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Executives

William Bayless - Chief Executive Officer

John Graf- Chief Financial Officer

Greg Dowell - Chief Operating Officer

Gina Cowart - Vice President of Investor Relations

Analysts

Karin Ford - Keybanc Capital Markets

Michelle Ko - Bank of America

Dustin Pizzo - UBS

James Mullen – Sandler O’Neill

Michael Levy – Macquarie.com

Erick Wolf - Citi

Dave Brag - ISI Group

David Doty- Citigroup

Stephen Swett - Morgan Keegan & Company, Inc.

Joe Dazio - J.P. Morgan

Andrew McCullough - Green Street Advisors

Paula Poskon - Robert W. Baird

American Campus Communities Inc. (ACC) Q1 2010 Earnings Call April 29, 2010 11:00 AM ET

Operator

Good day ladies and gentlemen and welcome to the first quarter 2010 American Campus Communities Inc earnings conference call. My name is Haley, and I will be your operator for today. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operators Instructions)

I would now like to turn the conference over to your host for today Ms. Gina Cowart, Vice President of Investor Relations; please proceed Madam.

Gina Cowart

Thank you Haley. Good morning and thank you for joining the American Campus Communities, 2010 first quarter conference call. The press release is furnished in Form 8-K provide access to the widest possible audience.

In the release the company has reconciled the non-GAAP financial measures to those directly comparable GAAP measures, in accordance with Reg G requirements. If you do not have a copy of the release it’s available on the company’s website at www.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 filing.

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 statements 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 advice or update any forward-looking statements to reflect events or circumstances after the date of this release.

Having said all that, I would now like to turn the call over to Will Bayless, Chief Executive Officer, for his opening remarks.

William Bayless

Thank you Gina. Good morning and thank you all for joining us as we discuss our Q1 2010 results. I would also like to welcome Dan Burck, our Chairman of the Board who is here with us today in Austin.

Let me address the format of our presentation. Greg Dowell will address our operational leasing results; William Talbot will address our investment activities; J.E. Wilhelm will discuss ace and third party services; and Jon Graf will discuss financial results and our guidance. Daniel Perry and I will then lead the Q&A.

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

Greg Dowell

Thanks Bill. Operationally it was a great quarter. Our results of operations met and in some cases exceeded our internal expectations.

If you turn to page five of the supplemental package, you will see that the first quarter same store NOI increased by 6% over Q1 of 2009. This was the result of a 3.4% increase in revenue, and a minor increase of only four tenths of 1% in operating expenses. This minimal change in operating expenses was largely attributable to a decrease in marketing costs for the quarter of $316,000, compared to Q1 of the prior year.

As you can see on page eight of the supplemental, March 31, 2009 occupancy at our same store wholly owned properties with 96.2%, compared to 92.8% for the same day in the prior year. This represents an increase of 3.4% over the prior year, and two tenths of 1% over the December 31, 2009 occupancy reported on our last call. As of March 31, occupancy for the total wholly owned portfolio was 96%.

If you turn to page nine, we can review the leasing status for the 2010 and 2011 academic year. As of Friday, April 23, our same store wholly owned portfolio was 79.3% applied for and 73.8% leased. This compares to 77.2% applied for and 73.9% lease for this approximate date in the prior year. The same store ACC legacy portfolio was 79.1% applied for and 71.4% leased, compared to 79.5% applied for and 75% leased for the same period one year ago.

The GMH same store portfolio was 79.4% applied for and 76.5% leased, compared to 74.7% applied for and 72.8% leased for the same period in the prior year. You will note the we have now stabilized the velocity of leasing at the GMH portfolio to equal that of our legacy assets, further demonstrating the success of the integration process.

We are currently projecting an overall rental rate increase of 2.2% to the wholly owned same store portfolio, consistent with the projection on our last call. Based on the current leasing velocity and projected rental rates, we would anticipate same store NOI growth of 3% to 5% for the 2010, 2011 academic year.

With that, I will turn it over to William Talbot to discuss our investment activity.

William Talbot

Thanks Greg. Turning to acquisitions, during the quarter we acquired University Heights, a 528 bed property serving the University of Alabama, Birmingham, from our joint venture of Fidelity Real Estate Group. The purchase price of $9.9 million acquired a good pricing of $19,000 a bed, well below replacement cost for this asset. We believe that under our direct ownership in asset management, the property offers strong upside related to occupancy and rental rate growth of a projected stabilized normal yield in the high sevens.

During the first quarter, there appears to have been significant change in temperament, as many in the sector have stated they are actively preparing to buy and sell assets. Brokers are expecting significantly more activity in the second half of 2010, than we selling each of the last two years. They expect us to aid our disposition progress and remain an active buyer of core assets that meet our long-term investment criteria, as well as those investment opportunities that offered net asset value creation via improved operations.

Currently, we are underwriting an excess of $500 million worth of acquisition properties, including both marketed opportunity and direct negotiation, including distressed opportunities directly from the bank. The returned interest of institutional capital and the improvement in the debt market as addressed by the GSC, once again competing with the live companies and banks to place debts, we believe there will be significant downward pressure on cap rates.

On the off campus development front, we plan to capitalize on the favorable construction market by moving forward with several land tracks we are carrying in our land bank. As we are announced last quarter, we anticipate breaking ground on our UT San Antonio development in May, for a fall 2011 opening. We have commenced predevelopment activities related to the development of the 680-bed property in Huntsville, Texas. The pedestrian site is across the street from San Houston State University, and was a part of the GMH acquisition.

Pending receipt of approvals and final necessary permits, the development is anticipated for a fall 2011 delivery. We are also proceeding with predevelopment activities on our Amherst, New York site across the street from the University of Buffalo, and we are currently targeting a fall 2012 delivery.

We are actively pursuing additional sites for future developments in other markets, and we are targeting a minimum of two off campus development projects to commence in 2011.On all off campus development transactions, we are targeting going in the yields or eight to eight and three quarters. We will update the market as we progress in this area.

Moving on to dispositions, on March 26, 2010, we completed the disposition of Cambridge at Southern, a 564-bed owned off campus property for a sale price of $19.5 million, including the assumption of a $18.4 million mortgage during 2016. The property, which is one of three assets, we own in the state borough market at the Georgia Southern University.

So for a nominal cap rate of 7.7%, and a fully loaded economic cap rate of 7.1% on our estimated forward towards NOI. We believe the two assets that we continue to own in the market have better growth prospects, and the disposition property had limited NOI growth potential.

