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American Campus Communities, Inc. (NYSE:ACC)

Q4 2012 Earnings Conference Call

February 13, 2013 11:00 ET

Executives

Gina Cowart - Vice President

Bill Bayless - Chief Executive Officer

Greg Dowell - Chief Operating Officer

William Talbot - Chief Investment Officer

Jamie Wilhelm - Executive Vice President, Public-Private Partnerships

Jon Graf - Chief Financial Officer

Daniel Perry - Executive Vice President, Capital Markets

Analysts

Alex Goldfarb - Sandler O’Neill

Jana Galan - Bank of America

Derek Bower - UBS

Eric Wolfe - Citi

Matt Rand - Goldman Sachs

Ryan Meliker - MLV & Company

Paula Poskon - Robert W. Baird

Karin Ford - KeyBanc Capital

Ross Nussbaum - UBS

Operator

Good morning and welcome to the American Campus Communities Fourth Quarter 2012 Earnings Conference Call and Webcast. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Ms. Gina Cowart, Vice President. Please go ahead.

Gina Cowart - Vice President

Thank you, Sue. Good morning and thank you for joining the American Campus Communities 2012 fourth quarter and year end conference call. The press release was furnished on 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 don’t have a copy of the release, it’s available on the company’s website at americancampus.com in the Investor Relations section under Press Releases.

Also posted on the company website in the Investor Relations section, you will find a supplemental financial package. We are also 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, the references to the disclosure in the press release on the website with the slides and SEC filings. Management would like to inform you that certain statements made during this conference call, which are not historical facts maybe 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 the 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’d now like to turn the call over to Bill Bayless, Chief Executive Officer for his opening remarks.

Bill Bayless - Chief Executive Officer

Thank you, Gina. Good morning and thank you all for joining us as we discuss the fourth quarter of 2012 and also kickoff 2013 with our first earnings call. You may have noticed in the corner of the press release that this year we have a special anniversary logo and then it was 20 years ago this October that we actually formed American Campus with four corporate employees and one third-party management contract. At that time, we set off on a quest and a goal to be the premier company in the student housing space. And as we continue on that quest, certainly 2012 was a very important and fantastic year for the company along that mission, $2.2 billion in asset growth with 51 properties representing over 30,000 beds, industry leading occupancy in our same-store portfolio, and also setting the stage for significant quality growth in the future and beyond.

As we approach 2013, certainly the most meaningful celebration of our anniversary can hopefully be the continued execution of our strategic plan and meeting the expectations of the company and the market. In discussing that today, Greg Dowell, our Chief Operating Officer will review our operational results and our leasing status; William Talbot, our Chief Investment Officer will give an overview of our investment activity, Jamie Wilhelm, our EVP of Public-Private Partnerships will discuss our on-campus activities related to ACE investment and third-party development, and Jon Graf, our CFO will review our financial results and our guidance. We’ll then open it up for question-and-answer which Daniel Perry and I will lead.

With that, I will turn it over to Mr. Dowell.

Greg Dowell - Chief Operating Officer

Thanks Bill. We are pleased to once again report consistent, meaningful growth in both our Q4 and full year 2012 results, while also laying the ground work for continued value creation by completing the initial integration of the 2012 acquisition properties.

If you turn to page five of the supplemental package, you will see that our fourth quarter same store NOI increased by 2.5% over Q4 2011. This was the result of a 2.4% increase in revenue and an increase in about – operating expenses of 2.2%. These results are somewhat adversely impacted by the increase in property taxes at our 2011 development properties. Development properties are not fully assessed on the property tax rolls until their first whole calendar year of operation. These properties become part of same store grouping in the fourth quarter of their first full calendar year of operation and thus dilute the company’s same store NOI growth in that quarter. When excluding this increase in property taxes on the 2011 fall development properties, our quarterly same store expenses increased by only 1.6% and our quarterly same store NOI increased by 3%. You will also see that our full year same store NOI growth was 3.4%, as a result of a 2.7% increase in revenues, and a 1.8% increase in expenses.

It’s worth noting that since our IPO in 2004 this is our eighth straight year of positive annual same store NOI growth. As you can see on page eight of the supplemental occupancy at our total wholly owned portfolio with 96.4% as in December 31, with the same store wholly owned properties reporting 97.4%, compared to 98.1% for the same date prior year. We expect to achieve same store NOI growth for the next three quarters in the range of 3% to 5%.

If you turn to page nine of the supplemental, we will review our leasing progress for the upcoming 2013-2014 academic year. As of Friday, February 8, 2013, our total same store wholly owned portfolio was 47.7% applied for and 43.3% leased compared to 53.7% applied for and 46.4% leased for the same date prior year. Our 2013 Q4 same store portfolio currently has a projected rental rate increase for the 2013-2014 academic year of 2.1%. We are targeting 230 to 400 basis points of rental revenue growth for the 2013-2014 academic year. As we move through the leasing season we will utilize our lamp system to maximize revenue via the proper combination of rental rate and occupancy.

We are pleased to see that our developments being delivered for the occupancy in fall 2013 have been very well received in their respective markets. You will see on page 15 of the supplemental that these assets are 66.3% leased with five of our new development properties already over 96% pre-leased. You may note that the Manzanita and University View developments are currently showing 0% leased. Both properties are awaiting the beginning of the on-campus leasing and assignment process of their respective universities. We expect our combined 2013 own development deliveries to reach 95% or greater cumulative occupancy in fall 2013.

And now I will turn the call over to William to discuss our investment activities.

William Talbot - Chief Investment Officer

Thanks Greg. 2012 was the most active year in the company’s history in terms of external growth. Between acquisitions and own development the company added 51 properties totaling over 30,000 beds and $2.2 billion in total cost. The average age of these growth assets is under four years old. And the average distance to campus is 0.4 miles all characteristics that meet our disciplined investment criteria.

On November 30th, the company completed the acquisition of the 19th property 12,049 bed Kayne Anderson Portfolio for $863 million including the assumption of $396 million in outstanding debt. 74% of the portfolio is located within 0.5 mile to campus and 88% of the NOI is derived from assets build within the last four years. The portfolio is managed by six different third party managers, and is currently 93% occupied offering significant upside through occupancy and revenue gains in addition to efficiency through a management and operating platforms and programs.

Included within the portfolio is the pre-fill acquisition of 366 bed second phase of the largest of East Lansing in Michigan for a purchase price of $32.3 million of which $8.3 million was funded at closing of the existing portfolio, and the remainder be funded at completion in third quarter 2013. After the investment of $12.3 million in upfront capital, we are targeting a total portfolio year one cap rate of 6% nominal and 5.7% economic. However, after only approximately 4.5 months of revenue for the second phase of East Lansing Phase 2, and non-cash GAAP adjustment, the total calendar year 2013 contribution for the portfolio equates 5.7 nominal cap rate on the total investments including upfront capital. We continue to target a stabilize year three cap of 6.7% nominal and 6.3% economic. Also in the fourth quarter, we closed on the $31.1 million acquisition of University Edge, a 608 bed property adjacent to the campus of Kent State University. That was part of our mezzanine investment presale program.

