American Campus Communities (ACC) CEO Bill Bayless on Q3 2021 Results - Earnings Call Transcript

Oct. 26, 2021 1:59 PM ETBlackstone Inc. (BX)
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American Campus Communities (ACC) Q3 2021 Earnings Conference Call October 26, 2021 10:00 AM ET

Company Participants

Ryan Dennison - SVP-Capital Markets and IR

Bill Bayless - CEO

Daniel Perry - CFO

William Talbot - Chief Investment Officer

Conference Call Participants

Samir Khanal - Evercore ISI

Neil Malkin - Capital One Securities

Nick Joseph - Citi

Alexander Goldfarb - Piper Sandler

Austin Wurschmidt - KeyBanc

Chandni Luthra - Goldman Sachs

Derek Johnston - Deutsche Bank

John Pawlowski - Green Street

Joshua Dennerlein - Bank of America

Operator

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the American Campus Communities Incorporated 2021 Third Quarter Earnings Conference Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we'll conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

I'd like to remind everyone that this conference is being recorded and I would now like to turn the conference over to Ryan Dennison, Senior Vice President of Capital Markets and Investor Relations for American Campus Communities. Please go ahead.

Ryan Dennison

Thank you. Good morning and thank you for joining the American Campus Communities 2021 third quarter conference call. The press release is 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. Also posted on the company website in the Investor Relations section, you will find an earnings materials package, which includes both the press release and a supplemental financial package.

We are hosting a live webcast for today's call, which you can access on the website with the replay available for one month. Our supplemental analyst package and our webcast presentation are one and the same. Webcast slides may be advanced by you to facilitate following along. Management will be making forward-looking statements today as referenced in the disclosure in the press release, in the supplemental financial package and in SEC filings. Management would like to inform you that certain statements made during this conference call, which are not historical fact, may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995.

Although, the company believes the expectations reflected in any forward-looking statement are based on reasonable assumptions, they are subject to economic risks and uncertainties. The company can provide no assurance that its expectations will be achieved and actual results may vary. Factors and risks that could cause actual results to differ materially from expectations are detailed in the press release and from time to time in the company's periodic filings with the SEC. The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release.

Having said that, our Chief Executive Officer, Bill Bayless, will be providing our opening comments today. He's joined by the following members of senior management for the call. Jennifer Beese, President and Chief Operating Officer; William Talbot, Chief Investment Officer; Daniel Perry, Chief Financial Officer; Kim Voss, Chief Accounting Officer and Brian Winger, General Counsel.

With that, I'll now turn the call over to Bill for his remarks. Bill?

Bill Bayless

Thank you, Ryan. Good morning and thank all of you for joining us as we discuss our 2021 Q3 results and the current operating environment. As you may recall, on our Q2 call in July, we were still somewhat apprehensive as we adjust surpass last year's COVID impacted leasing velocity and the emerging Delta variant was creating uncertainty around university's plans to move forward with in-person classes and a return of campus social activities.

At that time, based on historical leasing velocity data, we continue to believe that the industry's COVID recovery would not fully materialize until the fall of 2022. Today just three months later, we are extremely pleased to report that students all across the nation continue to flock back to their college towns and leased well into the months of August and September and universities continued to press forward with their plans to return to in-person activities, including full attendance at college football stadiums across America.

The result, the student housing industry has emerged from the COVID pandemic in the fall of 2021 with its investment thesis fully intact and with the sector having tailwinds, the like of which we haven't seen in many years. As outlined in our interim update earlier this month, we're pleased at the execution of our Fall '21 lease up produced an opening fall occupancy of 95.8% for our total portfolio and rental rate growth of 330 basis points to 380 basis points for our 2021 and 2022 same store property groupings respectively. All these metrics are above the assumptions in the high end of our prior lease-up guidance.

In addition to the extremely successful lease-up. our operational and financial results also exceeded our expectations in the third quarter with ancillary income and operating expenses beating our forecast. In addition, the ongoing development and commencement of operations at Flamingo Crossing Village, our community serving the Disney College program are also going quite well. During the quarter, we delivered the fifth phase of development and have now achieved 85% occupancy in line with our expectations for this fall.

Notably, since the DCP program recommenced only five months ago, we have already executed leases with and moved in more than 4,500 residents demonstrating the continued vibrant demand for the Disney college program. Our lease-up results and recent operational outperformance allowed us to increase the midpoint of our financial guidance by 4% to $2.08 per share, which is above the high end of our prior guidance range.