We have one wholly owned asset, Campus Walk - Oxford serving students at the University of Mississippi under contract for sale for approximately $9.2 million. The project, which contained 432 beds, is being sold to a related foundation of the University of Mississippi. We anticipate, the sale will close in the second quarter as we finalize terms of the assumption and move towards closing.

Connections with transferring the property to assets held ale for sale, we took a $4 million impairment charge against the book value of the assets. We will discuss cap rates on the next call after the decision is final.

With that, I turn it over to Jamie, to discuss on-campus developments.

James Wilhelm, III

Thanks William. The on campus development market remains vibrant with many emerging opportunities. Of note, in late March, Moody’s Investor Service issued a special comment on privatized student housing. To provide greater ratings transparency, the rating agency eliminated indirect debt category. We believe the clarity provided in the special comment and the elimination of the indirect debt category, may lead even more institutions to consider privatized transactions. We consider this to be a positive factor from both equity and 50133 Structure.

With regards to our Ace projects, we continue to make progress on our University of New Mexico transaction, and are on track to commence the construction later this quarter. We expect to receive final board of region approval on May 11. The first days of the project is expected to open in fall 2011.

Turning to Boise State. On April 8, 2010, Moody’s investor service issued a research card in conjunction with the university’s 2010 general revenue bond sale. The report, which included an assessment of our proposed phase 1 Ace project, affirmed Boise State A1 rating and maintained their outlook on the rating as stable.

Based on Moody’s evaluation of the project and partnership structure, which includes no obligation of Boise State financial to support the project, Moody’s did not include the development cost of the project in the direct debt calculations of the University. We were also informed by Boise State, they received a favorable evaluation from Standard & Poor’s corporation.

We are pleased that the project received the same favorable credit treatment as our Arizona State project. Despite the favorable ratings outcome, the Boise State Administration informed us that the Idaho State Board of Education did not approve the ground lease at their April 22 meeting.

We intend to continue to work with the University regarding the delivery of this project; however at this time, the previously anticipated Q2 2010 commencement, and 2011 delivery are not probable. We will update the market when we have a new time on.

We continue to make progress with the transaction structuring and predevelopment activity on our Portland State University project. We have received additional construction estimates, and the project remains in the area of a 7.5% going in yield. Based on NOI growth prospects, we still find that project attractive of that yield. Subject to the successful completion of the entitlement process and all the necessary TFT approvals, we are targeting a Q4 development start at the end of fall 2012 delivery.

We also continue to make progress at Arizona State University, West, Northern Arizona University and component three on the ASU tempi campus. Contingent upon the successful structuring and approvals, NAU and ASUS are targeting 2011 construction starts, and fall 2012 openings. The definitive schedule for component three at ASU is still being developed. Our target yield on these Ace transitions remained at 8%.

Turing to our full party business segment, our project at UCI and Cleveland State, Phase I, remain on track for fall 2010 openings. With regard to new third-party starts, pending the closing of taxes and project finances, we expect to commence construction on our Edinburgh University Phase II project during the second quarter, with anticipated completion for fall 2011.

We remain optimistic for our college of staff and Ireland project, and are working closely with the college and the university system to structure a feasible transaction with the hope of commencing development sometime during the latter portion of 2010, which would lead to our fall 2012 opening. Finally, we continue to see meaningful RFP and RFQ activity, providing future opportunities for both third party and Ace transact.

With that, I would like to turn the presentation to John Graf.

Jonathan Graf

Thank you Jamie. For the first quarter of 2010, we recorded total FFOM of $22 million or $0.41 per fully diluted share, within line with our internal expectation, and consistent with our guidance projections. This compared to FFOM of $18.5 million or $0.42 per fully diluted share for the comparable quarter in 2009.

As compared to the first quarter of 2009, the 2010 first quarter results include the impact on the weighted average share count related to the 9.8 million shares issued in conjunction with the May 2009 equity offering, and the operating results related to the Barrett Honors College development delivered in fall 2009.

First quarter 2010 FFOM excluded $4.8 million in impairment charges, as we believe the inclusion of such charges is inconsistent with the treatment of gains and losses on the disposition of real estate, and that excluding such charges more appropriately presents the operating performance of the company’s real estate investments on a comparative basis.

Total third-party revenues were $2.8 million for the first quarter of 2010 as compared to $3.3 million for the first quarter of the prior year. Total third-party revenues consisted of $574,000 in development fees, and $2.2 million in management fees. Third-party revenues were slightly below the internal expectations for the quarter due to a timing lag in the recognition of development fees at Hampton Roads

Corporate G&A for the quarter was in line with internal expectations at $2.8 million. We continue to expect to be within our previously provided guidance range of $11.4 million to $12 million for 2010. We do not expect the recently past health care reform legislation to have any material impact on our 2010 G&A or operating results. We continue to assess any impact that the new legislation may have on our expenses in the future years.

As of March 31, 2010, the company said the total market capitalization was 42%. We paid off $34.5 million of maturing fixed rate debt, with cash on hand during the quarter, and have $49.3 million of remaining 2010 fixed rate debt maturities or 4.5% of our total indebtedness. Our variable rate construction loan on this has a December 2010 maturity date; however, we have one remaining one-year extension option, which we currently plan to exercise.

These debt maturities, along with anticipated 2010 property development expenditures are expected to be funded with cash on hand and cash generated from operations, are $225 million corporate revolving credit facility which was fully undrawn at March 31, and remaining proceeds are available under our $125 million already packed revolving credit facility.

Our total interest expense for the quarter, excluding the on campus participating properties was $13.8 million, compared to$13.7 million in the first quarter of 2009. The company’s interest coverage ratio for the last twelve months increased to 2.43 times, compared to 2.04 times as of one year ago, as we continue to see improvements in this ratio, resulting from the turnaround of the GMH portfolio.

The quarterly interest expense numbers previously discussed do not include interest expense, classified and discontinued operations of $366,000 in 2010 and $622,000 in 2009. There was no capitalized interest for the quarter related to own projects and development.

Turning now to 2010 guidance, the financial results for the quarter were in line with internal expectations and consistent with our guidance projections. Despite the completed or anticipated dispositions of Cambridge at Southern, and Campus Walk – Oxford we continue to believe that FSOM guidance range of $1.44 to $1.62 for fully diluted share for 2010 is achievable.

For the balance of the year, the most significant factors that that currently may impact our 2010 FSOM guidance range are as follows: Leased up exposure, we previously communicated a total owned property NOI of $145.7 million to $152.1 million, which did not assume any property acquisitions or dispositions during 2010.