The asset is currently 90% occupied with the first year projected cap rate of 6.4% nominal and 6% economic. The asset is already 95% leased for academic year 2013-‘14 and us expected to achieve a stabilized year two cap rate of 7% nominal and 6.6% economic. We will continue to make progress on our other mezzanine investment and presale acquisition opportunity at Townhomes, at Newtown Crossing that serves student attending the University of Kentucky. The 608 bed property which is managed and leased by ACC, it’s currently 97% leased for academic year ’13-‘14 and is expected to achieve an initial nominal yield at 7%. ACC intends to inquire to property for $38.8 million after completion in the third quarter of 2013.

Turning now to owned development, we continue to make progress on our fall 2013 deliveries. The seven development projects totaling $303 million contain 3945 beds and average one-tenth of a mile to campus. The 2013 deliveries are evenly diversified between are on and off-campus owned projects with three of these seven opportunities as based own on-campus developments totaling $163.5 million and over 2000 beds. And four off-campus owned development totaling over 1900 and $139.5 million. We are targeting a 7% yield on all seven 2013 owned deliveries. With regards to our development pipeline, we broke ground on our $112 million development adjacent to the University of Central Florida in Orlando at the end of 2012.

And predevelopment activities are ongoing for second phase in Kennesaw, but these assets are expected to be delivered in fall 2014 at an initial yield of 7%. In addition, we have four ACE developments in the pipeline that Jamie will discuss. With regards to dispositions the company currently has four assets under contract for sale totaling 2,841 beds and $137 million in gross proceeds with a targeted late second quarter close subject to the financing contingency. The properties currently have approximately $18.8 million in outstanding mortgage debt. We have also just began the marketing of six assets for potential sale, totaling 3174 beds and are targeting total dispositions for 2012 between $100 million and $250 million. We will update the market on our progress in these areas during the next quarter earnings call.

With that I’ll now turn it over Jamie discuss on our on-campus development.

Jamie Wilhelm - Executive Vice President, Public-Private Partnerships

Thanks William. During the quarter, we continued on with development and construction management activities for our on-campus developments. We also remained focused on qualifying new equity based on-campus investment opportunities by our American Campus Equity purchase program and pursuing additional third-party development engagements. With regard to our earned ACE developments, during the quarter the company continued to make progress on all of our fall 2013 deliveries. Our ACE developments at Drexel University, the Chestnut Square project, the Arizona State University Manzanita Hall redevelopment project and the Prairie View A&M University project remain on-time and on-budget.

We continue to target first two yields 7% with use of these projects. Our fall 2014 and 2015 ACE delivery pipeline continues to develop and gain momentum. Our previously announced project at Texas A&M University in College Station remains on schedule predevelopment activities for the 784 bed, $36.3 million community our ongoing and we expect to commence construction in the second quarter of 2013 for a fall 2014 delivery. Additionally, during the quarter American Campus was awarded of second ACE development on the campus of Drexel University in Philadelphia, Pennsylvania.

The proposed 1316 bed project has an estimated total development cost of $168 million and will include both suite and apartment style accommodation. The mix used building will include ground floor retail, a dining facility and over 20,000 square feet student amenity space. Construction commencement is anticipated during the third quarter of 2013 with occupancy expected for fall 2015. Also during the quarter, the company executed a letter of intent with Drexel to convert our existing 1,016 bed university crossings asset, which is located immediately adjacent to the core campus and occupied almost exclusively by Drexel students into an ACE partnership. We expect closed this transaction during the third quarter of 2013 as well.

Our Drexel University ACE investments including Chestnut Square, the existing university crossings and our proposed 13,000 bed development on Lancaster Avenue for each the unique product offering including under the universities, two-year residency requirements. First year students are currently required to live in on-campus university residence halls and sophomores may live in Drexel residence halls or university approved or affiliated housing. Each of our communities will comply with these university standards.

By repositioning the university crossings asset is an on campus ACE partnership, it will receive the same university policy and marketing benefits as Chestnut Square and Lancaster Avenue projects. And one final note, Drexel also currently has the certain academic programs in lease space within university crossing. During the quarter, the company also executed a predevelopment agreement with Princeton University for the development of an estimated $77.7 million faculty and staff housing project via proposed ACE partnership.

The development of the Merwick Stanworth community will include demolishing of an existing facility and the development of 326 units on two contiguous university own sites located less than half a mile from the university’s main campus. The proposed project is within walking distance to campus and Palmer square, the vibrant retail, dining and entertainment district in the heart of Princeton, New Jersey. The community is intended to serve in house primarily Princeton faculty and staff members in the mix of 1, 2, and 3 bedroom apartment in townhome units.

We expect to commence development in the second quarter of this year and open the project in two phase to the portion of the community being delivered in the summer of 2014 followed by the balance of the community in the summer of 2015. With regard to future ACE development during the quarter, the company executed a predevelopment agreement for an estimated $49 million ace investment on the University of Southern California health sciences campus.

The proposed community will contain approximately 460 apartment style beds, the commencement of the project construction and anticipated delivery will be determined in the coming months and are directly related to the cumbersome City of Los Angeles entitlement process. We are currently targeting 7% going in yield for our ACE investments. And finally, the company continued with predevelopment activities relating to our planned development at West Virginia University and Morgantown.

The company and the university are currently evaluating a variety of transaction structure due to feasibility constrains. It is likely this project will become a third-party transaction targeted for 2014 delivery. Now with regard with a third-party fee development pipeline, our fall 2013 and 2014 deliveries accounts for approximately 1,871 beds and are proceeding in accordance with our expected delivery schedule, included in these projects, our fall 2013 deliveries on the campuses of the City University of New York College of Staten Island and southern Oregon University.

The fall 2014 delivery is the 715 bed graduate residential community on the campus of Princeton, New Jersey. With our university clients choosing ACE on 7 of our 11 active on-campus project, our third part development fee income in 2013 has been somewhat diminished. However, we continue to see a steady stream of increase for both ACE and third party development of modern on-campus student housing and remained confident in our ability to obtain engagements for both structure.

With that, I’d like to turn the presentation over to Jon.

Jon Graf - Chief Financial Officer

Thanks, Jamie. For the fourth quarter of 2012, we reported total FFOM of $57.1 million or $0.56 per fully diluted share. Excluding $3.3 million of acquisition expenses, fourth quarter 2012 FFOM was $0.59 per fully diluted share, which met our internal expectations. This compares to FFOM of $37.6 million or $0.52 per fully diluted share for the comparable quarter in 2011, which excludes the acquisition expenses of $858,000.

