American Campus Communities to Shell Out $348.9M for 14 Student Housing Properties

The properties, which encompass an aggregate 8,534 beds, do not come unencumbered; the price tag includes $252.2 million in existing debt.

June 8, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user shonk

Austin, Tex.-headquartered American Campus Communities has decided to increase its 10 percent joint venture interest in a group of 14 student housing assets with the $348.9 million acquisition of the remaining 90 percent interest from two separate institutional funds managed by Boston-based Fidelity Real Estate Group. The properties, which encompass an aggregate 8,534 beds, do not come unencumbered; the price tag includes $252.2 million in existing debt.

The mortgage loan that ACC will assume in the deal comes with a weighted average interest rate of 5.85 percent, and is scheduled to mature in three-and-a-half years. ACC and Fidelity are relatively new owners of the 14 assets. In 2008, ACC made a $326 million joint venture contribution of 15 student housing properties that had been part of the portfolio of GMH Communities Trust, which ACC had just acquired in a $1.4 billion merger. The joint venture’s portfolio has since changed. At the close of 2009, it consisted of 20 assets, and prior to the new agreement, it encompassed 16 assets. Alas, ACC’s impending acquisition of Fidelity’s 90 percent stake in 14 of the 16 assets does not mark the end of the joint venture; ACC will continue to own 10 percent of the remaining two housing communities.

Sales volume in the student housing sector, as is the case in every other commercial real estate sector, has plummeted since 2007’s transaction frenzy, but signs of a turnaround have emerged. According to a recent U.S. Capital Trends report by global commercial real estate research and consulting firm Real Capital Analytics, in the fourth quarter of 2009, student housing sales skyrocketed 131 percent from the third quarter of 2009, reaching $119 million. However, the total is still 26 percent lower than sales volume in the fourth quarter of 2008.

So far this year, student housing transaction activity has been anything but rare. In May alone, deals included Place/BV Student Housing Fund L.L.C.’s purchase of Stadium View Student apartments, a 956-bed high-rise community near the University of Minnesota in Minneapolis, and Kayne Anderson Real Estate Partners I L.P.’s investment in a student housing property near the University of Louisville and another near Texas Tech University for a total of 1,420 beds.

And there’s more activity on the horizon for ACC. During the REIT’s first quarter earnings call in late April, William Talbot, ACC Senior Vice President-Investments, said, “Currently, we are underwriting an excess of $500 million worth of acquisition properties, including both marketed opportunity and direct negotiation, including distressed opportunities directly from the bank.”

ACC’s transaction with Fidelity is on track to close during the third quarter.