American Campus Communities Inc

Good day and welcome to the American Campus Community's Q1 2021 Earnings Conference Call. All participants will be in 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 questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question from the queue, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Ryan Dennison, Senior Vice President of Capital Markets and Investor Relations for American Campus Communities. Please go ahead.

Thank you. Good morning and thank you for joining the American Campus Communities 2021 First Quarter Conference Call. The press release was furnished on Form 8K 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. Also posted on the company website in the investor relations section, you will find an earnings materials package which includes both the press release and a supplemental financial package. We are hosting a live webcast for today's call which you can access on the website with the replay available for one month. Our supplemental analyst package 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 as referenced in the disclosure in the press release, in the supplemental financial package, and in SEC filings. Management would like to inform you that certain statements made during this conference call which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 as amended by the Private Securities and 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 that, our Chief Executive Officer, Bill Bayless, will be providing our opening comments today. He's joined by the following members of senior management for the call. Jim Hopke, President. Jennifer Beas, Chief Operating Officer. William Talbot, Chief Investment Officer. Daniel Perry, Chief Financial Officer. Kim Voss, Chief Accounting Officer. And 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 2021 Q1 results and evolving operating environment. As we commented last quarter, 2021 will be a year of transition on the path back to normalcy. And as overviewed in our release last night, we're off to a good start. The results for the quarter exceeded our expectations at the property level and for the company overall, with NOI and earnings per share beating our projections in Q1. And operationally, we continued to see stability this quarter. Collection rates for the first quarter were 97.3%, consistent with the fourth quarter of 2020. Requests for assistance under our resident hardship program continued to decrease. totaling only $750,000 for the quarter. Student requests for refunds at on-campus communities also continue to decrease, with refunds only being provided at one university totaling a net refund of just $1.3 million this quarter. We expect the need for refunds to continue to decline through the remainder of the current academic year and do not expect refunds to continue into the new academic year this fall. Increased spring leasing and less seasonal attrition led to the lowest reduction in fall to spring occupancy that we have seen in recent years, another positive sign of improving consumer sentiment. We're also pleased with our ability to continue to control operating expense growth, despite the impacts this quarter of the extreme ice storms in February, which resulted in over $800,000 net of insurance proceeds in repairs and maintenance costs. and increased utility expenses in Texas, Oklahoma, and other affected states. Turning to pre-leasing for the 2021-22 academic year, as we mentioned last quarter, and consistent with what has been reported by our private peers and in third-party market research, pre-leasing across the industry continues to lag behind the traditional pre-COVID pace. However, as we anticipated, we have begun to see significant acceleration in weekly pre-leasing velocity compared to the prior year, now that we are into the leasing period when activity slowed dramatically early in the pandemic last year. Since March 12th, our weekly velocity of applications, renewals, and new leases are running approximately two and a half times the same period prior year. With a significant amount of leasing left to do before the next academic year begins, we'll continue to utilize our proprietary LAMS platform in an attempt to maximize rental revenue. On our next earnings call in July, we should be in a position to disclose a more meaningful leasing comparison to the prior year, and at that time give an early indication as to where our final occupancy may be. While we remain cautiously optimistic that we will experience increased occupancy levels for fall of 2021 over the prior year, We continue to believe that we will not fully return to historic occupancy levels this fall, and at this time, the range of final fall occupancy and overall financial outcomes is still too wide for us to provide full-year earnings guidance with a reasonable and useful range. As such, at this time, we're providing guidance for the next quarter. We do want to thank the analyst community. for their efforts since our request on last quarter's call to better incorporate the seasonality of our business into their quarterly estimates, despite what is obviously a very difficult environment in which to project earnings. With regard to our Disney College program development, as some of you may be aware, on their last earnings call, Disney CEO Bob Chapek commented that they have been very pleased with future park bookings. And at their recent annual shareholder meeting, he conveyed that the Disney College program is a tremendous asset and that they are hopeful that the program will be back in business by the end of the year. Based on these public comments and our ongoing conversation with Walt Disney World Management, we now believe that once the college program is reinstated, that the ramp-up in occupancy may well occur at a pace that ultimately allows us to meet our targeted stabilized yield of 6.8% by May of 2023, as originally anticipated prior to the COVID pandemic. We will, of course, provide additional updates as Disney plans for resumption of the program continue to develop. Turning to on-campus P3 opportunities, We are seeing early signs of university administrations beginning to focus their efforts on the future modernization of on-campus housing post-COVID. During the first quarter, we were awarded a new project to renovate Kelly Hall, a 1960s era community bath residence hall located at Drexel University. And we commenced construction on another third party project at Concordia University. We continue to believe that both ACE and third-party on-campus development opportunities may well be greater in a post-COVID environment as universities prioritize their limited capital on academic and research infrastructure and as older community bath residence halls are taken out of service given the negative consumer sentiment and economic impacts of de-densification during the COVID pandemic. I'd like to congratulate the ACC team for two National Development Awards this quarter. First, our Leadership in Sustainable Development was recognized by the National Association of Home Builders with the Pillar of the Industry Award for the Best Green Market Rate Multifamily Community for our development of Plaza Verde at UC Irvine. This was not a student housing specific award, but rather was selected from among all multifamily developments nationally. Also, in the student housing category, the academic and residential complex that we developed on the campus of the University of Illinois at Chicago received the Pillar of the Industry Award for the best on-campus student housing community. Lastly, I'm proud to announce that we recently published our 2020 ESG report, which can be found at esg.americancampus.com. We have always attempted to positively impact the lives of our residents. from fostering academic achievement to nurturing health and wellness. In 2020, we took great care in making our communities a haven of well-being during these challenging times. As outlined in the report, ACC earned a LEED Platinum certification for Lightview at Northeastern University in Boston. This is the company's 38th project that has earned or is tracking LEED certification. In addition, The company completed its first greenhouse gas emissions inventory to inform future target setting, and we entered into renewable energy contracts at six communities for a projected 11.4 million kilowatts annually. Additionally, the company published employee demographic data demonstrating our commitment to diversity and inclusion, with over half of our team members being female and over half of our team members being minorities. We're very proud of our efforts to bring value to all stakeholders and look forward to what the future holds for our company. With that, I'd like to turn it back over to the operator to start the question and answer portion of the call.