CCG Reports 2Q13 FFOA of $0.19/Dil. Share

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CCG Reports 2Q13 FFOA of $0.19/Dil. Share

- Same Store Quarterly NOI Up 5.8% -
- Same Store Operating Margin Up 150bps to 53.5% -
- Same Store Rental RevPOB Up 1.7% -
- Leasing of 84.4% at All Grove and Copper Beech Properties -
- 90bps Y-o-Y Leasing Spread at 32 Wholly-Owned, Up 50bps from June NAREIT -
- Acquisition of Hotel in Montréal for Conversion to Upscale Student Housing Tower -


CHARLOTTE, N.C.--(BUSINESS WIRE)-- Campus Crest Communities, Inc. (NYS: CCG) (the "Company"), a leading developer, builder, owner and manager of high-quality student housing properties, today announced results for the three and six months ended June 30, 2013.

Highlights

Operations

  • $0.19 Funds From Operations Adjusted ("FFOA") per diluted share for the quarter
  • Solid gains in quarterly wholly-owned same store results:
    • 5.8% increase in quarterly Net Operating Income ("NOI")
    • 90 basis point increase in average quarterly occupancy to 91.0%
    • 1.7% increase in rental revenue per occupied bed ("RevPOB")
    • 5.3% increase in services RevPOB
    • 150 basis point increase in operating margin
  • 32.0% increase in quarterly student housing rental and services revenue helping drive a 270 basis point margin expansion to 54.7%
  • 84.4% pre-leased at all Grove and Copper Beech properties for the 2013/2014 academic year as of July 28, 2013
    • 82.9% pre-leased across our Grove portfolio up 50 basis points
    • 35-property Copper Beech portfolio was 86.6% pre-leased

Growth

  • Announced selection of CCG by Beaumont Partners to be a partner in a venture that acquired the 711 room, 33-story Delta Centre-Ville Hotel in downtown Montréal, Québec for C$60.0 million
    • Partnership intends to convert it into an upscale student housing tower serving a market of nearly 200,000 students to open for the 2014/2015 academic year
  • 6 new Grove properties and phase II of The Grove at Flagstaff are on-schedule for opening in 2013/2014 academic year1
  • Continued progress on projects for 2014/2015 academic year delivery with a solid pipeline:
    • Two Grove joint venture properties - The Grove at Greensboro and The Grove at Louisville
    • The Grove at Cira Centre South - urban market concept in Philadelphia
  • Commencement of two new Grove wholly-owned properties - The Grove at Slippery Rock and The Grove at Grand Forks - for 2014/2015 academic year delivery with a total cost of $58.1 million

Financial Results for the Three and Six Months Ended June 30, 2013

For the three and six months ended June 30, 2013, Funds From Operations ("FFO") and FFOA are shown in the table below.

FFO/FFOA   
Three Months Ended June 30,

Per share -

Per share -

($mm, except per share)  2013 

diluted

 2012

diluted

FFO$12.8$0.20$5.6$0.18
Write-Off of Unamortized Deferred Financing Fees----
Elimination of transactions costs0.20.00--
Elimination of FV adjustment of CB debt(0.8)(0.01)--
FFOA$12.2 $0.19 $5.6$0.18
        
 
Six Months Ended June 30,

Per share -

Per share -

($mm, except per share)  2013 

diluted

 2012

diluted

FFO$20.9$0.38$10.2$0.33
Write-Off of Unamortized Deferred Financing Fees--1.00.03
Elimination of transactions costs0.60.01--
Elimination of FV adjustment of CB debt(0.9)(0.02)--
FFOA$20.6 $0.37 $11.2$0.36

 

A reconciliation of net income attributable to common stockholders to FFO and FFOA can be found at the end of this release.

For the three months ended June 30, 2013, the Company reported total revenues of $38.9 million and net income attributable to common stockholders of $2.8 million, compared to $35.4 million and $(0.7) million, respectively, in the same period in 2012. For the six months ended June 30, 2013, the Company reported total revenues of $74.2 million and net income attributable to common stockholders of $3.8 million, compared to $68.3 million and $(2.3) million, respectively, in the same period in 2012.