NOI will be contingent upon the final rental rate in the occupancy achieved for our 2010, 2011 lease up, and the related marketing expenditures, which may fluctuate depending on the velocity of lease up. Based on the current projective rental rates for the 2010, 2011 lease up, and previously discussed first quarter dispositions and acquisition activity, we believe that we are currently trending towards the mid point of the previously discussed NOI range.

For third-party service revenues, our 2010 guidance projections assumed $17.5 million to $20 million in third-party service revenues. The high end of the guidance assumes that the CSI and Edinburgh University Phase 2 third party development projects will commence construction during 2010, and that we will earn incentive fees as a result of sharing and cost savings on current projects under development.

The commencement of 2010 project starts will be dependent upon the availability of project financing which may be affected by the current capital market conditions. If closing of CSI does not occur during 2010, approximately $2.3 million to $900,000 in related fee income included in our guidance range would move into 2011.

With that, I’ll turn it back to Bill.

William Bayless

Thanks John. In closing, we are really pleased with our progress this quarter. We continue to have excellent strong core value creation moving into late 2010 and into 2011, especially with the continued inauguration and success of the turn around of the GMH portfolio. We also continue to have strong external growth prospects in every area of our business, acquisitions, off-campus development, ACE and third party services.

With that, we’ll open it up for Q&A.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Karin Ford - Keybanc Capital Markets.

Karin Ford - Keybanc Capital Markets

First question just on pre-leasing. On a leased basis it looked like you were flat as of April 23, for the entire portfolio and then the statute released on April 9 a couple of weeks ago were a little better than that. Is there any trend to be read into there and what could have been causing the differential?

William Bayless

Karin, one of the things is it’s highly unusual that we release numbers to the market on two-week increments, because you always see small fluctuations and periods. Given that we had the real share confidence when I was speaking, I want to make sure we had information.

If you look, over the last two weeks we’ve gotten 2,541 applications, compared to 2,778 last year. So it really is a nominal difference and don’t think there is any trend there. Also these were the periods right after spring bright, where its not uncommon to have big major weekend type events, that you can have to begin swaps, and so we don’t think there is any conclusion to draw.

When you look at the application rate, we were 3.8% ahead two weeks ago; that is currently 2.1, but I don’t think that the denotes that there is an merging negative trend on any side.

Karin Ford - Keybanc Capital Markets

Okay. Do you have either an upward or a downward bias on the 2.2% rent increase that you guys are seeing today?

William Bayless

Let me give you some color on that, and type last year also. As you recall, the problem that we had last year, and the whole industry was somewhat shocked by slower leak in velocity related to the down economy, and the issue we had last year is that we were not able to hold on to our rental rate increases as we were lowering rates in other markets, because everyone’s uncertain of what leasing trend would be in the later part of the year.

What we have done this year, at the 80 wholly owned assets, if you’ll see the leasing reporting over there, we’ve lowered rent at 13 assets, but we have actually raised rate at 35 properties. Now that maybe we are just on the one unit side that had a velocity that was ahead of the market.

We tweaked around $5 here, $5 there, and so very still volatility as there is in every market place every year, continuing in this week, but the difference this year is because we now have that historical velocity and lands from the second half of last year’s leasing season, and we have now statistical data again off of which to make good decisions. We have been able to raise rents aggressively in other places to offset any decreases.

So in looking at being right now 79% through the lease up, and having been able to maintain that, at this point of time our feeling is that 2.2 has seemed to have held steady all the way through, and at this point don’t have any data to indicate one way or the other that it may go slightly up or slightly down.

Karin Ford - Keybanc Capital Markets

That’s helpful. My next question is just on the expense side. I think last quarter you had been telling people you didn’t think you were going to see big margin improvement, and or sort of expecting to see inflationary type expense growth. It seems like you did a little bit better this quarter. Can you talk about what potential trends you might see on the expense front?

William Bayless

Sure, and I think wanting to attribute to Greg Dowell and his staff, I think that we have probably made that statement over many quarters over the year, so we expect inflationary expense have always tended to do a little better and attribute to them in their prudent management of those expenses.

One other things you saw a direct benefit of this quarter, is that we were able to ratchet back some of those marketing expenses from last year which was a direct contributor, but even when you backed that out, expense growth would have only been 1.5% and same store NOI 5.1% or so.

Again, I think what we are seeing, and not something that we can always project and we’re more conservative in our nature, but we continue to see the trend that you all seen over the last quarters and years, is that as we integrate assets into our portfolio we continue to find efficiencies in keeping those expense ratios in check. I would say moving forward, we would expect inflationary increases and wouldn’t count on those forever.

Operator

Your next question comes from the Michelle Ko - Bank of America.

Michelle Ko - Bank of America

I was wondering if you could talk a little bit about how much and where you see most of the growth coming from over the next few years? Do you think it will be more from the internal side improvements on the GMH portfolio or more externally from acquisitions or on campus developments? Previously I think you mentioned that if out there could be more external growth from the Ace projects versus the acquisitions.

William Bayless

Michelle we would say, first looking at internal to external, and one of the things that has been a great benefit to us over the first six years in going public, is that as we have integrated growth asset, as you are now seeing with GMH, we really have the opportunity for value creation. We expect that to continue.

When you look through the things we talked about today in terms of underwriting $0.5 billion of potential acquisitions opportunities, the return of the off campus development market, where we believe the continued vibrancy of the ACE transactions in that third party sector, we would expect there to be significant external growth opportunities, and as we incorporate those growth opportunities into the organization, that’s what provides the opportunity for above inflationary internal growth, as we continue to apply our operating platform over those.

So as we look in both of those, and that’s one of the things we think makes the American Campus Story, still so attractive compared to even multifamily that seem some dynamic future growth prospects, and if those two things combine for us are still very compelling and we think unique to the organization.

Michelle Ko - Bank of America

So if want to just put some numbers to some of that growth. If you could say on average may be the next few years internally you would expect maybe 3% to 5%.

William Bayless

Well, Greg in his script commented that we expect 3% to 5% moving into Q4, and because of the nature of our leases going to September to September, I think you can safely interpolate what we do in Q4 of this year into Q1 through Q3 of next year going into a ’11.

Then as we move into 2012, when you look at our historical growth rate on the core of our core asset, your full year same store property groupings were typically 4% to 5% when you coupled with the quarterly same store number that are being integrated. Those are typically the north of 7. So when you look back at our historical growth rates, we don’t think there is any reason why we should not be able through discipline in what we do and they continue to reform our platform to duplicate those type of growth profiles.

