend to be more expensive and we can be more direct with the social and digital and online mediums. And and so, you know, we would expect to continue to to benefit from that. Obviously. We are going to start seeing just some benefit because wage

you know for the this period of time where

For students are not on campus. We're not doing on campus promotional events and things like that that we will use in the future. And so some of that will come back, you know, repairs and maintenance continuing to to try and create efficiencies efficiencies there with our national purchasing contracts and some of the asset management initiatives. We have done with the finishes at the properties to bring down those fences on you know, the utilities management front we continue to see real benefits from our LED initiatives our our Peak billing page or usage initiative. And so, you know, really across the board. We're continuing to see great Returns on all of the asset management initiatives that we've deployed off the portfolio. I thought it was really important to communicate that during the first quarter. It was each and every month in each line item other than insurance that we out performed our budget and authors.

Sleep for the first two and half months of the quarter. There was really, you know, pretty much nothing related to covid-19 going on.

The other thing the only other thing we would point out is that you know business has continued as usual in the other areas of our business Jamie Wilhelm and his team continue to do presentations to universities. Now, they're on various video call methodologies, you know, as William said we signed the pre-development agreement with a mighty right in the midst of all this and so schools aren't in Ewing to strategically move forward on all the initiatives that they had in place were just accomplishing it in different ways now,

Great. Thank you. I wish the team well, thank you. Thanks Jeff. Thank you and yours?

Our next question will come from Drew baton with bear, please go ahead. Hey, good morning. Good morning a couple Silver Lining type questions here, you know obviously competitive new why is then his his coming to Free the last few years especially kind of in the the later stages at lease up maybe using Austin is an example of a market where you're going to see at least amount of competition this year. Do you view this event is something that makes it highly unlikely that a lot of the competitive private developments might actually deliver this year might them getting kind of pushed out create an opportunity where you know, everybody knows he's going to be open. The facilities are going to be there for them. Is that something that's helping you or something that you can leverage? Well, you know, we we would say when you looked at our leasing velocity of 3200 beds ahead prior to the crisis, you know, we had talked on the last earnings call that supplies down this year and it was a much more favorable Supply delivery.

Re pipeline being smaller. And so we believe we were seeing that benefit even before the crisis and so as we look at what the impacts of the price is, maybe as it relates to Motor Supply delivery or the next couple of years Supply. That's likely a market Dynamic that is probably going to continue to work in our favor be on this crisis.

Okay, and related to that to the extent there is Ace relationships where a university might not open on campus in the fall there for students are not going to be there in the on-campus facilities in that event might it be possible that brown rent forgiveness might be some kind of an offset to that or is that something that's been talked about with the universities if we ended up in a situation that occurs and again our first premise of activity would be as I just mentioned in answering the last question even where you know, we have students today living in our facilities at ASU and in living in some of them are not ACC facilities while they're delivering classes online. And so even under the perspective that classes are in online in the fall. We do believe are belong at this point in time is that universities still will open some portion of on-campus housing for the students that want to be there and we're very well positioned to that are newer modern products will be the name.

Products that allow them to achieve the the the CDC guidelines and social distancing. So even in that Arena we think that's possible. If we did end up in a worst-case scenario where our transactions we're not occupied in the fall. Certainly, we would have those discussions with Universities at that point in time the the one thing and again, we couldn't be the the Partnerships that we have with with our University Partners everything that we have done throughout. This crisis has been in hand-in-hand acting in good faith and thinking about what is important to the other side of the table times. And so it's something that our our relationships are only stronger coming out of this than they were going in. Okay. Good to know. When one question for you Daniel on the balance sheet from Home in talking to your creditors to the extent that there's some kind of temporary, you know reduction in ebitda resulting from this are there any covenants that kind of come into play where you may be having to have surgery

Discussions about this Covenant relief in the interim here and I guess you know in a situation where if the fall is severely impacted what additional assets sales be potentially something you look at too crazy leverage down in that type of scenario. Where does that stand right now in those discussions?