Full year 2012 FFOM, excluding acquisition expenses of $9.7 million was $174.7 million or $2.02 per fully diluted share, which was near the high end of our 2012 FFOM guidance range of $2.03 to $1.99. The 2012 results benefited from the previously discussed same store wholly-owned NOI growth and the 58 growth assets placed into service over the last 18 months. Additionally, the weighted average share count reflects the impact of both 12.65 million and 17.25 million shares issued in conjunction with respect of October and July 2012 equity offerings.

For third-party services revenue, we exceeded the high end of our 2012 guidance range of $13.5 million to $14.8 million as we earned $15.5 million in third-party revenues during 2012 consisting of $8.6 million in development related fees and $6.9 million in management fees. During the fourth quarter of 2012, we earned $756,000 of construction savings on certain of our third-party development projects completed during 2012. Third-party expenses for the year were $10.9 million, which is below our communicated guidance of $11.9 million primarily due to the lack of new third-party awards during 2012 and the 2012 growth in our wholly-owned property portfolio.

Excluding $7.5 million of acquisition expenses related to the Kayne Anderson and Campus acquisitions transactions, corporate G&A for the year was in line with both guidance and internal expectations at $15.5 million. It should be noted that for portfolio acquisitions, the company records acquisition expenses and G&A and for individual property acquisitions such costs are classified within wholly-owned property operating expense. As of December 31, 2012, the company’s debt to gross asset value was 37.7% and the net debt to run rate EBITDA was 6.3 times. During 2012, we increased our term loan by $150 million. We extended the term of our combined credit facilities by more than a year and a half we assume $646 million of fixed rate debt associated with property acquisitions and we paid off $160 million of maturing fixed rate debt in construction loans. As a result, the average term to maturity of our outstanding debt went from 3.2 years to 4.2 years.

In 2013, we will look to further extend the average term to maturity of the company’s debt to beyond five years. Fixed rate debt maturities for 2013 are $74.9 million or 3.6% of the company’s total indebtedness. With completion of two follow-on equity offerings in 2012 in which we raised approximately $1.3 billion in net proceeds, the company was able to fund the significant 2012 growth opportunities while maintaining strong credit ratios and sufficient liquidity to execute on our development pipeline.

Management believes the remaining capacity on our credit facility along with cash generated from operations and property dispositions and the ability to raise funds in the unsecured bond market provide ample capital for our wholly-owned development projects being delivered in both 2013 and 2014. As of year end, we had approximately $2.9 billion in unencumbered asset value, which was over 53% of the company’s gross asset value. Our total interest expense for 2012, excluding the on-campus participating properties, was $50.5 million compared to $45.8 million in 2011. And the company’s cash interest coverage ratio for the year increased to 3.73 times.

Interest expense for 2012 includes $4.1 million related to debt assumed on 2012 acquisitions. Interest expense is net of approximately $8.5 million in capitalized interest related to own projects in development during 2012. We are providing guidance for 2013 FFO in the range of $2.37 to $2.46 per fully diluted share. 2013 FFOM in the range of $2.32, $2.42 for fully diluted share and 2013 per share net income in the range of $0.72 to $0.82 for fully diluted share. Some of the major guidance assumptions are as follows. For total owned property NOI excluding the on-campus participating properties, our guidance includes the range of $352 million to $358.1 million. Our midpoint assumes approximately 4.4% in same-store NOI growth from our 2013 full year same-store property grouping.

In addition, the midpoint NOI includes $82.2 million from the Kayne Anderson and campus acquisition property. We are allowing for $0.02 to $0.03 impact on either side of the total owned property NOI midpoint from over or under performance in property NOI and the impact of the timing in amounts of acquisitions and dispositions executed. The low end of the NOI range assumes $100 million of net property dispositions in excess of property acquisitions. At the high end, it assumes $100 million of net property acquisitions in excess of disposition.

The NOI guidance range does not include the ground lease expense from our ACE projects. Approximately $3.2 million in ground lease expense from ACE projects is anticipated to be included in the ground lease expense line item on our consolidated income statement. For interest expense excluding the on-campus participating properties, we are projecting $76 million to $77.5 million net of capitalized interest. Whole capitalized interest from our projects underdevelopment during 2013 is expected to be approximately $8.6 million.

The interest expense range is primarily driven by our assumptions with regard to interest rate fluctuations, the timing and size of dispositions and the timing of an anticipated unsecured bond offering during the first quarter of 2013. Later the amortization of deferred financing cost excluding our on-campus participating properties is projected to be approximately $5.4 million in 2013. For G&A, we are projecting $16.6 million for 2013 compared to $15.5 million incurred in 2012.

This increase is directly related to the company’s substantial growth and is primarily comprised of increased payroll and benefit expense including restricted stock award amortization. For the on-campus participating properties at the midpoint, we are projecting $3.4 million of FFOM contribution from the management fees and the 50% split of cash flows for 2013, which is in line with what we recognized during 2012. The third-party services we are projecting total revenue of $9.3 million to a $11.8 million for 2013 with management fees seeing consistent with 2012 level.

Expenses for this business segment are expected to be $10 million in 2013. Based on our current shares, our units in stock awards outstanding, we assume weighted average share count of $1.67 million shares. A summary of these and other assumptions in our guidance range is provided in table to of the earnings release.

With that, I’ll turn it back to Bill.

Bill Bayless - President and Chief Executive Officer

Thank you, John. In closing our company presentation, we’d like to extend a heartfelt thanks to the American Campus team. In addition to the normal rigger of the operational cycle of student housing, the growth in integration of the two major acquisitions that we did was a lot of hard work and dedication on behalf of the team we want to thank them for their great efforts in personal sacrifices during that period of high growth.

With that, we’ll go ahead and open it up for Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question comes from Alex Goldfarb of Sandler O’Neill. Please go ahead.

Alex Goldfarb - Sandler O’Neill

Good morning down there.

Bill Bayless

Good morning, Alex.

Alex Goldfarb - Sandler O’Neill

Just tackle the pre-leasing upfront and the campus acquisition rents down, you guys are thinking that will be down about a percent. So, the pre-leasing is lagging last year and the overall rent growth. I think you guys are looking for us about 2%. So, how much of this is the integration of Kayne Anderson and Campus acquisitions and to that point, how much can you effect the pre-leasing of those portfolios this year versus more of an impact next year, and then what else is driving the lag in the pre-leasing?

Bill Bayless

Sure. Alex, if you look at the – and we’ll focus on the application number, which really is the better trend to look at in terms of the gap. When you look at the application gap in the same-store properties, we are trailing by 4079 beds. About half of that or 2100 beds is very easily explainable with very little concern. A 1,083 of those beds are at Barrett Honors College, which is our on-campus residence hall at ASU that is part of the university’s administrative assignment of the honors college, which is just running behind administratively. Another 779 beds and this will be a recurring thing we talked about last year and we will talk about next year, we had the 11 2012 development properties that is you are seeing again this year, the new developments leased up extremely quick. And so 7 of those 2012 development openings that are now on more normalized lease-ups are actually they are leasing fine, they are going to do great, we expect them all to fill, but they are running 779 beds behind where they were last year or 19% of that total.

