Q1 2008 AMERICAN CAMPUS COMMUNITIES INC Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day, ladies and gentlemen, and welcome to the First Quarter 2008 American Campus Communities, Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference.

(OPERATOR INSTRUCTIONS)

As a reminder this conference is being recorded for replay purposes. I will now turn your call over to Gina Cowart, Vice President of Investor Relations. Please proceed, ma'am.

GINA COWART, VP - IR, AMERICAN CAMPUS COMMUNITIES, INC.: Thank you, J.B. Good morning, and thank you for joining The American Campus Communities First Quarter 2008 Conference Call. The press release has furnished a form 8-K to provide access to the widest possible audience. In the release, the Company has reconciled the non-GAAP financial measures to those directly comparable GAAP measures in accordance with Reg. G requirements.

If you do not have a copy of the release, it is available on the Company's website at www.studenthousing.com in the Investor Relations section under Press Releases. Also posted on the Company website in the Investor Relations section under Supplemental Information, you will find a supplemental financial package. Additionally, we are hosting a live webcast for today's call, which you can access on the website with the replay available for one month. Our supplemental analyst package and our webcast presentation are one and the same. Webcast slides may be advanced by you to facilitate following along.

Management will be making forward-looking statements today through references to the disclosure in the press release on the website, with the slides, as well as SEC filings. Management would like to inform you that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995.

Although the Company believes the expectations reflected in any forward-looking 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. 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 all that, I would now like to introduce the members of management with us today -- Mr. Bill Bayless, Chief Executive Officer; Mr. Brian Nickel, Chief Investment Officer; and Mr. Jon Graf, Chief Financial Officer. And now I'll turn the call over to Mr. Bayless for his opening remarks.

BILL BAYLESS, CEO, AMERICAN CAMPUS COMMUNITIES, INC.: Thank you, Gina. Good morning, and thank you all for joining us as we discuss our operating and financial results for the first quarter of 2008. In addition to Brian Nickel and Jon Graf, I also have Greg Dowell, our Chief Operating Officer, with us today.

With that, let's begin. Our operational financial results met our internal expectations. If you turn to page five of our supplemental package, you'll see that our first quarter NOI for our same store wholly-owned properties increased 6.3% over Q1 of '07. This increase was driven by a 3.9% increase in revenues, while operating expenses increased by just eight-tenths of 1%.

As you can see on pages seven and eight of our supplemental, occupancy at our same store wholly-owned properties as of 3/31 was 96.9% compared to 97% for the same period prior-year. Our total owned property portfolio was 95.5% occupied at the end of the first quarter.

If you'll turn now to pages 9 through 11, we'll review the leasing status for the upcoming '08/'09 academic year. With 17 to 18 weeks remaining prior to the commencement of fall classes at our subject universities, our leasing velocity continues at a vibrant pace. As of April 25, our same store wholly-owned properties are currently 87% applied for and 82% pre-leased compared to 89% and 84%, respectively, for the same period a year ago. And our 2007 acquisition properties were running significantly ahead of last year, as we're currently 73% applied for and 67% leased compared to 58 and 57%, respectively, for the period one year ago.

Leasing is also well ahead of expectations at our owned development -- at our own development projects opening in the fall of 2008. Vista del Sol, our first owned ACE project at ASU, is 100% pre-leased with a significant wait list. In addition, the Villas at Chestnut Ridge in Amherst, New York is 90% pre-leased. Our combined total owned portfolio is currently 87% applied for and 81% pre-leased for the upcoming 2008/2009 academic year.

Our current rental rate increase for the same store property grouping stands at 3.8% through the current lease-up. However, given softness in several markets, especially Athens, Georgia and Fresno, California, where we just recently lowered rents, we could see the final rental rate increase for the same store property grouping in the area of 3.6%.

Our rental rate increase for our 2007 acquisition properties remains at approximately 1%, with an opportunity for significant revenue growth coming in the form of increased occupancy. Overall, our total owned portfolio has a current rental rate increase of 3.5%, and at this time, we would expect the final rental rate increase for the total portfolio to range from between 3.2% to 3.5%.

Turning now to the GCT transaction, over the last several weeks, Greg Dowell, seven members of our operational staff, and I have had the opportunity to visit all of the GCT wholly-owned and joint venture assets. We toured each property, interviewed staff and residents, and toured competitive properties.

In sharing our initial impressions from those visits, we believe there is significant opportunity for significant improvement in virtually every aspect of operations. We do believe that this year's term will require approximately $150 to $175 per bed to bring portfolio to our term standards and to fully impact resident retention and pricing power for the 2009 lease-up.

Beyond improved operational performance, we also believe there is a strategic opportunity to create additional significant NOI growth via the prudent investment of $30 million to $40 million in capital projects focused on changing the product position of many GCT assets.

The 2008/2009 academic year will be a transition period with vast improvement expected in the '09/'10 academic year. Bottom line, we're more bullish than ever on the transaction, and we believe that our strategies and operating platform will be effective in creating significant value for our shareholders. With that, I'd now like to turn it over to Brian.

BRIAN NICKEL, SENIOR EXECUTIVE VP, CIO, AMERICAN CAMPUS COMMUNITIES, INC.: Thanks, Bill. During the first …