Based on the progress we've made this year, total property NOI returned to pre-pandemic levels this quarter, a full year earlier than we previously anticipated and more impressively, rental revenue is expected to exceed pre-pandemic levels in the fourth quarter for our same-store properties from 2019. We now expect to grow earnings by 3% to 7% over 2020. All in all, the company's recovery and financial performance this year has certainly exceeded our expectations, as cumulatively we've exceeded our original guidance for the first three quarters of the year by $0.12 per share, or almost 10% as students continue to return to college campuses throughout the year.

I'd like to now turn to the fundamentals of our industry. As reported by owners and operators attending the NMHC Student Housing Conference earlier this month, occupancy and supply demand fundamentals of the sector are strong. And again, the industry is experiencing some of the most substantial tailwinds we've seen in many years.

The broader comparable sector represented by the RealPage Axiometrics 175 returned to pre-pandemic occupancy levels of approximately 94% while also producing attractive rent growth of 2.5%. We saw robust admission applications at four year public and private universities we serve and target the strengthened admission applications appears to have directly led to the highest level of first year student enrollment growth we've seen. In the 48 of 68 university markets for which we are able to collect first-year enrollment data, there was an increase of 7.4% over Fall 2020 and 6.4% above pre-pandemic Fall 2019.

For perspective, for four year public institutions in the prior 30-year period average first year enrollment growth was approximately 2%. This level of significant growth in first-year students occurring this year indicates the emerging post-COVID year of demand from students wanting to attend high quality universities in person and should provide significant recurring housing demand in the years to come.

The record number of first-year students, the reinstatement of on-campus housing policies and the resumption of in-person campus activities will once again allow us to implement our in-person and exclusive sports marketing program activities in the 2022 leasing season. Historically, these programs have been an integral part of our early leasing season velocity outperformance and our final fall occupancy outperformance as compared to our peers. The significant increase in first year students led to the highest level of total enrollment growth in recent years, up over 1.5% versus academic year 2020, and pre-pandemic academic year 2019.

In 60 of the 68 ACC markets, for which we've been able to collect total enrollment data, this represents the addition of over 30,000 students. Tailwinds also include a reduction in national new supply, continuing at least through the 2020 to 2023 academic year. This includes a projected decrease of over 25% in ACC markets and represents the lowest level of new supply we have seen in over a decade.

In total, we're tracking new supply of only 15,500 beds with only one third of our NOI being produced in market seeing new supply. This compares to 55% to 67% of NOI being produced in new supply markets over the last three years. We're also seeing significant demand from universities seeking to modernize their on campus housing.

During the quarter, we were awarded new third-party developments at Emory University and the University of Texas. And this month we started a new third-party development on the campus of Princeton University. In all, we are tracking more than 60 universities that are evaluating privatized residential projects, a continuing increase compared to pre-pandemic levels.

In summing it up, we're extremely pleased with the progress that we and the sector have made in managing through the global pandemic. Finally, with our sector's resiliency and investment thesis fully intact as we emerge from COVID, institutional capital is once again focusing on the sector with several notable transactions recently occurring in this space. We are highly competent in our ability to fund our business through strategic capital recycling and free cash flow generation while producing attractive earnings growth for our shareholders.

With the sector's COVID recovery now largely complete we believe the current transaction environment affords us the opportunity to accretively fund recent and ongoing development activity and further strengthen our balance sheet in 2022. As such, we intend to accelerate 200 million to 400 million of disposition activity, which fully satisfies our projected funding needs. Including the strategic capital recycling, we believe that FFO and per share growth in the range of 12% to 15% is achievable 2022.

Based on the positive fundamentals in the student housing industry and the accretive contribution from our ongoing development program, we are excited about the prospects for continued growth beyond 2022. We believe we are now well positioned to produce long-term earnings growth, net asset value creation and superior returns for our investors in the years ahead.

With that, I'd like to turn it back to the operator to start the question-and-answer portion of the call.

Question-and-Answer Session

Operator

Thank you. [Operator instructions] Our first question comes from Samir Khanal with Evercore. Please go ahead.

Samir Khanal

Thank you everybody. Good morning. So Bill or Daniel, can you provide further color around the 12% to 15% growth for next year? Maybe walk us through kind of what are the assumptions behind that range and also just curious if you do end up doing better than that range of 12% to 15%, where do you think the upside would come from?

Daniel Perry

Yeah, Samir, this is Daniel. I'll take that. And, obviously we're not ready at this point to give too much additional detail in terms of guidance for 2022. We did want to put that 12% to 15% out there for folks as we do have some foresight obviously through the remainder of the current academic year that we just completed the lease up, which takes us into the third quarter of next year and the really attractive revenue growth that we'll be able to deliver from that.