Yeah, so, you know with regards to creditors. Obviously, we have very little secured debt on our properties right now only about 8% of total debt is secured debt. I think we're down to maybe less than 15 properties that have Mortgage Debt on and maybe less than 12 and in many cases you're not reporting back on covenants, but rather ratios just as particle reporting standard for those mortgage loans the primary covenants we would be looking at would be where it's regards to our corporate office facility in our revolver. The one that is when we do stress-testing on it that we would be the closest on would be our debt to total assets for our revolving credit facility that is based on a trailing 12-month ebitda or noi that is capped up and we have about a hundred and seventy million dollars.

of room that we

Could lose within a twelve-month period of in a lie before we would get close to that as you heard me answering a question earlier. I said that if we if we came down to about 60% occupancy that would lead to about a hundred and thirty million dollars of lost Revenue if that played out through the entire fall semester, if you put that together with the refunds and things that are occurring right now that would get you up close to that 170 million dollars. But of course that doesn't take into consideration the potential mitigation we will have through Thursday expenses. And as you can imagine if we were in that kind of a scenario in the fall, we would be looking to more extensive expense efficiencies that we can drive as part of a different environment for the fall than what we're currently anticipating.

Okay. I appreciate you framing that out. That's all for me. Thank you. Thanks.

Our next question will come from Steve with evercore is I please go ahead thanks. My questions have been asked but just one quick one and just as it relates to kind of accounting office or the I guess the students that are requesting rental lease and there is the federal are you still sort of booking knows as Gap Revenue in the quarter of safe for Q2? And then if those students don't Place orders bad debt and sort of take the right off down the road or how does that get handled? Hi Steve, this is Kim Boss. Yes, the intent from an accounting standpoint is that you would see that reduction in revenue and the intent is that all of that would be taken in the months that those abatements are provided. The accounting rule makers have provided some recent relief to make that more straightforward for companies and allow them to take that hit per se to revenue all in the periods of those abatements are provided rather than you know, smoothing it out over the term of the lease. So that's our intent.

Okay. So basically it's going to be on a cash collection basis not sort of a kind of a gap smoothing basis as the payments are provided. You'll see those statements hit, you know on a dollar-for-dollar basis, but one of the things will also continue to look at very closely as we monitor collections is just the ongoing impact that that we'll have on our provision for uncollectible accounts, which always isn't necessarily wage for cash analysis, but something that we look at you know on a broader scale in terms of how much do we ultimately think we're going to collect for potentially those residents that are under payment plans off and things of that sort. So it's a little bit of a mixed bag between, you know, the direct effect of the abatement as well as the ongoing assessment for bad debt over a period of time.

Okay. Thanks very much. Appreciate all the details.

Our next question will come from Derek Johnson. But please go ahead good morning. Everybody High, you know, we've read about a wide variety of options when college does resume and you know clearly not necessarily a complete return to normalcy right away, you know one option that we've heard contemplated life is one student per dorm room. Do you think this is at all possible and and how impactful would it be on a c c as you guys least by that? Yeah, and it will vary for and again many universities as we mentioned in their older products that have much higher densities in common facilities. That one student per dorm room is a much better option and It ultimately what they're attempting to do is probably get their number of people sharing a common bathing facility down to an acceptable less than 10 and phone number.

The CDC standards. We're we're very

Well positioned in that in our modern products again in that typically the way our units are designed are never more than two people per room and with one either only mortgage never more than two sharing the in units that and so we tend to be better suited for that than many of the older products, but we would expect again in with your graphic regions for universities to be very creative in terms of based on what their inventory is how to maximize the use of it while complying with the CDC guidelines.

Okay, great. And then just secondly so the varsity was sold in a very healthy for one cap on 320 but clearly that was posted dated price and you know as we move towards closing was there push back on on pricing, you know during covid-19 celeration. You know, how did that deal progress throughout FaceTime and secondly, you know have the private transaction markets adjusted meaningfully since the papering of this transaction and you know going forward to expect any additional dispositions and off at this time.

Hey, this is William. You don't know throughout the whole process and has this crisis was emerging. It was fairly business as usual with the the disposition thumb. The the buyers being graced are the transaction actually ended up closing a little sooner as the crisis emerged. They wanted to get it done just with the uncertainty. So we actually saw a little bit of an acceleration of the of the fiber timing of that transaction closing when you step back now and look at the the overall transaction market for student housing. It's certainly taken a temporary pause and as people are evaluating, you know with all the different circumstances. Obviously a lot of people looking to what the decisions are related to fall. So you really have seen that transaction Market to step back and awaiting. I think more clarity for the future, then the final question you asked there are no more playing dispositions at this time for for 2020 calendar year.