And then we have got another handful of properties about 5 that are already over 80% pre-leased well ahead of their markets but trailing last year. And so when you sum those up, that’s about 2,100 beds or 52% of the entire gap that is related to very explainable high confidence level in terms of all those categories filling. When you look at the remaining couple of 1000 in the gap, that gap is spread over 61 properties in 35 different markets. And so it’s nothing major from a perspective of oh, there is a problem here or problem there. Now, I do think in candid, when you look at the fact that we have integrated 51 assets closing in Q4, I think it would be intellectually dishonest to say that the integration did not to some degree impact the implementation as we have kicked off the leasing season, and so I would attribute some of that to that. As you look at that and if you break it down by a marketplace, in the 45 markets that we are currently trailing, in 22 of those markets, the entire market is running behind and that less students have made a decision at this point in time as compared to last year. So, on an overall trend about 50% of that deficit is easily explainable in those categories and the remainder which is on a much more widespread base. It’s thus just continuing to utilize our systems and to nurture the processes we always do.

Now, getting specific to your growth questions and the rental rates and as you all may recall, we did breakdown and provide new buckets to the leasing categories in this supplemental based upon the growth strategy. And so when you look at the same store properties, you will see that the first couple of pages 10 and 11 are those same store properties that are already virtually fully leased at 98% above in an average of 99.4%. And there we have rental rate growth of 3.1. When you look at the next category of same store properties on page 12, and those are the properties between 95% and 98% we are currently 96.8% there. We have rental rate of 2.4. We are hoping to get 300 to 400 basis points of growth we are targeting there through the uptick in corresponding occupancy in that category. And then the real opportunity to outperform is on page 13 in the same store, where you’ve got 15 assets that are currently 87% occupied, rents are relatively flat, but you’ve got the opportunity to really build revenue through the occupancy. And so the plan all intact we talked about in terms of our initial goals of getting that 300 to 400 basis points of revenue growth, rental revenue growth moving into next year.

Going to your question on the Campus acquisitions, when you look at the rental rate growth of the CA properties, and you see some of those decreases in some cases that’s a little misleading, and that the final fall occupancy at several of those properties, for example, the union and Baylor, one you look at and you see we are 99% occupied, there is a slight rental rate decrease. What is going on in actuality there is they had a lot of short-term leases. And so that final fall physical occupancy 99.4% really doesn’t result in a 99% economic occupancy. In our strategy, we convert all of those to full year 12-month leases, growth in revenue tweaking the rental rate accordingly. And so this is very reminiscent of the GMH in terms of the first year, we are going to focus on building revenue through the occupancy gains and managing the rate. And again the little hidden thing in there that you can’t see in that and we have talked about this a little bit at the last quarter because they didn’t filling their beds at the end due some shorter term leases. In future periods you may see a downtick in quarters on the occupancy of that portfolio, but all of our releasing is based upon eliminating all that on the full year 12 leases, 12 month leases.

Alex Goldfarb - Sandler O’Neill

And Bill just following up on the 61 properties, 31 markets I mean is that just generic weakness, is that supply is that competitors cutting rents, is that students being impacted by the economy not of like what’s that seems to be?

Bill Bayless

And again when you look at that large of a spread, the good news is it’s not a meaningful number in anyone area, that is not in insurmountable to overcome. Again in 22 of the 45 markets it appears to be a timing issue, that there are again less students that made a decision in our own properties in the direct competitive set in that arena. When you then look at the supply and demand, and while there is new supply in many of the markets this year, and we have four markets actually whether there is more than 2500 beds coming in. That is not a major impact to us in many cases. The only markets that I can point you, say no, we’re going to absolutely feel some supply impact directly in our property segment San Marcos, Texas, Texas State that’s we have 3,323 beds coming into that market.

I’m sorry that State Georgia, right I apologize for that. San Marcos has 2,983 beds coming in. Our sanctuary product is running behind, there is a new property coming in right next door to it. State College Pennsylvania 2,500 beds coming into the market. They on 2,100 beds, we are only 110 beds behind. And there is really – we can’t draw any direct correlations in anywhere that we are significantly behind to the new supply. Now the reason I would say in most cases your new supply is coming in at a very high pro forma rate. They are usually priced above the market and we’re priced very well in our build for the masses versus the classes strategy.

Now, where I do think that we’re going to have to be very cognizant is when you – as you recall we had a great lease up last year to 97.4. Many of our competitors did not do so well. And so when you look at the markets where we’re currently behind, we have an occupancy of 97.2, the competitive base of properties in those markets are currently at about 91.8 that is about 219,000 competitive beds of existing supply not new supply and they’ve got about 18,000 vacancies in those beds. And so the thing that we will have to monitor most closely in our leasing system is that as other folks in the marketplace, is look to build occupancy and perhaps being more conservative to with their own rental rate that is where we will have to monitor most closely in managing our own velocity. So, when you look at that the current rental rate growth in the area of 2% I don’t know that this is year to have a lot of upside in building that because of that factor and what we will always focus on is as we have in the past is maximizing that revenue through getting the maximum occupancy also.

Alex Goldfarb - Sandler O’Neill

Okay and then just second question Daniel and Jon I appreciate the comments on trying to smooth out the debt maturities and hitting the unsecured debt market this year or this quarter. Where do you guys stand on ATM I can’t recall if you guys have one or not and given that you’re continuing to grow the development program. Do you see the match funding of an ATM to be part of it or not something that you need?

Daniel Perry

Right now, we did not have an ATM in place actually our shelf filing expired in March of last year and we had to refile and at the time we were in a block out due to the Campus acquisitions transaction. So, we didn’t refile it, we probably will go ahead and refile one after this filing of our K this year. As far as the use of it we’re going to look at, what we think is a most appropriate source of capital in terms of minimizing our overall cost of capital. We do intend to go out and do the bond offering and then beyond that we do have the disposition portfolio that William talked about of $100 million to $250 million, which will provide capital for funding the growth. And then we’ll look to use the ATM occasionally into help manage leverage as well.

Alex Goldfarb - Sandler O’Neill

Thank you.

Operator

The next question comes from Jeff Spector of Bank of America. Please go ahead.

Jana Galan - Bank of America

Thank you. Good morning. This is Jana for Jeff, I was wondering if you could give us some of your expectations for the same store wholly-owned expenses in 2013. And how you are getting to your kind of 4.4% same store in NOI rate when it looks like I think top line for the first half with the rental rates of 3.4% for the first half and 2.2% for the second half of the year?