"This has been another solid quarter, as our teams continue to benefit from investments we have made in our people, systems and practices. Our same store properties continue to show positive gains in occupancy, revenue and expense management, while leasing across the portfolio is up over the prior year," commented Ted W. Rollins, Co-Chairman and Chief Executive Officer of Campus Crest. "Additionally, we are excited to have closed our first full quarter with Copper Beech as part of the team and to be selected as the partner of choice for a leading international investment group on our Canadian JV. Our pipeline of new properties remains strong, and we look forward to deploying our multi-brand strategy across the U.S. while strengthening operations and continuing to proactively manage our balance sheet."

Operating Results

For the three and six months ended June 30, 2013, results for wholly-owned same store properties were as follows:

Same Store Results        
Three Months Ended June 30,Six Months Ended June 30,
($mm) 2013 2012 Change   2013 2012 Change
 
Number of Assets27272727
Number of Beds13,88413,88413,88413,884
Occupancy91.0%90.1%90 bps91.4%90.1%130 bps
Total Revenues$19.1$18.62.8%$38.1$37.22.5%
NOI$10.2$9.75.8%$20.4$19.73.7%
NOI Margin 53.5% 52.0% 150 bps   53.6% 52.9% 70 bps
 

The improvement in same-store NOI for three and six months was driven by higher RevPOB, increased occupancy and expense management.

NOI margin is calculated by dividing NOI for the period by total student housing rental and services revenues for the period. A reconciliation of net income attributable to common stockholders to NOI can be found at the end of this release. In addition, details regarding same store NOI and calculations thereof may be found in the Supplemental Analyst Package.

Portfolio & Leasing Update

As of June 30, 2013, the Company owned interests in 86 properties totaling 45,205 beds across the United States. Approximately 62% of the beds are branded The Grove, while 37% are branded Copper Beech. The remaining 1% of beds is a 629-bed redevelopment at the University of Toledo that will remain operational for the 2012/2013 academic year, and the Company expects to begin renovations during the 2013/2014 academic year.

The portfolio overview and the 2012/2013 academic year occupancy status as of June 30, 2013 are outlined in the table below. In addition, the table includes 2013/2014 academic year pre-leasing.

Portfolio Overview     

# of

Pre-leasingOccupancy
Property 

Properties

 Units Beds 07/28/13 07/28/12  06/30/13 06/30/12 
 
Total Operatng Wholly-Owned1326,24816,93686.0%85.1%91.9%91.5%
 
Total Operating Joint Venture71,4223,94874.6%70.6%77.8%82.1%
 
Wholly-Owned - 2013 Deliveries2, 337041,97283.9%n/an/an/a
Joint Venture - 2013 Deliveries3 664 1,784 70.9%n/a  n/a n/a 
Total 2013 Deliveries61,3683,75677.7%n/an/an/a
             
Total Grove Leasing Portfolio 45 9,038 24,640 82.9%82.4% 89.2%90.3%
 
Toledo, OH Redevelopment4138262935.6%n/a65.2%n/a
 
Total Copper Beech356,24216,64586.6%n/a96.4%n/a
             
Total Leasing Portfolio 81 15,662 41,914 83.8%82.4% 91.9%90.3%
 
Total 2014 Deliveries51,2373,291n/an/an/an/a
             
Total Portfolio 86 16,899 45,205 83.8%82.4% 91.9%90.3%
             
Total Grove and Copper Beech Portfolio (excl. 2014 deliveries) 80 15,280 41,285 84.4%82.4% 92.4%90.3%
 
Note: Excludes the acquisition in Montréal, Québec, which occurred in July 2013.
1 Includes The Grove at Nacogdoches - Phase II.
2 Includes The Grove at Flagstaff - Phase II.
3 On July 14, 2013, there was a fire at The Grove at Pullman, WA. The Company is still working with local authorities, the university, and its insurance provider in evaluating the situation.
4 As part of the initial renovation plan, one building comprised of 121 beds will be removed. These 121 beds are not being pre-leased for the 2013/2014 academic year. The Company will give a further update on the renovation plan in the 2013/2014 academic year.
 