When you look at kind of inflationary expense growth that we assume probably in the 3%, maybe 3% to 4% range, we should be able to deliver same store NOI that compares very well to other sectors. And so, obviously you also have the accretive contribution from Disney as additional phases come online and we get a full year's contribution from that ramp up that we're seeing at Disney. So, we wanted to help people understand whether or not the recovery was reflected appropriately in the numbers they put out. And we felt like that helped clarify that a bit.

Samir Khanal

Okay. And then I guess my second question is around, you provided some color around dispositions of the $200 million to $400 million. That's part of your plan. I'm just curious, how are you kind of selecting those assets that are, you're looking to sell, I guess, why does it not make your criteria and what is the cap rate we should be applying to that bucket?

Bill Bayless

Yeah, part of what we're considering in conjunction with those dispositions, in some cases, we're looking at the analysis of an outright sale, but also selling into a 55-45 joint venture in terms of assets where it's appropriate to harvest some of the value that we've created out there. But the growth rates are substantial to where we still want to have that coupon clipping income going forward. So certainly anything we would be looked to be selling would be in the low 4s consistent with where we're seeing the market cap rates trade and accretively put that into the current and ongoing developments that we have.

Operator

Our next question comes from Neil Malkin with Capital One Securities. Please go ahead.

Neil Malkin

Good morning, everyone. Great job, very pleased with the pre-leasing results, obviously a testament to everyone on the team and Jennifer as well from her operating ability. So congrats on that. First question and I think I've been asking this to you guys for a couple of quarters, but can you give some updates or any clarity on the growth 2030? If you're close, what does that look like size, has anything changed given the I guess if you want to call it, pull forward of recovery or elevated investment capital looking in student housing or potentially lower supply environment making you more active. So if you can just maybe talk about your thoughts and plans there.

Bill Bayless

Yeah, certainly and the first component of that is the 55-45 joint venture structure that we talked about in contemplation of this immediate $204 million of our own capital recycling and having that platform in place to be able to execute on it. The additional effort continues to go well, obviously the team's been very focused on the lease up and the delivery of bids. William and his team are running that process and we are well down the road and do expect to have it contemplated by the end of the year. And look forward to moving forward with it.

We think there's great opportunities for us as we go forward from a growth perspective in terms of bringing more assets on to the -- into the portfolio that we can create outsize returns for our investors in that joint venture structure.

Neil Malkin

Yeah. Thanks. I just want to be clear on, you said the 55-45 that is, what does that relate into? Is that the growth 2030, that the JV was going to be like a 90-10…

Bill Bayless

The broader component of pursued growth 2030 initiative is broader than just one JV of 90-10 and also we look at the existing JV structure we have with early ones where we had already transacted earlier in some of the Austin assets. And we look at that as part of the strategic vehicle in terms of assets that I previously described, where there's still good growth to continue to harvest, but there's also an opportunity in the current environment to sell into and take some of the chips off the table with the value that we've created.

Neil Malkin

Appreciate that. Other one for me is related to development. So, I think historically you guys have delivered around $300 million of developments annually And I think if you're obviously lower than that in the $100 range, I guess over the next couple of years, I think you might get to $200 Million IN 2024. Can you just talk about how you see that pace and when you expect to get to and probably pass that $300 million per year just given again the strong fundamentals and accelerating interest from the universities for housing revitalization.

Bill Bayless

Yeah. And this will be a post-COVID ramp up of a little bit of a slower nature than you'd seen in a non-COVID impacting environment. One is you saw prior to COVID most of the transactions that we were developing on balance sheet were indeed on campus P3 transactions. And that is where we see the best accretive yields. It's also in an environment like this with related to land costs, construction pricing, where you have better opportunities to structure transactions, where we can achieve our yield.

Certainly the colleges and universities we mentioned over the last 18 months, had a pause in moving forward with many of their processes as they dealt with COVID and the reopening of the campuses. As was mentioned and as you now see proof of on this call, the universities are now focusing beyond COVID and you're seeing that activity ramp up, but those development deals do take time to come to fruition and so the dip that you see at this moment in time is directly related to that little bit of pause. We see more demand than ever, as we mentioned in the script in terms of the number of transactions that we see coming on that front and so it will be lots of opportunity, but we look at the natural development cycle and putting assets into place it's really two to three years out before you see those historical volumes start to come back into play.

Neil Malkin

I appreciate that. Thank you, guys and great quarter.

Operator

Our next question comes from Nick Joseph with Citi. Please go ahead.

Nick Joseph

Thanks. As you look at your rent roll for this fall, how many December leases are there versus a normal year? And how do you think about back-filling I guess for the second semester beginning of January.