Michelle Ko - Bank of America

Okay great, thank you that’s helpful. Can you talk a little bit about the acquisition market? You mentioned briefly, I think previously that you had some acquisitions that you are underwriting. Could you just talk a little bit more about the magnitude of what you expect this year?

John Graf

No, I’ll let William comment here also, but when we currently have about $0.5 billion dollars of both marketed deals and direct negotiated transactions. We are in the process of evaluating and underwriting, and I think that in general, there has been two student housing conferences in the last three weeks, and we did see many analyst and investors in some of those, and I think any of you who attended, it was certainly a different feeling in the air -- of optimism and activity. William why don’t you comment directly in terms of some of the institutional lending and the type of environment you think is emerging is going to cost that.

William Bayless

Yes Michelle, as we said in the last call, we do see a lot of increased activity coming in the second half of 2010. We are thinking again, we’re starting to see portfolios marketed again in six plus properties and a lot of that is fueled by the returned interests of institutional capitalist as we said earlier, and the debt market strengthening with the like companies, the banks; I mean they are actively out there engaging and putting loans out. So we think that will fuel the additional product to look at in our appetite as well.

Michelle Ko - Bank of America

Okay great, and I guess just lastly, could you give us a sense for what kind of lending rate the GSEs are offering versus the Life Co’s of the banks.

Daniel Perry

Sure Michelle this is Daniel Perry, right now the spread for ten year loans has been hanging out around 2% over the ten year treasury, to just a little under 2% driving rates, just under 6%, say somewhere around 5%, 5.75% and three quarters to 5.8% we are seeing similar type rates being quoted by the live companies for the first time since displacement in the debt market, so we are really excited about that.

As William mentioned in his prepared remarks, we are starting to see the banks compete with Fannie & Freddie again, and actually Fannie & Freddie are even saying that they are losing some deals to banks. So we are really excited about the terms that are starting now.

Operator

Your next question comes from Dustin Pizzo - UBS.

Dustin Pizzo - UBS

You guys certainly sound like ramping up the off campus development effort, and I mean given where the yields are there and your comments, I mean has the effort shifted at all from the focus on Ace projects, to that off campus and perhaps the third party on campus, because given what those yields are. I mean why deal with the bureaucratic headaches that come along with these projects if we not getting in on a relative basis and out sized the turn.

Daniel Perry

Justin, when we look at all of our business segment, whether its Ace, off campus development or acquisitions in what opportunities are there to do the best transaction, the most accretive transaction in each segment. So rather than saying you want to focus specifically on this segment or this segment or that segment, we would rather say “let us focus on the prime opportunities in each of those segments that offer the company the best yields. So we look at all of them.

One of the comments I made when we San Antonio on the last call, UTSA was a market; that was, the University did not express any interest in any type of Ace transaction; that is a great market that we want to be in and meet all of our investment criteria. To the contrary, when you look at Ace opportunities, those are markets we want to be in and when you can’t be on campus in a partnership relationship with the University it is a preferred position.

So I don’t think that you will see a shift in our focus from one segment to another, but rather always being opportunistic to explore whether the best opportunity in all of those segments, and right now I think if we are to buy any time, the things that we talked through, and that all three you’re lining up simultaneously; and so for us its being prudent in finding the best transactions in each of those.

Dustin Pizzo - UBS

Okay, and then just in terms of the various opportunities in the pipeline, are there any entity level opportunities out there that fit into any of the accretion through effiecencies best or is it more portfolios and just one off assets?

William Bayless

I think it’s a whole array out there. One of the things that we have been talking about, that we do believe as unique institute in housing. This is an operational business and when you look at the success that we have had with royal, with proctor, with GMH, one of the things that we truly believe is that the value creation opportunities in our sector in many cases are driven by the lack of sophisticated operating platforms that many companies in this sector don’t have.

So whether that is people who have a portfolio or a density levelor individual properties that underlying components of upside due to the under management exists through a lack of sophisticated systems, provides opportunities I think in all sectors.

Operator

Your next question comes from James Mullen - Sandler O’Neill.

James Mullen – Sandler O’Neill

Most of our questions have been covered, but I was wondering if you could give us a little more color on the Boise State project and just how the out of legislature -- I mean on going to prove the real exemption, but the board didn’t approve the ground lease. Is there any changes in deal terms, and then how you look at managing that development risk? Are you having parallel discussions with both groups, or is that sort of you have to take them in sequence. I just wanted to get a little more background on that?

William Bayless

The good news on Boise is when the rating agencies looked at that transaction specifically, we did get consistent credit treatment with Arizona State in terms of it not being included in the schools direct debt ratios and get the outcome that we were looking for.

One other things, and then we have a de-briefing meeting with the A2 administration set up for later this week. Jamey will be attending, to strategize and talk about how we move that transaction forward from here. One of the things that we have to talk is guys -- prior to that de-briefing, one of the things that occurred; and I am sure we’ll talk about it a little more -- with the Moody’s issue they’re rating favoring late March, which we think is a good thing, but anytime a rating agency puts information out there, it takes a while for colleges and universities to digest it, to absorb it and those papers are written in a general sense.

They don’t address the specifics of any one type of structure, any type of transaction, and part of what I think may have occurred at the Boise, the board level, is looking at some of those general statements that the rating agency has out there. Not having adequate time to process them in terms of what they may need for this specific transaction, even though it was looked at after the paper was written, and in that regard we were looking a breaking ground six days after that board meeting.

There are fine, fine folks at Boise, and the tax payers of audit can take great comfort and they are very conservative, they are very diligent, they take their fiduciary responsibilities, and they move it a pace that gives them the comfort level to verify the things they need to.

So as with every transaction and/or third-party product, once we see it no different, our job is to work through those processes with universities, be the best partner that we can. When they hit times like this to help work to improve and to continue to provide the service of bringing a great project to their campus.

James Mullen – Sandler O’Neill

And I guess just, there is nothing here that would start to change your approach or process that you’ve learned so far from your explains on the field?

William Bayless

No, this is the one thing. The Ace program is probably now in it’s third, going to the fourth year of infancy, and the one thing you here us talk about frequently; whether its an Ace deal or 501C3 deal, the process is identical. You go through the exact same pre-development process.

Now the certainty of financing and closing is different, net equity deals are actually easier in that regard, but we have been doing this since 1996. We’ve done over 50 of these public/private partnerships. This type of administrative process and approval process in all cadre, this is one of the better to entry. Most companies don’t have the patience to work through these types of processes. For us Boise sees no different in all market transactions we’ve been doing for years.