Daniel Perry

Sure. Good morning, Jana. This is Daniel. Yes, that’s definitely a contributing factor to that 3.9% to 5% same-store NOI growth that we are giving in guidance. Actually at the midpoint, we are assuming only about 0.7% expense growth, same-store expense growth. And that is driven by a couple of factors, one is just with the amount of growth we have had, we have really seen a lot of economies of scale on the broader G&A platform and the amount of G&A expenses hitting the properties. If you were to neutralize the impact of those savings, you’d actually see about a point higher in expense growth which would take your expense growth up to 1.7%.

The other factor is our asset management initiatives that we are putting into place which are creating a lot of savings through national contracts and it sounds like small things, but your waste management contracts, your cable IT bundling contracts, utilities contracts, all of those kinds of things are creating a lot of savings that we are seeing across the same-store portfolio. And so again neutralizing for that, you probably see about a 70 basis point higher expense growth and that would take you up to about 2.4%, which would be kind of normal for a year. So, really a lot of benefits this year in bringing that expense growth down.

Jana Galan - Bank of America

And I guess just any outlook on real estate taxes?

Bill Bayless

Yeah. We are expecting kind of mid single-digit, mid to upper single-digit property tax growth somewhere around 7% to 8%. However, that does include and that’s on the same-store portfolio. However, that does include about $800,000 at one property, that’s coming off of a tiff. If you were to take that out, you would only be seeing a little over 4% property tax increase. Now, let me give a little bit of a disclaimer there and that those are estimates of property tax increases, our best guess estimates based on our work with our property tax consultants, but certainly as the assessments come in this year that could go up or go down.

Jana Galan - Bank of America

Thank you.

Operator

The next question comes from Derek Bower of UBS. Please go ahead.

Derek Bower - UBS

Hi, thanks. Good morning. Just a quick follow-up on the pre-leasing, how confident or how much visibility do you have in that 2.2% projected rate increase. And I am just trying to gauge if you’ve baked in a level of conservatism in that number and because I know that you have done along the cost savings, but the leasing gap doesn’t close this year. Is there a risk that we see little to know NOI growth next year?

Bill Bayless

And certainly the goal is again the 300 to 400 basis points of revenue growth through the proper manipulation of rate and occupancy. As we are talking about earlier when you look on the same-store property at that 2.1, there is going to be in our opinion and at this early stage in the game, there is going to be difficulties and pressure to move that up substantially. Just given again the fact that we said that most of our competitors are at 90% to 91%, so we don’t see them being aggressive with rate, which is going to impact our ability to further create the spread. We have though if you look at the individual leasing debt already exercised through the year, where we show the initial rental rate increase and then the projected. You can see that already we have raised rates of 11 properties we have loaded in 19. There is a balancing of that, but I do think the 2% on the same-store property basis. At this point in time, our opinion will be that you are probably going to see that hold relatively flat if anything there could be a little downward pressure, but that would only be where we’re trying to gain it through the occupancy. And so in all of our projections we believe that we will create a revenue growth thus which will lead to the net operating income growth.

Derek Bower - UBS

Okay, got it. Thanks. And then I just want to switch over to markets in new supply and specifically with Drexel and the Philly market, what about that market gives you increased confidence that it can absorb the amount of new supply coming on, not just with your two 2200 beds over the next few years, but I think one of your competitors is delivering I think about 850 beds next year as well?

Bill Bayless

Yeah. Well, one of the things you’ve heard us talk about strategically in our business plan is that whenever we are working with private colleges and universities, we focus on on-campus ownership versus off-campus development. And so for us the relationship with Drexel is very strategic in that we are going to be as Jamie was reading in his script, our beds are covered under their on-campus housing requirements and their housing goals and objectives. And so our ACE partnership with them, we are part of their housing stock, which in their strategic plan, next year they are implementing a sophomore housing requirement is we are helping them meet all of their housing goals.

Now, the other thing that we also like about that is that Philly is a great student market beyond Drexel. There is a lot of university students there. In our ACE deals, we always have the back stopped it in addition to the unique relationship we just talked about that we can lease to the open market if we ever did not fell. And so we are very excited about being in a market of Chestnut Square project is at 30-13 Chestnut is already a 100% pre-released for next year incredible demand, university crossings, the property that we owned is currently is off campus we’re rolling in to an ACE transaction has not missed the beat – even with the beds that we have brought online and also I have to say, John Fry, who is the President of Drexel is just one of the most impressive presidents in higher education today, very entrepreneurial great vision, great leadership, and the university is implementing on it’s plan to grow and to have qualitative growth and so, we are very high on that market, we like the metropolitan nature of filling an housing environment there beyond. The on-campus partnership with Drexel and we also love our basis in the marketplace if you look at what we are building in what cost.

Derek Bower - UBS

Okay, great, thanks for the color. And I guess lastly from me, can you comment on how many more campus acquisition or Kayne Anderson type portfolios are out there on the market – that could come to market in the next two to three years.

Bill Bayless

Currently, there are none that are out there on the marketplace. There is a handful that we thought the lot last year there is still – there is 4 to 6 portfolios that are starting to accumulate that scale of approaching a $0.5 billion and above, a lot of the money that is come in has been closed in funds that at some point of time in the future are going to be look at returning capital or returns their investors. And so on a longer term – a short long-term horizon that makes any sense, call it two to four years. There is certainly we think we’ll continue to be consolidation opportunities within the sector. We are the marketplaces right now, we commented on this last earnings call. Our expectation to 2013 is going to be more or like ’09 and ’10 where you saw good one off properties, smaller regional portfolios, and the same type of opportunities that provide great quality growth. Part of it – if you look at our leasing report, the one-off properties, some of the largely one-off properties that we have purchased over the last two to three years for the big deals are just greatly exceeding their investment expectations, here in Houston, 26 West, we have 8.7% rental rate growth, our pro forma was 5% and so there is still lot of great opportunities out there due significant acquisitions on a one-off basis or smaller portfolio basis and create real value.

Derek Bower - UBS

Thanks, Bill, I think I have a quick follow-up.

Operator

Our next question comes from Eric Wolfe at Citi. Please go ahead.

Eric Wolfe - Citi

Hey, guys, I think you partly answered my question in response to Alex’s question, but on last quarter’s call, you mentioned that you are initially targeting a 3% to 4% revenue growth range. I think you said 230 to 400 in your opening remarks. Can you just talk about what change in your forecast that caused you to drop the bottom end whether it’s on rate occupancy, whether it was specific to the pools that you are bracketing in your supplemental.

Daniel Perry

Yeah, Eric, this is Daniel. What I’d say is really when we talked about the 3% to 4%, we were talking about the hard of what we were targeting that’s really kind of where our midpoint is, that the – at that point we won’t really speaking to low or high end of guidance and so going with the 2.3% to 4% targeted revenue growth is kind of capturing the whole range of guidance now. Obviously at the higher end of still being at that 4% given that we were 97.4% occupancy this year. There is only so much occupancy you can pickup and so a lot of it had to do with seeing how rent rates came out for the setting process and based on that we think 4% is really going to the high end.