Bill Bayless

Yeah. Nick, we've got about 40 bps of additional December ending leases than we typically do. Actually it's about 30 bps looking at the numbers directly. In most cases, those leases are at markets that have not fully recovered from COVID and so there's still upside in occupancy and the ability to backfill. I will note that on the interim leasing update that we did, we did put a footnote in the leasing table taking into consideration two things that's slightly elevated level this year, but the bigger issue was how much leasing we continued to do last year, as it related to Q1 and Q2, that we could see some tempering up given the success of the fall lease up.

And so we talked about, where we talked about the 8% in rental growth in Q4, we tempered that and said probably 6.75% to 7.75% in Q1 and 5% to 6% in Q2 taking that aggressive leasing that took place last fall that was a little abnormal and coupling it with that.

Nick Joseph

Thanks. That's helpful. And then just on the asset sales with the fall lease up complete, where are you in terms of identifying and marketing the properties and when would you expect them to actually close either the sale or a JV?

Bill Bayless

And we are very excited that we have hit the point that the two things have occurred. One that the re-stabilization of our portfolio in the industry has taken place. The other thing, and if you'd been at the NMHC Student Housing Conference a couple of weeks ago, student housing had not yet seen the compression that you've seen in multifamily and really cap rates stayed consistent throughout COVID. But we hadn't seen that benefit.

And so hopefully, we'll also see now with the institutional capital in the space with all the questions about the industry put to rest and the investment thesis in full tax, when you're beginning to see some of those transactions take place. And so we're very bullish on the ability to execute. We do have properties identified within our portfolio as it relates to outright dispositions and/or harvesting value in joint ventures and that's something we think we can move along in the first two quarters of 2022.

Operator

Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander Goldfarb

Hey good morning, morning down there. I feel like the kids sitting in the back of the class a little bit confused on what's going on. So I've to raise my hand and ask the professor. You guys talked about accelerating $200 million to $400 million of dispositions, you also have JVs outstanding that you want to execute, but I would imagine the JV would be for more than just $400 million of assets, because that would only be, maybe four or five assets at most.

So you just walked through big picture, what we're looking at? There's the joint ventures, there's the accelerated $200 million to $400 million. So I don't know if that's going to be executed later this year or that's something for '22, but just as we can conceptualize these different components that are going on, that you guys are thinking on the external side.

Daniel Perry

Sure. Alex, let me jump in on that. I think what Bill was trying to explain is how we think about both the capital recycling side of the equation, and then the opportunity to deploy that capital to pursue growth platform opportunities and so what we're talking about in terms of the $200 million to $400 million, you should expect to see us do that in a similar fashion to what we did with the Austin portfolio, where we sold a 45% interest in the assets and that would represent the $200 million to $400 million in proceeds to us.

The pursued growth 2030 strategic capital platform that we've talked about, where we would make a minority 10% investment into a larger joint venture platform to go out and buy assets. We've said we expect that to be about a $1 billion platform where our investment would be about a $100 million dollars and we expected that to commence next year potentially be in place by the end of this year with activity starting next year. And we do think it'll take a couple of two to three years to fully deploy the capital available in that platform and so, that's how you should expect those two different initiatives to take place.

Alexander Goldfarb

Okay. So, DP, just thinking about that. So the $200 million to $400 million, if we think about it, basically a 50-50 JV, it's basically on a gross basis is double that amount and then separate you have this new JV. Okay. Now, we're all set. And as far as modeling and thinking about timing, as we think about our 2022 estimates that $200 million to $400 million DP, you would, should -- will we think about that something later this year early next, or is that…

Daniel Perry

Yeah, that was something Bill commented on earlier that we would expect that to be in the first two quarters of 2022. We are already talking with different potential investors in that portfolio under a joint venture structure and so just wanting to work through and get the best terms for that partnership that we can get.

Alexander Goldfarb

Okay. And then the second question is in the opening comments, I think Phil referenced supply's down a 25% reduction in your markets at interface, the main takeaway there was supply, it's going to be less than half of it was back in 2013. So one, the 25% is that the same base here as 2013, just trying to figure out if it's different basis or if this is what the whole industry is doing, which is everyone is gravitating towards the flagship school. So it's really the tertiaries that are seeing the dramatic drop in supply and then as everyone shifts to the flagship schools, supply is still dropping. So I'm just trying to figure out which if it's a base year thing, or if it's a geographic thing on the changes in supply.

Daniel Perry

No. And certainly when we talk about the 25%, it's directly related to our portfolio versus the national numbers that Axiometrics get. I would say there is a flight to the blue chip institutions and certainly the power five conference schools. I got to tell you the industry fundamentals that we talked about on the call or what we are really sitting here excited about, when you take these things together, one, the increase in first year student enrolment being at 7.5% over last year in 6.4% over '19 pre-COVID, that is the pent-up market.