One of the things we always do is to make sure though that we are prudently managing our risk profile, we have cost sharing agreements to the institutions so that we are not solely in list in these types of situations, and so we don’t put ourselves in situations where we have a lot of dry whole costs on these types of transactions.

Operator

Your next question comes from Michael Levy - Macquarie.com.

Michael Levy – Macquarie.com

Most of my questions have been answered, but I was wondering if you can expand on the rent levels. I am sure you saw the article in the journal toady about raising college enrolment levels. Combine this with the generally stronger rental environment, naturally I have to wonder whether it’s possible for you to raise rents for the remaining un-leased rooms, is that possible?

William Bayless

Michael, one other things is being consistent with what we have always said, and makes no mistake. Raising enrollments is a positive thing for our sector, but as many of you have always heard us say, the larger variable in our business is supply.

While enrolment increases and decreases occur more modestly in over time, over supply typically comes into our market very quickly, and so when you look at saying okay in the remaining 20% of the year that we had in this lease up -- Well, fall enrollments have already taken place for the academic year there were.

Upcoming enrollments for the next year certainly has some impact to velocity, but that is not something that you would see correlate into an immediate driver, midway to releasing season, especially in those markets where rates maybe constrained because of the supply parameter that has taken place over the last 12 to 18 months.

Michael Levy – Macquarie.com

Okay. I mean I guess I’d say what about the fact that the renting environment seems to be stronger; that rental rates for non-student happening year-to-date seems to have risen.

William Bayless

Sure, and that is the in most of the towns that we operate, except the few that I’ll point out, we’re a tier 1 land granted institutions that are really college towns, where you don’t see a lot of your large multi-family markets. Now exceptions to that would be Orlando, UCF, Denver somewhat, Northern Bloomfield, some marketing in Bolder, and then also Phoenix in tempe. Phoenix is still somewhat weak and so we do not see. The good news is, in the very bad times we are not negatively impacted by the multi-family impact, and in the very good sense we also don’t quite benefit as much.

Michael Levy – Macquarie.com

Okay. So and then I guess you’d say that there shouldn’t be not much of a reap through by any improvement in the environment for next year leasing season, is that the first statement?

William Bayless

No, well there is not a direct correlation in terms of the drivers to multi-family for ours. The things that will positively impact student housing rents going in the future or the biggest one that over the last two to three years there have been barriers to entry in terms of equity and debt, and so we have seen less in the supply line, and so there has been a little of a slowdown in that.

There have been times for those debts to be absorbed, and so I am not saying that there are no opportunities to increase rental rates going into the future. I am just saying that the drivers are different in multi-family.

Michael Levy – Macquarie.com

Okay. One final follow up to I guess James’s statement about Boise State. I was reading through the minutes of the Idaho, State Board of Educations Meeting, and the motion for approving the Ace lease set there seem to be pretty bullish I think.

One of the other university presents had said the public partnerships are sort of the wave of the future there. Was it a close vote, I mean that I couldn’t find. Do you know sort of like how close you came, and I am just trying to really understand in the nitty gritty level what really went on.

William Bayless

And I don’t know and I candidly have not seen the vote count myself in that regard. To me this is an issue of a board that needs additional information in order to choose how they want to move forward on this. I mean we have worked very closely. No one was more disappointed than the Boycee administration, and the main thing here was from a tinny prospective.

Had we got the ground lease approved at that April 22 meeting, we were prepared to break ground on May 1, we were up and ready to go, and so that leads to our statement that certainly we do not believe we are in a position to commence construction in Q2 in delivering in 2011. Certainly later this week we will be regrouping with Boycee and coming up for a strategy in determining how they would like to move forward with the products in the board.

Operator

Your next question comes from Erick Wolf - Citi.

Erick Wolf - Citi

For the asset that you sold at Georgia Southern, could you just give us some color on who the buyer was, how many bidders there were, and just lastly what the rate on the mortgage was at the buyers end?

William Telvot

Yes, this is William Telvot. I cannot disclose the buyer, but they were a medium sized student housing buyer with a private equity source. We had between initial bids of 5 to 7, which we faired it down to a selective buyer, and then on the last question the interest rate was 5.78% on that loan.

Erick Wolf – Citi

Okay, as far as the Ace projects that you are pursuing now, are there any that aren’t captured on your supplemental. I am just trying to get a sense for how many other Ace were projects and pre development they we might see coming later this year.

William Telvot

Anything that has been awarded as an Ace transaction is on our supplemental. We do not disclose any that we may be competing for.

Erick Wolf – Citi

Okay, and then lastly you mentioned how you planned to address your upcoming secure term loan and construction loans, but in light of your increased development plans, could you discuss how you plan to fund those?

Daniel Perry

Sure. Erick this is Daniel Perry. Right now if you look at the availability of capital that we have on the balance sheet, we got about $277 million between undrawn revolver, $31 million availability under the Freddie Mac revolver, and then another $22 million in cash sitting on the balance sheet.

So we are going to address each developments as we move forward, and determine which ones we might want to use construction loans on, but given the capacity that we have on the balance sheet, and the cases where we can go ahead and develop a project with the kind of capacity that we already have, and not incur the additional financing cost, and then deliver unencumbered project that continues our goal of growing and it comes in at a point of being able to go out and start access to the unsecured market; obviously that’s helpful.

Operator

Your next question comes from Dave Brag - ISI Group.

Dave Brag - ISI Group

Good, thank you. My question I think has been touched on, but just to specifically ask a little more about supply. Bill given that multifamily starts are down about 70% from peak levels and student housing supply data its tougher to get a handle on, can you just talk a little bit more about the level of starts that you’ve seen at Universities where you own properties near, and that outlook going forward here.

Daniel Perry

David, over the last two years there has been slow down, not to say that there has been none. Many of the projects that got delivered were those that were in the pipeline really prior to the downturn. We talked frequently about gains in the market where we have now seen the slow down take place, but the market is absorbing over 5,000 to 6,000 beds in the three to four years prior to that.

College State in Texas, we had the same environment take place, where the projects got delivered there. Again a couple 2,000 to 3000 beds are now in the process of being absorbed, but we have seen a slowdown. That is not that the development has been non-existent, but rather it is been a much lower number of beds. Now we are seeing in markets, Orlando this year you got 600 beds coming, well that’s a manageable number to be absorbed.

San Antonio where we are going to be breaking ground this year, you got 440 bed development coming in. Those are reasonable absorption levels to where previously, literally we are seeing several thousands a year in some markets. The other thing that I will say there, those folks that have been active developers in the sector, we have seen a prudent move away from the merchant development far from campus.