  • All 50 Grove properties were built, renovated or are being built by the Company or its predecessor. The median distance to campus of the portfolio is 0.5 miles with an average age of 3.0 years as of June 30, 2013.
  • The redevelopment property is located adjacent to the University of Toledo campus and was acquired by the Company in March 2013.
  • 30 of 35 Copper Beech properties were built, renovated or are being built by Copper Beech. The median distance to campus of the portfolio is 1.2 miles with an average age of 7.5 years as of June 30, 2013.

In the early morning of July 14, 2013, The Company experienced a fire at its development at The Grove at Pullman. The Company is currently in the process of assessing the financial impact of this event. While no assurances can be given, after taking into account our existing insurance coverage, we believe that the damages sustained as a result of this fire will not have a material adverse effect on our financial position or results of operations. Further discussion of the fire at The Grove at Pullman, WA will occur on the earnings call.

Development and Acquisition Activity

Wholly-Owned and Joint Venture Development

The Company continues to maintain an active pipeline of development opportunities. It currently is conducting due diligence in approximately 80 markets, with land identified and under letter of intent or contract in approximately 30 of these markets for either a Grove or Copper Beech project. At an approximate cost of $25 million per project, this represents a total pipeline under control of approximately $750 million.

2013/2014 Academic Year Deliveries - The Grove

The Company is scheduled to deliver six 2013/2014 academic year Grove-branded projects and an expansion at The Grove at Flagstaff in the third quarter of 2013. Total estimated costs for these developments are approximately $184.7 million. These investments are split between wholly-owned and joint ventures with Harrison Street Real Estate Capital ("HSRE") as follows:

  • 3 wholly-owned projects and a Flagstaff phase II expansion with total estimated project costs of approximately $101.5 million
  • 3 joint venture projects with total estimated project costs of $83.2 million. The Company will own 20.0% of the joint venture projects being developed, with HSRE owning the balance

2014/2015 Academic Year Deliveries - The Grove

In the first quarter, the Company announced the commencement of construction of two joint venture projects with HSRE at the University of North Carolina at the Greensboro and University of Louisville. The two projects are scheduled for delivery for the 2014/2015 academic year and have total estimated project costs of $65.6 million. The Company will own 30.0% of the two assets.

During the quarter ended June 30, 2013, the Company also commenced construction of two wholly-owned projects at Slippery Rock University and the University of North Dakota. The project is scheduled for delivery for the 2014/2015 academic year and has a total estimated project cost of $29.9 million and $28.2 million, respectively. Select highlights for the projects include:

  • In close proximity to Slippery Rock University of Pennsylvania, this large, rolling 30-acre site will include a unique mixture of two-story buildings, three-story buildings and townhomes. In addition, a new cottage-style leasing office will be constructed which will later be converted into the permanent onsite management residence. In total, the project will include 603 beds.
  • Ideally situated adjacent to campus, and directly across from the campus golf course, the site is conveniently located to both the University of North Dakota and the Alerus Center. Residents can travel to campus via South 42nd Street or by means of a bike/walking trail. The three-story prototype will include 600 beds. The Grove will be the first purpose-built student housing community in Grand Forks.

The Company's joint venture partnership with Brandywine Realty Trust and HSRE continues to make progress on the development of the 33-story, 850-bed student housing tower, The Grove at Cira Centre South, on a site leased from the University of Pennsylvania. Campus Crest and Brandywine each own 30.0% of the joint venture, while HSRE owns 40.0%. Construction commenced in January with a targeted completion date for fall 2014; leasing is expected to begin in fall 2013.

Details of the Company's Grove-branded developments are as follows:

2013/2014 Academic Year Deliveries
ProjectPrimary University Served

Total
Enrollment1

Miles to
Campus

Units

Total
Beds

Est. Cost ($mm)

Wholly-Owned

 

The Grove at Ft. CollinsColorado State University26,769

On Campus

218612$32.9
 
The Grove at MuncieBall State University17,8510.121658425.3
 
The Grove at Pullman4Washington State University19,9890.021658430.4
 
The Grove at Flagstaff - Phase IINorthern Arizona University18,2920.25419212.8
       
Average/Median/Sub Total220,7250.07041,972$101.4
 

Joint Venture3

The Grove at IndianaIndiana University of Pennsylvania15,3790.6224600$27.6
 
The Grove at NormanUniversity of Oklahoma24,1440.622460027.0
 
The Grove at State CollegePenn State University44,679
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