American Campus Banks On Development Pipeline For Growth

Student Housing REIT American Campus Communities (NYSE:ACC) is anticipated to ride the growth curve driven by its superior development pipeline. In fact, in a recent video interview at REITworld 2017 with Nareit, the company’s CEO and co-founder — Bill Bayless — noted that the company is giving utmost priority to development activities.

The company has a robust development pipeline that aggregates approximately $2 billion through 2019. The company has been a net buyer of student housing in the current year. It acquired around $800 million worth of assets in total, of which $591 million marks the buyout of a portfolio from affiliates of Core Spaces and DRW Real Estate Investments, according to Bayless.

These acquisitions are in sync with the company’s strategy, and help it fortify presence in its current markets and also in Seattle. The developments and acquisitions are situated on or near to tier one universities. These are also anticipated to be conducive to earnings growth.

This reputed owner, manager and developer of high-quality student housing communities in the United States has a total managed portfolio of 204 properties with approximately 131,300 beds. The company has achieved 12 consecutive years of internal growth in same-store rental rate, rental revenues, and net operating income, as well as 51 consecutive quarters of same-store revenue growth.

Unlike residential REITs, including AvalonBay Communities, Inc. (NYSE:AVB) and Equity Residential (NYSE:EQR) , rental units of which are open for leasing to all, student housing REITs like American Campus Communities and Education Realty Trust (NYSE:EDR) , which is better known as EdR, lease their real estates to students. Hence, such real estates are generally required to be set up within or in places close to colleges and universities. Also, enrolment growth is a major driver for student housing assets.

Moreover, with a $24,000 salary differential between college graduates and high-school graduates, college enrolment is set to increase and this will drive demand for residential units that are leased by student housing REITs. Also, there is pent-up demand for new, purpose-built student housing properties which have better amenities than old, outdated housing. Further, supply remains manageable.

Apart from these, student housing REITs have decent opportunities to excel in the coming years as demand is emanating for on-campus developments from universities that are facing state budget cuts and low funds, and are incapable of developing or renovating the aging housing properties. And on-campus housing usually enjoys full occupancy.

Shares of American Campus Communities have outperformed the industry it belongs to, in the past month. This Zacks Rank #3 (Hold) company’s shares have inched up 1.7%, while the industry has incurred loss of 2.9% during the same time period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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