We have seen people that have now realized that core value creation really is driven by pedestrian products close to campus, and those sites and entitlements are harder to get through. So then part of the industry has become educated on what types of location products drive value and those yields are hard to do, and so that has been a little bit of a slow down.

Also the net result, some of the other projects that are coming in line, there is a lot of good core asset that are being developed, and we would throw in there and sometimes my folks they will know how to manage them, and will create acquisition opportunities for upside in buying those and creating values.

Dave Brag - ISI Group

Okay, so maybe given that, and despite the enrollment growth that I think that Michael mentioned, that was mentioned in the Wall-Street Journal article, is that contributing to a little bit of -- does that leave you just a little less willing to talk about potential growth above the 3% to 5% in a wide range, in an up year, a very strong year for the multifamily sector like 2012 or 2013 might be. Is supply the driver that could hold that back, or is it just the pure stability of the student housing product and the fact that you are not coming off the press ramps.

William Telvot

When you look at and go back two or three years, you are looking at our historical run rate increases on the core, and let us look at our current supplemental. Go to page 10, and when you look at our portfolio today as it exists, and this really speaks to how. Its really driven by supply and demand in the market, which yes that’s a side of what you are saying David.

That certainly has those variables to improve the opportunity to push rent and it’s going to get better, but 30 out of our 80 assets have rental rate growth right now in this economy above 3.3%, the range of 3% to 19.2%, that’s a little bit of an outlier on our turn around products that had very little rents, but 3 to 6.7%.

You look on the next page and you know it’s zero to 3, and so I do think there is opportunity in good times, in strong markets where you not having barriers you have barriers entry, of seeing solid 3% to 5% run rate growth, you see that right here on these pages. At the same time, not all at markets are going to have the limitations on barriers to entry where supply does tend to be the imitator on rent growth. Those markets won’t change over night and so you’ll have some drag.

As you look at the opportunities for American campus and so, I don’t think you’ll ever hear a student housing operator stand up and say “hey we think 2012, on a stabilized portfolio without external growth providing turn around upside,” on a stabilized portfolio you are not going to going to hear many student housing operator say “hey we think we have a 5% to 7% revenue growth a year, that typically doesn’t happen.

However, what you do here I say is consistent? Year-in year-out 3% to 5% revenue growth in good markets, and when you are able to manage the expenses as we have, to do a little better than that, and if you can couple that with integrating the assets that are under performing, then you can really juice it. That’s the opportunity for us moving forward.

David Doty- Citigroup

Got it, thank you. One last question; just looking at page six and the margins, at the legacy portfolio and GMH, it looks like over the past year you have an 800 basis point spread. Can you just help us out in terms of thinking about where that’s going to head or could head directionally; how much more room is there to narrow that?

Daniel Perry

David this is Daniel again. As we went into 2010 calendar year and we gave guidance, one of the things we talked about was that if you look at the GMH portfolio on an expense per bed basis, they are really not in that bad a shape. We felt pretty good about the levels that they are at, and so we were expecting kind of a normal inflationary kind of growth in expenses and to drive margin improvement by increasing revenues.

As we went into this year, we were thinking that we might see about 1.5 or so of decrease in expense margins for the GMH portfolio, and if you look versus first quarter ’09, we actually achieved about 3.4% decrease in expense margins.

So, we have been very happy with the ability that we had to control expenses, control those margin expense increases that we saw last year, and certainly hope to continue to narrow that gap. But for us to be able to say exactly how much we think we can narrow it at this point is difficult, because a lot of it is driven more by revenue growth and not so much by pure decreases in operating expenses for beds.

Operator

Your next question comes from Stephen Swett - Morgan Keegan.

Stephen Swett - Morgan Keegan & Company, Inc.

Daniel, I think as a follow-up to an earlier question on funding, you got a lot of acquisition opportunities that seem to be out there now. If you are able to hit on some of those, what are your thoughts on funding for a greater volume investment? Would you look more to dispositions or incremental JVs?

Daniel Perry

We certainly have an ongoing effort on the disposition front, and have some opportunities we are looking at that would help along that front. So that will certainly be an aspect as we continue to look at all sources of capital, whether it be refinancing assets that we paid off the loans on and we kept unencumbered.

We have plenty of capacity on the leverage front, and so if we need to generate liquidity off of those assets by doing additional pre-payable loans, we may look at that; whether its term loans or other types of bank loans, expanding our revolver along those lines.

Just on the assets we have unencumbered right now, and what we are looking at paying off in 2010 and ’11, we think there is another $300 million of financing capacity just on those assets. So we will also continue to look at whether or not raising additional capital on the equity side makes sense, and whatever is going to drive the best NAV accretion against the growth that we are looking at achieving, we will do that.

Stephen Swett - Morgan Keegan & Company, Inc.

John, I just have a clarification question. I know its a small amount, but the University Heights property that was internalized or I guess brought fully on the balance sheet, did you recognize the full contribution from that in the quarter.

Jonathan Graf

When you say contributions, how do you define that?

Stephen Swett - Morgan Keegan & Company, Inc.

Well, was it fully reflected in your fully owned consolidated results for the whole first quarter?

Jonathan Graf

Yes, since the acquisition that has been included in our results.

Stephen Swett - Morgan Keegan & Company, Inc.

What was the timing of the acquisition?

Jonathan Graf

That was early March, so about one month for this quarter.

Stephen Swett - Morgan Keegan & Company, Inc.

Okay, and then finally on the Hampton Roads, I think there was a comment that there was a delay in recognition of the fee, can you just provide a little more comment on that?

Jonathan Graf

On that on, just the construction on that one slid by probably about two or three months right now, and so what we are talking about is about $300,000 or so that we had anticipated recognizing this quarter, which is going to be pushing into the second and a little bit, just a very little bit into the third quarter.

Operator

Your next question comes from Anthony Paolone - J.P. Morgan.

Joe Dazio - J.P. Morgan

It’s Joe Dazio here on line with Tony. I was wondering if you could just quickly review the arrangements for the Ace transactions. I guess it may not be as straight or as simple, ground leased where the university is on the land and you guys own the building, because it sounds like I guess the universities could be on the hook for the debt if you guys were to default. So, I was wondering if you can kind of just briefly review that.

William Telvot

Let me first address your second comment and point you just to some detailed information. We certainly won’t have time to cover it today on the call, and that was, the university could be liable for debt if we defaulted.

You look at these transactions, and one of the things in the Moody’s paper, which again we think the Moody’s paper is very good for the industry, and we have great respect for Don Nelson and his crew, they do an excellent job and the more clarity that can be provided to the market place or through that clarity, the better all these programs are.