Bill Bayless

Yeah, let me say the target is still 300 to 400, the guidance accounts for 230 to 400.

Eric Wolfe - Citi

Got it, okay so, target and I was trying to understand that this is the targets 300 to 400 meaning that that’s what you expect or that’s just kind of what you think is a reasonable, I’m trying to kind of mix what’s the difference between the two.

Bill Bayless

Yeah, first, we say the 300% to 400% target, we are sitting our internal meetings with the marketing team and saying this is what the goal is and what we are targeting for and we believe that is reasonable expectation again based on the opportunity going through those buckets again as we did always looking at what is the occupancy in that category, what is the current rental rate increase in that category, and what is our ability to given that 300 to 400 basis points in each of those categories through the proper combination.

Eric Wolfe - Citi

Got it, understood, alright. And then second question just looking at page six of your supplemental, it looks like your other income from your new properties mix up much – I guess much higher percentage of your overall revenue than your same store properties. So, just curious what accounts for that and whether there are some other key generating opportunities that your – at your same store properties you could take advantage of?

Bill Bayless

And that’s something we are helping people with their modeling that we really always drive people towards looking at the same store number of an annual of $40 per bed. On the new store you are going to have the properties that are under development hitting that, so are under construction. And when they are under construction the bed count is not yet included because they are not yet operational. So, you’re taking other income in total absolute number that is also coming off of those development properties, but you are not including the bed count from those most properties in your ratio. So, that really drives that number up on a per bed basis.

Eric Wolfe - Citi

Got you, great. Thanks guys.

Bill Bayless

Thank you, Eric.

Operator

The next question is from Matt Rand of Goldman Sachs. Please go ahead.

Matt Rand - Goldman Sachs

Hi, how are you, I have got two questions. So, first on the leases, for the leases you’ve signed so far can you provide a little bit of detail on how many were renewals and how many were new leases how that mix changes over the course of the year and to what extent it has an impact on pricing?

Bill Bayless

Yes currently the, and again I’m going to talk on an application basis which gives you the most up-to-date trend in even more certain leases got some of those in process. When you look at a same-store properties 30,939 of those applications and you actually have to back out the 2012 same – the 2012 new developments because last year when you do a comparison everybody there was new, there were no returners. When you do that the current lease up numbers 12,379 are returning revenues versus 12,832 last year, so about 453 behind.

Also on a new perspective when you back that out that means we are 3,626 behind on the new. So, it is somewhat relative which I also I think speaks to in being candid there is probably some impact on the integration effort of the 51 properties that delayed us a little bit in terms of the implementation on both fronts. Now when you look at the – that currently represents 19% of the overall. And so that the goal of the total leasing you can have overall we are targeting to get that returning resident contribution to occupancy in the area of 30%, to 35%. So, still a lot of opportunity to do that we’re on track with prior years. We’re running a little behind which candidly could interpret positively from the fact that it shows that you haven’t fully taped that marketplace.

Matt Rand - Goldman Sachs

Got you. And do you expect the rents on those leases for new resident to be at a different level say three or four months from now than they are today?

Bill Bayless

Yeah, it’s going to be market by market, it really will be as we talked about when you go through the existing sheets there and compare the initial to the where the rates are today, we have raised on a 11, we’ve lowered on 19 and we will on an ongoing basis properly manipulate the prices based on the market data up and down.

Matt Rand - Goldman Sachs

Got you, sure. Thanks. And then on acquisition so just said earlier in response to another question that there is nothing big as far as portfolios on the market and you answered just now to my recent question implies that you’re still kind of getting the integration all showed up for the two portfolio deals you did. What are you tracking on the single asset side and essentially how much could it possibly be by the end of the year because obviously you come in the most years with a very low acquisition guide and then you end up doing a lot more?

Bill Bayless

Yeah last year kind of exceeded where we thought this time.

William Talbot

Hey Matt, this is William. We’ve got an active pipeline of one-off acquisitions that we’re looking at. We expect to have a robust pipeline mostly driven by debt maturities and a lot of new construction that neither has come on this past year coming on this year. So, there will be a number of core opportunities that meet our criteria we will continue to chase those and where will ultimately end up we will see.

Matt Rand - Goldman Sachs

Great and is pricing consistent on those deals with where it’s been in the past?

Bill Bayless

Yes.

Matt Rand - Goldman Sachs

Great, thank you.

Bill Bayless

Thank you.

Operator

The next question comes from Ryan Meliker of MLV & Company. Please go ahead.

Ryan Meliker - MLV & Company

Hey good morning guys. Most of my questions have been answered. But I was hoping you might be able to give us little color you have now made two large portfolio acquisitions. Where is the corporate level of G&A from a run rate basis going forward I’m imaging its not going to go up with revenue, but imagining probably we will tick up at least to some extent going forward. Can you give us some color on how to think about that?

Bill Bayless

Well, in guidance as Jon mentioned in his prepared remarks, we are assuming $16.6 million of G&A for 2013. Some of the growth that and I would say that includes all of the increases we expect related to the integration of these portfolios and ramping up the platform a little more to take on additional size. However, as you have more employees, you pay more restricted stock awards, the bigger that restricted stock awards pool gets, the more restricted stock amortization you have each year and so that’s going to be a growing number of probably $500,000 per year that will cause an increase in G&A. And then on top of that, you will have some inflationary growth just in payroll and other items.

Ryan Meliker - MLV & Company

Okay, that’s helpful. And then another question I know you talked about us a little bit already, guidance of roughly flat net acquisitions, are you expecting 2013 potentially to be a year where you guys will shut a lot of properties and we’ll actually see some material dispositions or do you think it just going to be one of those years where you are going to see what it will come to market and what makes the most sense.

Daniel Perry

No, actually, Dan Burck, the Chairman of our Board is sitting here with us today and he is smiling because the Board is always on about the accretive recycling of our own capital. Is William talked about we do have four properties currently under contract of $137 million. We have an additional package that is going already in the marketplace. We expect between 100 to 250 million perhaps. When you look at the guidance at the low end to the high end, we talked about a net in terms of the difference between acquisition and disposition and so, we certainly are focused on the accretive recycling of the capital. We want to become more of a self fund on a strategic basis and are focused on it at company level and as I said also at the Board of Director level and so we will continue to implement that disposition program along those lines.

Bill Bayless

One thing if I could Ryan that I’d like to add to that real quick. Is that we’ve never been may be to have it to include a lot of acquisition guidance and our guidance for the year. We prefer to see what comes throughout the year and what deals are good and do those deals. We don’t want to put ourselves in a box a same, we are going to buy $500 million worth of stuff and then go after and buy deals that don’t make sense, just to make guidance.