Most of those students have not yet benefited the private student housing market. That is the group of students that are moving on campus this year for the first time that will then migrate off campus over the next three years and so, when you look at the supply-demand equation coming down to the level that it is, typically if you look at our historical chart, those of you that have sat in our meetings over the year, we have the pie chart that has shown enrolment typically growing at 1.2%, or I'm sorry, supply growing at 1.2%, enrolment in the area of that same 1.1 to 1.3, and really more of an equilibrium in the industry.

When you now look at those charts for the first time, in our own portfolio, you see enrolment up 1.5, supply 0.8, the biggest differential we've ever seen. And then when you look at what was really driving most of that 1.5 is a first year enrolment number of 700 bps, that indicates what the future trend is. And so this is something we're most excited about is the trending of that differential in the decrease in supply with that first-year enrolment, as that evolves through over the next three to four years.

Alexander Goldfarb

And Bill, just to confirm the 25% reduction ACC markets, that's based also off that 2013 peak year.

Bill Bayless

No, that's this last year to this year. Fall '22.

Alexander Goldfarb

Excellent.

Operator

Our next question comes from Austin Wurschmidt with KeyBanc. Please go ahead.

Austin Wurschmidt

Hey, good morning, everybody and thanks for the time. I was curious with the increased competition in the sector, what's kind of your in terms of how that changes the landscape or opportunity set to do off balance sheet deals in sort of that 40, 40, 45, 45, 10 joint venture. And then I was also curious if you could share, what percent of the P3 backlog could fit within that joint venture. As I know you've talked about expanding the opportunities and an off balance sheet structure in terms of the schools, you'd be willing to do development deals at.

Bill Bayless

Yeah, let me start backwards. As it relates to on-campus ace transactions, those particular transactions, we would not undertake in a 90-10 joint venture where we are the minority partner and that kicking off those relationships in those transactions it's critical for us to be in a majority partner role in dealing with our universities. But rather when we look at the ACE portfolio that we have, we look at the recapitalization of those being better suited in the context of a 55-45 joint venture, where we sell a minority interest, we maintain the majority partner position with the university. And candidly, we think that can be a plus in university seeing that that's how we monetize those investments. And that they're always hoping that ACC is going to be their long-term partner versus selling out of those transactions.

William Talbot

Yeah. The other thing I want to make sure that there's not any confusion on Austin is anything we would do in a minority interest joint venture, the 90-10 growth opportunity joint venture that we talked about. You referenced maybe going to schools where we wouldn't do on balance sheet that is not at all the investment strategy of that joint venture. We would continue to target universities that meet our core investment criteria.

It's just that we want to reserve any capital that we raise from capital recycling to for -- on balance sheet for we think the most attractive capital allocation opportunity we have right now being that ACE on campus development. And we would then use that 90-10 off balance sheet joint venture to do more off-campus development or acquisition type opportunities that still meet our core investment strategy, but just from a capital restriction standpoint doesn't make sense for us to do on our balance sheet right now. And as it relates to the competition for those transactions, as you brought up there is indeed, a lot of capital in the space and it is competitive.

The other thing that has taken place though, and we've talked about this in the past, and I think you're going to see coming to fruition in the years ahead with the influx of capital into the space, you've seen, most of the transactions that have been done have been recapitalization of existing portfolios, not direct sales, and many of the folks that previously were merchant developers in the space are holding assets for the first time building their operating platforms for the first time and operating larger portfolios for the first time.

And so the merchant developers now have all, switched to where their holders of three to five, seven years and then they'll look to harvest value. This reminds us of the early days when we were public and you saw significant NOI growth from us in terms of the M&A deals that we were doing is that we still believe our greatest asset in creating value is the incremental value that we create in our operational platform and occupancy pricing sophistication. And so as we pursue transaction that arena, that's what we're looking for.

We're looking for what are the assets that we can underwrite differently than anyone else, because of the value that we can derive from our portfolio and more of the product that is being developed and held out there is in the context of being able to pursue those types of opportunities.

Austin Wurschmidt

Got it and I thought that just to be clear that you were looking at a broader set of more third-party development opportunities that you would undertake within a minority -- with a minority interest that to generate some additional income, but okay.

Bill Bayless

Yeah, the nature of that, what you're speaking to is really what we do on campus and the P3 utilizing the bond financing structure or universities funding themselves where we are the fee developer, and there are more opportunities on campus for that business just as more schools are undertaking modernization.

Austin Wurschmidt

So next part, so with sort of the recovery and fundamentals quicker than you had originally anticipated and now sort of the plan to accelerate the dispositions to improve the balance sheet strength, what's the appetite or need or thoughts around equity today?