Two of the things that Moody’s look at in a transaction of any kind, and on an ongoing basis throughout the life of the project, is what is the likelihood of financial stress? Meaning, below break even off that you can’t cover debt service, development construction over runs, things that occur in a period of risk.

And secondly, what is the likelihood that a university would have to step up and get involved and offer financial support in those times. That is where the equity structure offers its competitive advantage. One of the things we have done, we issued a press release Tuesday I believe it was, or maybe Monday, and it posted on our website is a three-page physician paper on the Moody special comment, and more directly Joe to your question, from our view point how to apply their process that they go through in analyzing an equity structure and a 501C3 structure.

The real benefit of an equity deal over any type of 100% project-based structure, is that because of low leverage, excellent debt service coverage, and better performance metrics of every type, you are much less likely to ever have a situation of financial stress occur, in a low levered equity own deal, that make 100% project based finance transactions.

Secondly, going to your point, if you ever do have financial stress occur in a project, then again, one has a low tolerance financial stress, the other has a high. In those situations, you have a fully invested equity partner with all of their money at risk, whose own credit profile would be negatively impacted if we did not act, and therefore when you evaluate an equity structure -- and Moody’s looks at these parameters.

When you evaluate an equity structure, you have a much lower risk of financial stress and in a worst case scenario where you do have financial stress, you have a much less likelihood that the university would be the party having to take action, because you have a fully invested private owner at risk.

I did not do that justice in that quick summary, but if you go to our website there under our quick links, there’s that paper that will give that to you in great detail, and because of that -- and this is where really nothing has changed in the drivers for equity or 501C3 transactions, and that for those schools that are both risk adverse and want the highest probability that a project does not experience financial duress that would put them in a position of having to financially support it, equity programs like Ace offer the best alternatives.

To the contrary, the institutions that have a higher risk profile with desire greater control in cash flow, a 501C3 deal makes more sense, and that hasn’t changed. That is not a new revelation. That has nothing to do with Moody’s recent paper, the recent paper, the recent paper only reinforced that that is the continuing factor of how schools evaluate transactions.

Joe Dazio - J.P. Morgan

With my comment about, I guess the event of a debt default by you guys; was that accurate then to say that the university would be then on the hook?

William Telvot

No, they would not be on the hook. Let me tell you where that comes into play in any type of transaction. If you have a failure, a financial and operational financial failure on a campus, and the university turns a blind eye and says, “We don’t care, its not our project, that’s not our money at loss,” from our conversation with Moody’s, Moody’s would not penalize the schools credit. The school did not offer financial support. It is the overed action of offering financial support, which is always there a choice, never an obligation that would cause that.

Again, the real difference, and I highly urge you with the detailed question you have there, if you look at that three page piece it will really outline it for you, and that was put up there for colleges and universities to understand and help them assess this very type of situation.

Daniel Perry

I guess just real quick Joe. This is Daniel. To kind of shape that out a little bit more and direct the answer what your saying about whether or not the school would be on the hooks of debt. In our own cases, do we put financing on an Ace project? In the event that we did, that is our debt. The entity that AT&T owns, it owns the project.

The only time that the writing agencies would determine that there was any kind of debt impact, was if the school decided, that in a scenario where Ace defaulted, that they wanted this project, but under the loan documents that we would have entered into, under only obligation to support that debt and learn how to part the loan documents.

William Telvot

As a matter of fact, and if you read Moody’s, particular write up on Boise in April when they gave that credit termination, they actually went out of the way to state that university as no financial obligation whatever in the transaction

Joe Dazio - J.P. Morgan

Okay, and then I guess as a follow-up. I apologize if I missed this, because I know it’s been then a topic a little bit here in the Q&A, but do you think it was really just the timing issue in terms of why Boise did not get approved, I guess the Idaho says most of that, but they just didn’t have enough time to review the Moody’s document or was there some other term that they weren’t comfortable with?

William Telvot

One of the things we always follow our University’s led, whether or not we participate in their board meetings. In the case of Boise we did not directly participate in that meeting, and so anything that I am saying is what I have gotten second hand form the administration folks that were at that meeting.

There were questions related to credit. Whether that is a timing issue or whether that is something that is a more fundamental perception, that a board member may have, is what needs to be fared out. Again when I say that, when you read Moody’s paper, they make some very pointed statements that are 100 accurate, that we will look at as positive if someone could originally interpret as negative.

Let me give you an example. Moody says “an equity structure in and of its self does now mean it will not be counted against your debt capacity.” I love that statement because that says in the financial who you pick as a partner, what their financials wherewithal is, how much equity they are investing that lower those performance metrics, what is their operational track record to be able to successfully manage your property and show there is no financial duress; how committed to they are at the industry.

Those are all qualitative factors they look at verses, Joe Blow may be buddy of an alumni that investors life savings in a project and no management expertise puts high leverage on a project, well that shouldn’t receive the same treatment.

Now back up, if you have a paper that says an equity transaction in and of itself does not guaranty, its not included in your debt capacity. We have competitors out there, running around and saying “oh look, that mean all equity is bad,” no it doesn’t mean that at all. Moody looks at everyone on a case-by-case basis independently, and so university, this is something again, we are quite used to this.

Whenever information is released by a rating industry on a very complicated specific issue, for us its not complicated, because its what we do for a living. There is always confusion out there; people need to work though those. If you go to our website and you view again that three page document, anyone who is interested in that subject, I think in just reading those three pages will have a great understanding of equity transactions, 501C3’s and based on the university desires and objectives, win base should pick each and the five things with nothing with that regard to their profit has changed.

Joe Dazio - J.P. Morgan

Okay, and then just one last question on the structure of these deals; is the ground rent fixed or is based on, or is it available just based on the revenue of the project.

William Telvot

I can be a variable work of those items, and each one of those is independently negotiated. In many cases it’s fixed, in other cases it’s a portion fixed, a portion variable. One of the things that we have seen, institutions in some cases like to see an out performance rent based on operational success type of revenues, specifically revenues driven on NOI.

Operator

Your next question comes from Andrew McCullough - Green Street Advisors.

Andrew McCullough - Green Street Advisors

Just to take you back on the Moody’s question, I know the calls getting a little bit longer here, but if use seem this embarrassed with new separate projects, do you think Moody’s would look at them differently as if there was finance via construction debt and finally via equity.

William Telvot

We do not believe they would look at them any differently whatsoever.

Andrew McCullough - Green Street Advisors

It really comes down to the sponsor in their mind.