And what someone does offer a for cap and then we may reconsider. Thanks, everyone.

Our next question will come from Anthony bologna with JPMorgan, please go ahead.

Thank you. I guess going to be left is going back to I think one of the original questions actually excludes have the option to to start the next school year on life it in a you know, they don't show up and and they pretty least and they don't take possession. What what do you do? Do you all are you taking larger deposits as you approach say August September to a show that you know, there's some skin in the game or how does that work know, we certainly won't increase any deposit or fees throughout this crisis years, you know, that would be not something in the spirit of doing the right thing that we would consider doing one. We will have dialogue throughout the entire summer with those students and we certainly won't gain weight and to see that whether or not someone shows up as I said earlier, even though you have a signed contract for the fall. It is very difficult to make any argument to collect rent.

normal, and ordinary process is for someone in

Never took possession of the unit as I mentioned at this point in time. We have had our our typical volume of people requesting to cancel performance is better than the prior-year and so we have not yet had any students that are looking to cancel those leases. And so that's the dialogue that we will continue to have wage Tony. I think a lot of it will to the extent that you have situations of that nature evolved. It's going to be Regional situations where maybe you have a a ramp-up of the virus in one location and students behave differently. I mean, those are the things that will just have to deal with throughout this process. And again, we'll just keep keep being transparent with you all as it comes in in the play-offs, you know, we do believe there's going to be a return to normalcy. Will it be with the commencement of this false classes? We'd love that. That's what we hope for but wage.

Just won't know until we get through this process and we see how the virus plays out geographically and how it occurs. As I mentioned. What we're going to be doing is having dialogue with the students that if sign those lease is just like you said to talk about what the benefits are of in right now as I mentioned, you know, we we estimate that we're anywhere from 30 to 100% occupied right now in the spring semester while students are taking classes online and so we don't believe it's a toggle of if the university goes on Thursday. We're not going to have any residents or if the university does go in line. We're back to normal. The reality is that that's the you know kids still want to be students still want to be in their college towns and many came and so this is one of the uncertainties that we're going to work through to try to create as much stability regardless of the the online or in-person classroom decision and that we will ma'am.

Through this process, you know, we certainly believed right now as I mentioned in my comments for those universities that may find themselves having to remain online then January becomes that point of normalcy from a classroom instruction perspective. That doesn't mean that all those students don't want to come to class till January. And so that's what we'll just have to manage through and part of the uncertainty of this is something we feel about based on the current consumer Trends. We're seeing in terms of request for cancellation and continuing to lease.

Okay, so I thank you.

Thank you, Tony.

And our final question will come from Nicholas. Joseph would say please go ahead.

Great, it's Mike Kellerman here with Nick. I was wondering how you're thinking about any potential legal liability from the standpoint of if you do open your facilities wage to a greater extent in the fall. And you know, you have the virus is still around in some form and it occurs at your assets. I don't know if you've built into your leases or how do you absolve sort of the company to mention any potential liability from that from from residents Contracting the virus off at your assets? Yeah, and certainly, you know, this is something for all residential real estate in terms of anyone that owns real estate and whether or not a virus is can you know same thing for workplaces off as you think about that and so there is not specific language in our leases nor I believe in anyone's leases that directly correlate to that situation. The only thing that we yep.

he was what every company in America is doing in all of the services they provide and that is

Implementing the government CDC guidelines and following them as it relates to the items that we can control with regard to sanitation in the like the other thing that I did mention Michael Thursday, we take appropriate precautions and our lease is due allow us to do this in our resident leases. We do not guarantee that all of the common amenities are open. And so that's where I mentioned we have closed down Jim's swimming pools Recreation rooms and Facilities to where it is largely Ingress and egress to your unit and out. No different than traditional multifamily.