Daniel Perry

Well, let me say this Austin, right now both, if you look at the market of the last few months and honestly our own opinion of NAV has increased substantially. We were in a very different place earlier this summer before our leasing had surpassed the prior year's leasing levels in terms of being confident about the recovery in the operating environment and the business.

Now that we have seen that take place, as Bill said in his opening remarks, we've seen analyst estimates of NAV move up in the 50% to 60% range with the upper half of that really being driven by people making, using assumptions that are based on a more normalized level of NOI which we think is appropriate at this point in time.

We are basically there in terms of the amount of NOI we're producing relative to 2019. And when you look at on a same property versus same property in 2019 basis, our rental revenue for 4Q of '19 is growing. So our 4Q of '21 is growing. And so we would tell you that our belief is NAV is up in the higher end of those ranges that are out there. And so our board and management team are focused on returning the stock to NAV and in no way, shape or form, are we interested in issuing equity at these levels? And that's why we gave the additional disclosure around our plan for increased dispositions in 2022.

Austin Wurschmidt

That's great. Thanks, Daniel.

Operator

Our next question will come from Chandni Luthra with Goldman Sachs. Please go ahead.

Chandni Luthra

Thank you for taking my question. Appreciate all the color around NAV and strategic capital platform. And thank you for that. My question is around these two new project awards that you talked about Emory and University of Texas. Could you perhaps give some color in also understanding scale as we think about modeling them? Are we looking at say a Princeton as a benchmark $6 million, or are we looking at Concordia as $1.3 million? How should we think about what the size of bids ultimately could be broad strokes.

Bill Bayless

Yeah, Chandni obviously that is the difficult part when we announced these new third party transactions. They at this point been awarded to us and we're in a position in the process with university to announce those, but we are still working on the ultimate project that we will develop for the university. And so that's why you see those TBDs where we're not able yet to disclose what the fee will be, because it all depends on the ultimate size of the deal.

When you look at really the average transaction for us, they're typically about $3 million in fees. The recent one we announced you see on our page S10 supplemental at Drexel University, that's a renovation. That's a smaller project, just under $2 million in fees. You look at one of the larger ones, I think at UCI that's up in the $5 million range, those are kind of the ends of the spectrum and so your average transaction tends to be more in that $3 million range. And so when we're still working through the ultimate project size with the university and not ready to disclose to you yet, that's what you should just assume, and on average should work out.

Chandni Luthra

And, just an extension of that Princeton's $3 million would be in fourth quarter and the rest through the construction process. Is that correct?

Bill Bayless

When you say the rest being through the country, yes. The rest of the fee being recognized through typically it's about 50% upfront recognized, and then the remainders recognized throughout the construction process.

Chandni Luthra

Got it. And then my follow up question is generally around inflation and supply chain headwinds that are sort of present across the economy right now. You gave some color on inflation, but as you think about all these projects that you're undertaking for growth, how do you think about, A, perhaps just the ability to get product and how that impedes your own economic calculations as you think about, just returns on these projects going ahead. Thank you. Okay.

Bill Bayless

Yeah, no. So the supply chain challenges are certainly something that is factored into each and every transaction. And we know one of the things that you have to do is maintain flexibility on the front end. And we sit on both sides of the table at times as an owner in contract and also as a service provider to universities in delivering those things. And so the process you have to have in place, and as an owner, developers have flexibility as it relates to your requirements and specifications and knowing what you can get versus what you can get out of submerging. You got to be well into the process in terms of maintaining that.

From a fee provider perspective, we protect ourselves in terms of force measure and making sure that we have the ability to implement those changes in specifications and as an owner, as we designed to think about it, we take those into consideration how we approach the design of them.

William Talbot

Yeah. The other thing Chandni, that I'll point out for you that we talk about quite often is why we like on-campus development transactions is it does give us the opportunity to work with the university to help manage through increased construction costs we're in environments like this. The universities at the end of the day, have a desire to deliver modern housing for their students on their campus that make them competitive.

And one of the triggers that they can pull to help facilitate those projects is in terms of what they basically charged for their land through the ground rent payment that is applied to the transaction. And so when we see an increase in construction costs, that we can work with the university to reduce that ground rent and make a transaction feasible to basically achieve what they're trying to accomplish, which is deliver modern product at a price that is affordable and acceptable to their students.

Chandni Luthra

Thank you for the color and congrats on a great quarter.

Operator

Our next question will come from Derek Johnston of Deutsche Bank. Please go ahead.

Derek Johnston

Hi everyone. Good morning. Given the widely reported university endowment performance and growth in 2021, are you seeing increased interest in third party development with maybe legs and are universities considering deploying some excess returns into updating their on-campus housing and how well positioned you feel ACC is to capitalize on this trend or any trend beyond the two recent wins?