Ryan Meliker - MLV & Company

Fair enough, thanks guys.

Operator

The next question comes from Paula Poskon of Robert W. Baird. Please go ahead.

Paula Poskon - Robert W. Baird

Thanks very much. And so I’ve heard you, Bill, say in the past that the GMH assets had ended up having a lot more upside than you had ever saw at the time that you’re underwriting it. Dan mentioned earlier in the call that the 2012 properties are performing better than you had expected. What are you seeing right now in terms of the integration of both campus acquisitions and Kayne Anderson portfolios that may surprise to the upside or downside relative to your performance.

Bill Bayless

Yeah, on a relative performance basis, everything is in line pretty much their expectations. As it relates to some of the – that the unique observations, at this point in time, they are pretty consistent with our expectation in the case of the Kayne Anderson portfolio and again we are high on both portfolios from an asset quality perspective. That’s one differentiation with GMH, a lot of the upside came from properties that we initially won’t really excited about the asset quality and asset characteristics proximity campus and that’s what made it such a surprise.

In this case, there is a much higher quality of asset base and asset characteristics and so you don’t have that element to be surprised by that we were. With the Kayne portfolio, it’s very much what we expected and with the six different third-party managers that we are in place. The great opportunity on the operating platform is to bring efficiency and effectiveness through a consistent operating platform in asset management perspective. And so everything is occurring very much along those lines.

In the campus acquisition transaction, I’d say the only surprise and not really surprise that a challenge that was a little bigger than we had expected was the bringing online of their construction development projects. We sometimes in the American Campus take for granted our product management and construction team and just how smoothly that turned over from operations – from development to operations goes and both the Michigan property and the USC property was a lot of blood sweat and tears as the construction finished out of those properties were a little more lumpy than it would have been as an American Campus perspective and it posts some challenges for us in terms of getting in there and making customer satisfaction was at a high. That was probably the only – again not a surprise something was a challenge, but beyond what we had expected. However, as it relates to the upside in both portfolios and again both fine companies think highly of both of them, but certainly we believe our operating platform brings a great deal of opportunity as it relates to maximizing revenue through a more strategic approach to product positioning in rental rate and driving occupancy and also through operational efficiencies in just the way that we do business. And so not a lot of surprises on the downside or the upside, I would say in that regard.

Paula Poskon - Robert W. Baird

Thanks, Bill. And separately with the scale that you now have of planning to approach the bond market really is putting the company now on a different playing field, any thoughts on your recommendations of the board on the dividend policy?

Daniel Perry

Sure Paula, this is Daniel. The dividend payment is certainly something we discussed with the board in great detail every quarter. Now, while we have not increased the dividend since our IPO, we are very proud of the fact that throughout the ‘08/09 debt crisis, we never cut the dividend level or paid stock in lieu of cash. Also as you may remember, our dividend to FFOM ratio in 2005, our first full year as a public company was just – was over 107%. Our dividend AFFO ratio was over 120%. However, today we are starting to see really attractive coverage ratio at the midpoint of guidance, you would be at about 57% dividend to FFOM. And our stock is currently trading at a level that we are seeing a dividend yield below 3% now.

Now, on the other hand, we have the benefit of being in a highly fragmented market with lot of growth opportunities and the most accretive form of capital for us is our own cash flow and our own capital. And so we keep that in consideration when we are considering increasing the dividend, but with all of that in mind we will certainly continue to discuss the appropriate level of dividend with the board and when we do decide to make a change we’ll strive to do so based on a clearly articulated strategy that shareholders can depend on.

Paula Poskon - Robert W. Baird

Thanks Dan.

Operator

The next question comes from Karin Ford of KeyBanc Capital. Please go ahead.

Karin Ford - KeyBanc Capital

Hi, good morning. Just wanted to make sure I clearly understood the 2013/2014 rental revenue growth range of 2.3 to 4. So, you said pushing rents a little over 2% probably not a kind of opportunity to go above that, the same store pool looks like it had final 2012 occupancy of 96.9. So, to hit the midpoint to the higher end of the range you are assuming that you think you can get a 100 to 200 basis points of occupancy gain in that?

Bill Bayless

And Karin -- and this is why we have provided the debt in this fashion that I think as people get used to looking at it will really, really help them think about it. So, again if you go to page 11 of the supplemental and you look at those properties that are already virtually full, 99.4%, we are at 3.1% rental rate growth and those are our strongest performing properties the group that you would expect to be able to maintain and hold rate and perhaps grow rate. And so as you look at that category, we expect in those grouping of properties to be between that 300% to 400%, in this case it looks like 310 bps based on rental rate alone. When you then go to page 12 and you look at that grouping of properties that is 95% to 98%, we are currently at 2.4% rental rate growth, 96.8% on the current occupancy. If we can get a 100 bps and get that to 97.8%, well then you are going to have 340 basis points of rental revenue growth.

Now, there is some upside before that if we could return to the historical levels like 98.5% that we have in the past. You then go to page 13 and you look at the 15 properties that are currently 87% where rents are relatively flat, where you have real meaningful upside in revenue basis through occupancy. Now, when you do the blending of all that 300 plus and rental rate on the fully stabilized, a combination of 100 to 150 bps in occupancy and 2.5% on rental rate on the category of 95% to 98% and significant upside on flat rates, but it is much as 1000 bps of occupancy upside. In that last category, it is the blending of those that leads us 200 to 300 to 400 bps of total rental revenue growth through those combinations.

Karin Ford - KeyBanc Capital

Okay, I appreciate that color. Thank you. Next question is just talking about the integration and what impact that may be having on pre-leasing in the legacy portfolio. Could you just talk about what experience you have when you are integrating GMH with the legacy portfolio. Did you find yourself a little bit behind early in that process that year and then what ultimately happened with the legacy portfolio that first year that you own GMH?

Bill Bayless

God bless you for asking that question. Yes, we actually went back and pull that data. On this call in 2009, which was the first session we are integrating GMH, we were 740 bps behind. Now, part of that in candor, I think was related to some of the economic uncertainty at the time, but certainly again with the challenges of integration especially in the initial part of lease up in the timely committed to it. It appears to have an impact and also now, the good news is call ended well. Dan, you get that old supplemental in front you there and that was fully occupied consistent with the prior year.

Karin Ford - KeyBanc Capital

I think we came in just right not at 20 basis points different.

Bill Bayless

Yeah.

Karin Ford - KeyBanc Capital

Yeah, Okay.

Bill Bayless

And so again the kudus to the team and this company is scalable, we have shown that time and time again, but the mere reality of integrating 51 assets in Q4 of last year, 51 new managers whether it be through acquisition or through promotion from within. There is no doubt that the corporate functional support has to be somewhat skewed in the orientation and integration of their group. And to say that is absolutely no impact on the implementation of the leasing on the same store, I think we just be intellectually dishonest.