William Telvot

It comes down to who the sponsor is and the sponsors credibility is one of a myriad of factors that they consider, but certainly one they do take into consideration.

Andrew McCullough - Green Street Advisors

On the fidelity JV assets, I don’t know if you can comment specifically on the performance of those assets, but can you comment on whether or not you think you’ll be looking at additional assets to either take over or may be hand the keys back on?

William Telvot

It’s just that we couldn’t comment on any of that, and we continue to work with feudality and be the best manager and partner that we can to maximums value for then. On a case-by-case basis we are work with them property by property to try to compensate those objectives.

Andrew McCullough - Green Street Advisors

And just one last question and sorry if I missed it. Your legacy assets are running behind last year on lease basis verses application, and I guess my question is, the spread between applications and timing is bigger than I would expect it to be, and much bigger than where we are currently seeing, can you comment on that spread?

William Telvot

And that’s driven at a couple of properties. You’ve got two or three of those variables for a simple barriers issues. I think a coupe of 100 are right there, and that we have an administrative process with a school we put in place, where we now incorporate everything in the lands after their assignments, and so last year everything that was assigned was immediately in an application and lease. We are going through a two step process on the administration of that. We’ve got a couple of other markets where we’ve got recent leasing activity on an application agent basis, we are fine as a lottery snap.

We really are focusing on that application number, and historically over the years we have been able to always manage that conversion ratio consistently, to where there is very little follow-on on that. So as we look at it, we don’t see there are any systemic problem and any property would lead us to believe that conversion ratio back up to leasing numbers is going to be any different than in the past year.

The other think I will say, and this is something systematic, we do talk about this internally -- GMH had a different leasing program than we did, partly good, partly bad and that they haven’t had an excellent process and manager incentive based on the very quick conversion on site to those leases.

We also on many of our on camps assets like this [Inaudible]. Did you know we market extensively though the parents also, and so part of that marketing process involving the parent and the send off of that lease to the guarantor is more of an established process that is co-involving the student there and will take a little more time administratively.

Operator

(Operator Instructions) Your next question comes from Paula Poskon - Robert W. Baird.

Paula Poskon - Robert W. Baird

I’d like to ask a little bit differently to Dustin’s earlier question. What do you think the spread is currently between accusation and development yields? What do you think its going to be six to twelve months from now, and how is that driving your thoughts on capital allocations.

Bill Bayless

Paula, one of the things that William did talk about, we do think there is going to be downward pressure on cap rates and I think you attended some of those conferences and you probably came away with the same feelings.

We continue to be an aggressive buyer based on NOI growth profiles. And so you know that those assets, we would be eager to pay at seven cap based on the NOI growth rather some properties you maybe in the sixes based on the NOI growth profile, and so we always look at it again. We look at cap rate as a component of what is that NOI growth profile and are we willing to pay a great different range based upon what we believe the profile of that growth property is, but we do think cap rate are coming down.

As it related to off campus developments, we are still able to find opportunities out there based on the current construction market, and on the availability of the land and our current land bank and sights and price that has come down, with an A plus; and so you know, you see the spread right now between acquisitions and off camps developments, between anywhere ranging from 100 basis points to 200.

I’m not saying that’s what we require as the spread; I’m saying that’s what we are seeing on opportunities that provide us the IRO’s we are looking for, is what the current spread is. Based on the mathematics of what we are willing to pay, what your requirements are as it relates to NOI growth profile and IRO.

Paula Poskon - Robert W. Baird

Then to follow up on your comments about marketing to students and to the parents, what are you hearing from them about there own economic satiations, in particular their though on financial aid, and are you seeing any repeat trends of students delaying there decision making because they are awaiting financial aid decisions.

Bill Bayless

We have not directly related the financial aid decision, and I have to say, throughout the last two years we have just not seen financial aid. When we look at those, page 10, third properties with rental rate increases from 3% to 6.9%, that velocity did grow last year, thirty somewhat on the following, 39 on the second page which runs from 0.3%, and so we really have not seen any negative impact related to financial aid.

I think college and universities and the government initiative programs have really done an excellent job in terms of making sure there is liquidity for students who want to go to school, and so we have not seen any direct negative impact associated with that.

Paula Poskon - Robert W. Baird

Are you seeing the local and regional competition act more rationally this year in the leasing cycle versus last year, in the panic of last year?

Bill Bayless

I would say there has been more of a balance. Again, last year I always refer back to that may read in what was at San Diego in terms of it. We all remember what the mindset was there. People were scared, and people didn’t know what to expect, and so I think that there was great caution and panic at times in terms of parole operators.

There is certainly a change in that, so I think people would have been more disciplined. Look at us; I mean in my comments in terms of last year, we had rental rate slides from what was originally 3.2, down to 1.7, and this year we are aggressively raising rates where we can to hold on to that 2.2.

So I think we are behaving more logically. Now part of that is because last we complained that because we always had the early leads up, we did not have the second half leasing velocity data for so many properties. The benefit we have this year in land and now we have all the historical data, so we can make those decisions based on statistical facts of knowing velocity.

So I think other companies too are doing a real good job in looking at supply-demand, looking at how much can be absorbed, and be more prudent in not just throwing $500,000 gift cards out there.

Paula Poskon - Robert W. Baird

Okay. This is a softball question for you to close. You mentioned the considerably improved count in the recent conferences, emerging growth opportunities that are meaningful, binding appetite is better, you are able to selectively push rents, so other than new supply bill, what is keeping you up at night?

Bill Bayless

I’m sleeping pretty good in all candor, but I’ve answered this question the same, ever since we went public. Our business is driven by people, and the strength of the American campus has always been our employees and our talent level. So the thing that we think about here day-in and day-out, we don’t ever want to be a stagnating company.

We look at the opportunities on page 13 and listen to William talk about in his script what we are underwriting, and so as always we want to make sure we have the next group of talent, groomed and ready to go for any growth this company may undertake, and so the training of our people and making sure that they are prepared is always something that is in a high priority for us.

Operator

This concludes the question-and-answer session. I will now hand the call back over to Bill Bayless.

William Bayless

We’d like to thank all of you for joining us. We think it was a very strong quarter. We think we continue to be uniquely positioned with our external growth and internal growth prospects. The price earnings growth ratio for American campus multifamily is only looking better everyday. So thank you all for listening, and we’ll see you next quarter.

Operator

Ladies and gentleman that concludes today’s conference. Thank you for your participation. You may now disconnect, and have a great day.

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Source: American Campus Communities Inc. Q1 2010 Earnings Call Transcript
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