Bill Bayless

Yeah. And while that's certainly a plus for many universities in terms of the performance of their endowment, we are not seeing universities typically earmark their capital for ancillary development, which housing is now falling into, and they're preserving their capital for academic and research. There are exceptions, for example, Princeton is funding the transaction there. And so you will have some schools that do have the wherewithal just to write the checks themselves, but that's not the norm.

And so most of the transactions that we're pursuing and those that are hitting the street are not university funded, but rather off balance sheet for the university in the form of either project-based revenue, tax, exempt bonds that we've done for decades or the equity model. And, as we talked about in our comments, we do see those numbers to continuing to increase post-COVID. We're now tracking more than 60, and we feel the company is better positioned than we have ever been in that space, especially being the only public company left pursuing that business that gives us a real alignment and transparency with the universities.

Derek Johnston

Okay, great. Second question. It looks like on the supplement page eight, you call for a return to pre pandemic leasing next summer. So we expect you're referring to summer camps, conferences and revenue drivers along those lines. So what's giving you confidence that summer 2022 can bring the camps back on campus and pretty much return to pre-pandemic activity at this time?

Bill Bayless

Yeah and many of those camps are tied to university athletic programs. In many cases, they're ran by the coaches and so they tend to go hand in hand with the campus activities that take place around sports, band, cheerleading, all those types of things. And so with the return this fall of all those campus activities, we're seeing a ramp up in plans for those camps and conferences to come back.

Operator

Our next question comes from John Pawlowski with Green Street. Please go ahead.

John Pawlowski

Thank you, William, for the three development projects that are confirmed to be ACE on the supplemental MIT, Berkeley and Northeastern, could you share the latest thinking on stabilized yield assumptions?

Daniel Perry

Yeah, as we continue to work with those universities and again, MIT could potentially be third-party or ACE, but we continue to target that, 6% development yield range, and we're, as Bill said on a number of comments that we're able to still achieve those ranges because we're working with the vested partner of the university through ground rent and other levers to hit those, even when you've got an escalating development cost environment. So those yield targets have not changed at this point.

John Pawlowski

Okay. Great. Second question for Jennifer or William. Just curious about your strategy for setting rents at Disney in an environment where traditional multi-family rents continue to spike in Orlando, will you be increasing rents the market aggressively, or should we expect kind of 2% to 3% rental rate bumps similar to traditional student?

Bill Bayless

This is bill and as we've talked about, Disney was completely modeled the same as an on-campus ACE transaction. It fits that structure and also, and so in that regard, it is a coupon clipping 2% to 3% inflationary rental revenue increase on an ongoing basis.

Operator

Our next question comes from Joshua Dennerlein with Bank of America. Please go ahead.

Joshua Dennerlein

Yeah, good morning, everyone. Just maybe a follow-up on the Disney project. Looks it's like you hit out 85%, which I think is your forecast for this fall. Curious is that something that you can continue pushing as we get to your end? Or is there something seasonal about the Disney internship program and when interns might enter that enter the facility?

Bill Bayless

Yeah, no, we will continue to work with Disney on increasing occupancy three-year and then going into '22, that's something we're forecast to, if you go back to, when we originally talked about the program, we expect that project to average 93% occupancy throughout the year. It'll ebb and flow as they move in to move out, but that's certainly our expectation as we get into '22 and beyond and get two more normalized operation and occupancy.

Joshua Dennerlein

Okay. And is that 93% built into that 12% to 15% FFO growth for 2022?

Daniel Perry

Yes. This is Daniel, Josh. It is as we said on recent calls and continue to expect and probably are even more confident and we expect Disney to basically be on pace with its original pro forma underwrite for the full year 2022 and that is at that 93% average occupancy.

Joshua Dennerlein

Okay. Awesome. Maybe one final one from me, for the third party development awards that you got this quarter, were those projects you started working on pre-COVID or something that kind of came up during or during COVID.

Bill Bayless

Yeah, they were both projects that we were tracking pre-COVID, but really those processes, the awards all occurred during COVID that really in the last call it three to six months. Okay.

Operator

[Operator instructions] Our next question comes from Nick Joseph with Citi. Please go ahead.

UnidentifiedAnalyst

Hey it's Michael [ph], and here with Nick. Bill and Daniel, I just wanted to follow up on equity and NAV and sort of just step back for a second then I'm sure you look through the REIT sectors and you look at the self-storage or industrial or NH the gaming REITs, even from the apartment REITs that are trading at premiums NAV and obviously then have at that extra cost of capital and their equity to drive accretive external growth.

