This month, just as it has every August for the past 15 years, American Campus Communities (ACC) will open its doors to welcome eager young college students ready to settle in for the new school year. But this year, the Austin, Texas-based REIT has a great many more doors to open, thanks to the firm's recently completed acquisition of Newtown Square, Pa.-based GMH Communities Trust.

With the close of the GMH acquisition in June 2008, ACC now owns 88 student housing properties containing roughly 54,300 beds, an increase in bed count of more than 90 percent. The REIT also owns a minority interest in 21 joint-venture properties containing 12,100 beds and third-party manages thousands more beds. All told, ACC's portfolio consists of 145 properties under management with about 92,000 beds in 93 college markets. (The GMH portfolio expanded the REIT's reach into 41 new markets.)

Such heft was believed by many to guarantee the REIT's success in a tough economy. After all, the acquisition cemented ACCs position as the nation's leading student housing company. Today, the firm's total market capitalization is $2.5 billion. That's nearly seven times the $373 million market cap of its next largest public competitor, Memphis, Tenn.-based Education Realty Trust.

Yet, at first, Wall Street wasn't sure the deal would close in light of uncertainty in the capital markets. They were wrong. —ACC has delivered what they promised to the market in terms of growth and execution—their track record has been good, and they've been good managers of both capital and the capital markets by getting the GMH deal done in a difficult capital market,— says Jordan Sadler, managing director of real estate equity research for Cleveland, Ohio-based KeyBanc Capital Markets. —But it's going to be a significant challenge to integrate that deal over the next 12 to 18 months.—

Indeed, the months ahead will require a significant level of energy and expertise as ACC works to integrate the GMH portfolio into its own. This challenge comes at a time when the REIT is aggressively trying to grow its ACE program—an initiative launched in 2005 that allows the REIT to develop on-campus facilities with its own equity through ground leases with universities. And to top it off, the company will need to continue to manage its own properties and take care of its third-party management and development clients.

Navigating the company through the fray is president and CEO Bill Bayless. —We have three main objectives: We need to successfully integrate the GMH portfolio; we need to drive our ACE program; and we need to continue to manage our balance sheet,—Bayless says.—We need to take care of what's on our plate, and GMH and ACE are our top priorities.—


Thankfully, the company has some experience managing its growing pains. While ACC's size doubled with the GMH acquisition, ACC has experienced a number of expansions since its predecessor company, American Campus Lifestyles Cos. (ACLC), was launched in 1993.

Bayless, who got his start in the student housing industry as a resident assistant at a West Virginia University dorm, founded ACLC after hooking up with student housing investors Joseph Domberger and Wayne Senecal. Their goal? To take over the management contract for the University of Texas' Dobie Center, a large dormitory near the Austin campus that the trio came across in 1993..

While renovating Dobie Center, ACLC identified other projects and quickly added Langston University in Langston, Okla., and Florida State University as clients. Just two years later, the company, which focused exclusively on third-party management of these student housing properties, expanded its operating platform to include development.

Their first client was Prairie View A&M University in Prairie View, Texas, for which ACLC built the 672-bed University Village. When the project opened in 1996, it was fully occupied and had a waiting list of more than 400 students. As such, the work began rolling in.

Within a year, ACLC decided to bring on New York City-based Reckson Partners as a majority partner. With Reckson's backing, the firm could ramp up its activities, acquiring existing student housing assets and developing new student housing properties off-campus. Soon after announcing the partnership, in 1997, ACLC changed its name to American Campus Communities, and for the next seven years, the company focused on acquisitions and off-campus development.

From 1997 to early 2004, ACC purchased student housing properties at the University of Central Florida, Arizona State University, and the University of Georgia, and developed properties at Texas A&M University, the University of Colorado, and the University of California, Irvine. Then, in 2004, ACC—frustrated with struggling to access capital as a private company and having to pay through the nose for that capital?went public as the nation's first student housing REIT. Prior to the company's IPO, its weighted cost of capital was in the double-digit range, Bayless says.

With its IPO, ACC introduced Wall Street to the challenges and opportunities of student housing. While most institutional investors considered student housing a niche play, confusing student housing with traditional multifamily, they soon learned that student housing properties are leased by the bed, not by the unit. What's more, leasing, make-ready, and move-in/move-out dates are all determined by the academic calendar, which means these activities occur within very tight time frames.

Since ACC's IPO, the REIT has generated—excellent and steady— growth in funds for operations (FFO) and net operating income (NOI), according to Karin Ford, a REIT analyst with KeyBanc Capital Markets. As of February 2008, ACC had posted a total return of 95.1 percent, according to SNL Financial; Education Realty Trust, on the other hand, recorded a total return of -11.7 percent.

Last year, ACC's total revenue was $147.1 million, up nearly 24 percent from $119 million in 2006. Moreover, the REIT increased NOI for same-store owned off-campus properties by 4.8 percent over 2006; occupancy levels at those properties hovered at 97.9 percent by year-end 2007.