Right, how do you you know with most of the offices, you know office tenants, you know, they're only going back, you know, and it's still a ways away to maybe fifty percent occupancy wage, I guess and I know every state and every city is going to be a little bit different but how do you even obtain and and I do view this period of time where students were already at school and you've got a distance learning very different than whether School opens up in the fall or not. Right? I don't think you can just take what's happening today in terms of students. Just staying on site versus a New Jersey school year starting but how do you ensure a certain amount of proper distancing from an occupancy perspective overall, you know proper missing within a unit the people that you are, you know, typically there's four people living in a unit and those four people are going to be you know, they're currently living together and they're going to be exposed to each other and they're signing their leases and moving in with the understanding.

They know who they're living with, you know in the rare cases of that we have had occur of covid-19 on property and a student has gotten it in some cases all the roommates have quarantined with that person because they were exposed and so they stayed together throughout that crisis with people bringing groceries and dropping to the door and the like the other thing that you know, I think back Michael when we visited with you all in early off at your conference and at that point in time, you know, when we talk about managing covid-19, it was very much solely around none of us contemplated the level to which the government actions would take place. It was around managing when people were infected by the virus and how we handled that and that's where universities and as we talked about then our plan and what we did do in all those cases. We immediately worked with the university. We immediately worked for the local health department and follow the quarantine procedures to isolate and do that universities as they talk about fall Arthur's.

Thinking about maybe keeping certain facilities offline. Let's say those older traditional residence Halls that are more difficult for any cases of covid-19 Wrecker in the market to assist people in isolating the students as it occurs. And so it will be geared more toward the management of those incidents when and if they occur I mean certainly it is there there's nothing that we can do to you know, attorneys will be attorneys. And so certainly we are comfortable with how our lease is constructed and what the the decisions that students make is residence and we make it landlord.

That is what it is.

And how do you think about you know, you talked a little about how the dorm product on University campus relative to your modern student of Bill product. Have you found a university is willing to Master Lease a certain number of your beds to offset, you know their occupancy and their needs for social distancing and what percentage of the portfolio could that entail, you know, effectively a university Master leasing a certain portion of your beds. Yeah, that's something and William and his team that is their primary focus that we mentioned in the next 30 to 60 days as those conversations are taking place in that, you know right now, you know, a lot of the A's portfolio not a lot but you know a portion of the portfolio right now is already Mastered by universities. And so that is something that we do think is possible not just for our Ace Partners, but for you know, where we serve universities off-campus right? Yep.

And so it's certainly a possibility Michael that we think is I can't quantify it at this point in time, but we are having those conversations with institutions dead. Right? Yeah. I'm thinking more about your off-campus product than the university basically coming in and securing those doesn't sound like anything has been negotiated yet wage has not been negotiated yet. Again. They end us have just made our way through managing the early part of this crisis, but now with you know, most universities that formed they're reopening task forces and so is it working in concert with them to have those discussions and those conversations? I also in and certainly, you know, where the universities I think immediately are going to look to off-campus housing this may provide some alternative and hope again for multifamily and hotels that are right next to campus as universities look at exhausting off-campus housing and moving to the next step. They're needed.

Okay. Thanks for the time. You got it.

This will conclude today's question-and-answer session and I would like to turn it over to management for any closing remarks again. We would like to thank all of you for taking the time today. I know this was a long call in our remarks were especially long but we wanted to be as thorough and comprehensive because we could in helping you all understand the thought processes and the values that we are holding dear as we go through this crisis. Certainly we nor any company is isolated from the short-term Financial impacts associated with this crisis as you have seen and we would expect to continue while the crisis is he dead? We do believe however, there will be a moment in time whether it is the fall term or whether it's the spring term where we will have a return to normalcy. And as we stated we believe in coming out of that crisis, we will return to the position we have in the market and the Rapport that we have in the market with our partners and will be the same investment thesis that we uh,

Have had for the long term of being a company that is.

Session resilient and also offers great stability of cash flows. We will keep you up-to-speed as things emerged our next earnings call. Of course is toward the end of July. And at that point in time will have much greater color as a release relates to the decisions universities have made with regard to online education versus in Residence and will be much further along in our pre Lisa. We want to thank again our employees and our residents and their families and being patient and understanding is we all work through this together. Thank you so much.

Thank you for attending today's presentation. The conference is now concluded and you may now disconnect.