And Daniel, from your comment on the call saying that I think he said something like there's no way, shape or form that we're interested in issuing equity at these levels, effectively targeting an NAV in the high 50s. And you're selling assets doing joint ventures to take advantage of the price of the assets relative to the price of your stock. I guess, what point do you step back and say, if the market's not willing to give us it's cost of capital that the market's giving to other specialty asset classes. I guess like what's the end game, like is this a six month process, a 12 month process to help me reconcile those things?

Bill Bayless

Yeah, and certainly I say we're pleased to be at a point in time where the questions about the industry emergence from COVID are finally being cleared up. And as I mentioned, we have not yet seen the cap rate compression to some of these other sectors are seeing certainly multi-family. And we think that was some of the overhang from the initial response universities had to COVID that created some misperceptions on the investment thesis with those being put to bed and the recovery taking place quicker than people anticipated.

All the positive training we're seeing with the tailwinds, we would expect people to look at the current discount to NAV and think it's a great opportunity to own the stock and certainly now it's time for us to execute as we go forward. As Daniel said, we're going to sell into this market now to harvest the value on that $200 million to $400 million attempt to drive the stock to NAV and implement when you watch, see how everything plays out.

UnidentifiedAnalyst

So it's basically and then timing of asset sales, you think are I guess, point like if we're sitting here, is it next June that you start to re-evaluate? I'm just trying to understand what the next decision point processes and I know you're hope is that the stock trades at NAV, but it hasn't been there pre-COVID right. This is not a new phenomenon for ACC at the same time that you see all these other specialty asset classes continue to trade at premiums. So totally disconnect somewhere.

Bill Bayless

Yeah. The differentiating factor Michael's in earnings growth. And when you look at that pre-COVID, it was 2019 that we came out and had the 5% earnings growth return after the last round of capital recycling, which again was the non-core drive assets. Now we're coming out of COVID with an excellent earnings growth profile. And so with tailwinds, we talk about in that change in earnings growth profile, a lot of the investors are, earnings per share driven and now they see the performance coming out of COVID related to it. And we would expect that that would be a key driver for the stock going forward.

UnidentifiedAnalyst

And then just in terms of that earnings growth, that 12% to 15%, can you just break down broad strokes, how much of that internally driven versus externally driven versus balance sheet driven, just in terms of the different components. And, I know as everything has reopened, I assume you're going to get more camps next summer and all the other rental income that comes with that. I don't know if that's adding a 100 basis points or 200 basis points, but just give a little sense of breaking those down that 12% to 15% growth.

Bill Bayless

Yeah. I think that I'd say there's three components that are really the driver of that growth. One is, when I'd say it's about half of it is coming from internal same store growth and then the remainder coming from a combination of the accretive contribution from the Disney phases that have been delivered because you got to think about, we're getting a lot of extra accretion there from the cases that were delivered and originally supposed to contribute NOI in 2021 that are really just now ramping up as that program has come back here in the last few months now contributing a full year in 2022.

The other area that we have some significant upside is in development fee income. When you look at our awards that we have, including both the new awards, we got this quarter at Emory and UT, but also in place awards that we have that we expect to start in 2022, we expect to be back towards that record level, a third party fee income we were delivering in 2019 and 2022. And so those are really the three components with about half of it coming from just internal core NOI growth and the remainder coming from the other two.

Operator

Our next question comes from John Pawlowski with Green Street. Please go ahead.

John Pawlowski

Thank you for taking the follow-up. Bill, if the flood gates suddenly opened up with ACE opportunities, where's the next on the concentration to on-campus housing you'd be comfortable with the portfolio.

Bill Bayless

You know, John, we have always talked about typically 30% to 40% being kind of an upper limit in our thoughts pre-COVID. I think it's going to be interesting to play out in it's so much of the development that we see being contemplated on campus is pure replacement housing in terms of modernization and not a new supply.

And so that is a trend that's very interesting in terms of the captive audience that comes with that first year residence hall housing the continues to make it very attractive, but, ultimately over the long-term, typically we have seen that be about a third to a little over a third of our portfolio, and I would expect the opportunities over the long haul over the next decade or two to be consistent in that regard of the ratio two thirds off a third on, but certainly something we want to play close attention to given the training and what our capabilities are in that area.

Operator

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

Bill Bayless

Yeah. And certainly want to thank you all. Again, this was an excellent quarter for the company and the industry in terms of its emergence from COVID with the investment thesis and the resiliency of the sector once again, proving out. I'd like to close by thanking the ACC team, not just for this -- the lease-up results and the incredible financial performance, but how they conducted themselves over the last 18 months throughout this pandemic and how they have served their customer, our university partners and all of our stakeholders. We're very proud of their efforts. Thank you. And we'll look forward to talking with you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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