And so certainly, we believe there is some impact there now. Some of the things that we are doing, along those lines we are – many of you over the years been exposed our marketing calls and participation in that. We always have – we call our critical marketing call portfolio that usually really kicks in full swing in the month of April and May that is actually kicked off this week myself, Greg Dowell, Jim Shoulders, and Jenny Beese sit in those. So, this is fun for me that I am back in marketing calls doing some of that stuff again. But the company’s corporate focus is appropriately on putting heads on beds, which is at the end of the day beyond great customer service what this business is all about.

Karin Ford - KeyBanc Capital

Great. And can you just tell us what pricing is looking like on dispositions this next slog that you are marketing today.

William Talbot

Hey, this is William. At this point since we are on the contract, we are not going to speak to that, but once it’s finalized and certainly updates the market at that time.

Karin Ford - KeyBanc Capital

Is it consistent with some of the dispositions you’ve done in the past?

William Talbot

Correct, I think we did some of those kind of cap rates.

Karin Ford - KeyBanc Capital

Okay. And then finally just on the new Princeton ACE deal, it sounds like that’s going to be more of a multifamily type property and lease up. Can you just talk about the – how the economics of that deal work and will the university be leasing – helping at least that and is that a potential new business opportunity faculty and staff type on campus housing for you guys.

Bill Bayless

Faculty and staff housing, we’ve done some development of it in the past on a smaller scale basis. It does resemble more multifamily and we’ll lease by the unit by the bed and our candor, we sat around on our investment committee meeting on that, just a whole lot easier than student housing. The turnover on the faculty staff housing in many cases these are multiyear tenants two to four years. So, it is a – we’ll be working hand and hand with Princeton as far as the identification of the perspective faculty staff, the leasing of those faculty staff. From an operational leasing perspective, we are highly confident in our ability and actually look at it is something significantly easier than what we do year in and year out. Also for Princeton, this is a lot of replacement faculty staff housing, they’ve been improving that quality of stock over the years taking step offline and so it is a consistent proven market. And then to the extent, however, like any ACE transaction that you don’t grow with that priority market, you then have the ability to open it up to the general market place. So, we’re really excited about it and yes, it could be duplicated in other areas on a one-off perspective, not a core strategy that the company at this point, but certainly not something we walk away when the economics are good.

Karin Ford - KeyBanc Capital

Thank you.

Operator

(Operator Instructions) We have a follow-up question from Derek Bower of UBS. Please go ahead.

Ross Nussbaum - UBS

Hey, Bill, it’s Ross Nussbaum here with Derek. I had a follow-up regarding the leasing gap and I appreciate the answer you just gave to Karin regarding some of it perhaps being due to corporate attention on some of the newly acquired assets. But I thought I heard you make a statement very early in the call surrounding, so half of the gap is due to things that you have very high confidence and you’re going to be able to overcome, but half of the gap is due to sort of what I’d call, wide spread student potentially delaying some of the housing decisions. I don’t want to put words in your mouth, but that troubled to me a little bit because I’m not quite sure why that would be.

Bill Bayless

Yeah. And then give you the exact stat on that, Russ. On the – in the 45 markets and again, 2100 of the gap is starts very easily explainable based on just very unique circumstances to specific assets. When you look at the remainder of that gapping spread across 61 properties, 35 markets again much more of a broader perspective. In 22 of the 45 markets, there is actually a slight delay in the number of students who have made a housing decision at this point in time. I give you an example, Tempe. Tempe is 1,096 students less as of today that have made a housing decision then made housing decision last year.

Now on this particular case, the university just like we’re behind better because administration, the university typically did their on-campus renewal in November. This year, they didn’t start there on-campus renewal till January. In every university, the kick-off of the university renewing their on-campus beds and basically pushing students out into the open market is really the kick-off. So, I can tell you in Tempe that market is behind because of the administrative policy on-campus. Now in 21 other markets, there is also that type of statistic where it’s behind where it was last year, not on a huge basis and some cases, its 10% behind. I think the biggest one is maybe 2% to 3% behind.

Can’t speak to, because these are so geographically dispersed to try to say exactly why truly could and couldn’t tell you. I don’t think we have any systemic issue perhaps there was some uncertainty at the end of the year with the economy, what was happening with taxes in the fiscal cliff. I can’t speak to that, again its only 22 or 45 properties. But not overly concerned from the perspective that the good side of that spread over such a wide base, the deficiency is not so great anywhere that can’t be overcome.

Ross Nussbaum - UBS

Okay, that’s helpful. Because with – if it’s not a supply problem and it doesn’t seem to be some massive dropping in university enrolment, when you see that kind of gap sort of a scratch you had and say what else is going on. But it doesn’t to you it doesn’t seem like any kind of systemic problem?

Bill Bayless

Got you and I got to tell you and thank you for that. We’ve scrubbed the data backwards, forward, sideways trying to see if there was any correlation we could draw to a cause and just couldn’t.

Ross Nussbaum - UBS

Okay. And then just quickly if I ask you just a plain simple question of, do you feel better or worse about student housing industry today than you felt 12 or 24 months ago. How would you answer that?

Bill Bayless

I would say better and let me tell away I would answer at that way. I think that the industry as a whole has continue to mature in terms of how we have a sector do business that the capital we attract, how it is approached by institutional real-estate investors and people’s understanding of the business. And that the sector will benefit from now if I broke that down in the categories and you said how do you feel about supply today versus 24 months ago, probably feel work there is certainly more supply coming and at this point in time than there were 24 months ago. So, I mean the answer there is, as you got state through to your investment criteria to make sure you’re protected in those intercourse when those things takes place. If we ask me about enrollment growth, how do you feel today versus 24 months ago. I feel better and then enrolment growth is steady. Again from our perspective and we can answer at that way and that we focus on premier Tier 1 land-grant institutions that are stable. And so, we overall continue to feel better about our sector as a whole.

Ross Nussbaum - UBS

Appreciate it. Thanks guys.

Operator

This concludes our question-and-answer session. I would like to turn the conference back to Bill Bayless for any closing remarks.

Bill Bayless - Chief Executive Officer

Yeah, in closing and again, I want to thank the staff of American Campus. 2012 was an incredible year and have the type of growth that we did in the operational result that we did is truly 100% attributable to the dedication and the striving for excellence that this staff has continually put forth. On that same vein, I want to turnaround and say 2013 team, let’s do it again. We’ve got a lot before us, and we need to rise to the challenges that this year provides. Also in conjunction with our 20th anniversary, we will be getting out a note. We will be having an Investor Day in Austin later in the year. We will work with some of you on what is an appropriate date to do so. And hope to show you some new assets here in Austin along with some turnaround assets that we have implemented and probably be later in the year after lease up so we have a whole lot more full color at that point in time that we will do so. Thanks so much and we will speak to you next quarter.

Operator

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.

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