t67263_10k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2009.   
 
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From _____________________ to __________________.       
 
Commission file number 001-32265
 
AMERICAN CAMPUS COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)

 Maryland
  
 76-0753089
 (State or Other Jurisdiction of Incorporation or Organization)
  
 (IRS Employer Identification No.)
805 Las Cimas Parkway, Suite 400  Austin, TX
(Address of Principal Executive Offices)
  
78746
(Zip Code)
 
(512) 732-1000
 
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:

(Title of Each Class)
  
(Name of Each Exchange on Which Registered)
     
 Common Stock, $.01 par value
  
 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x No oX

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o  No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o   

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o  No oX

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o     
  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x                                                                                                           Accelerated filer o                             

Non-accelerated filer o  (Do not check if a smaller reporting company)          Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No x

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $1,155,094,432 based on the last sale price of the common equity on June 30, 2009 which is the last business day of the Company’s most recently completed second quarter.
 
There were 52,208,669 shares of the Company’s common stock with a par value of $0.01 per share outstanding as of the close of business on February 24, 2010.
 
DOCUMENTS INCORPORATED BY REFERENCE

Part III of this report incorporates information by reference from the definitive Proxy Statement for the 2010 Annual Meeting of Stockholders.
 
 
 
 
 
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2009
 
TABLE OF CONTENTS

   
PAGE NO.
PART I.    
Item 1.
Business
1
Item 1A.
Risk Factors
7
Item 1B.
Unresolved Staff Comments
16
Item 2.
Properties
17
Item 3.
Legal Proceedings
22
Item 4.
Submission of Matters to a Vote of Security Holders
22
     
PART II.    
Item 5.
Market for Registrant’s Common Equity and Related Stockholder Matters
23
Item 6.
Selected Financial Data
25
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
46
Item 8.
Financial Statements and Supplementary Data
46
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
46
Item 9A.
Controls and Procedures
46
     
PART III.
    
Item 10.
Directors, Executive Officers and Corporate Governance
48
Item 11.
Executive Compensation
48
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
48
Item 13.
Certain Relationships, Related Transactions and Director Independence
48
Item 14.
Principal Accounting Fees and Services
48
     
PART IV.
    
Item 15.
Exhibits and Financial Statement Schedules
49
     
SIGNATURES
  
53
     
 
 
 
 

PART I

Item 1.  Business

Overview

American Campus Communities, Inc. (referred to herein as the “Company,” “us,” “we,” and “our”) is a real estate investment trust (“REIT”) that was incorporated on March 9, 2004 and commenced operations effective with the completion of our initial public offering (“IPO”) on August 17, 2004.  Through our controlling interest in American Campus Communities Operating Partnership LP (the “Operating Partnership”), we are one of the largest owners, managers and developers of high quality student housing properties in the United States in terms of beds owned, developed, and under management.  We are a fully integrated, self-managed and self-administered equity REIT with expertise in the acquisition, design, financing, development, construction management, leasing and management of student housing properties.

As of December 31, 2009, our property portfolio contained 85 student housing properties with approximately 52,100 beds and approximately 17,000 apartment units, including 39 properties containing approximately 22,800 beds and approximately 7,300 units added as a result of our acquisition of the student housing business of GMH Communities Trust (“GMH”) on June 11, 2008.  Our property portfolio consisted of 79 owned off-campus properties that are in close proximity to colleges and universities, two American Campus Equity (“ACETM”) properties operated under ground/facility leases with a related university system and four on-campus participating properties operated under ground/facility leases with the related university systems.  As of December 31, 2009, we also owned a noncontrolling interest in two joint ventures that owned an aggregate of 20 student housing properties with approximately 11,300 beds in approximately 3,400 units.  Our communities contain modern housing units and are supported by a resident assistant system and other student-oriented programming, with many offering resort-style amenities.

Through our taxable REIT subsidiaries (“TRS”), we provide construction management and development services, primarily for student housing properties owned by colleges and universities, charitable foundations, and others.  As of December 31, 2009, we provided third-party management and leasing services for 31 properties (five of which we served as the third-party developer and construction manager) that represented approximately 23,300 beds in approximately 9,100 units.  Third-party management and leasing services are typically provided pursuant to multi-year management contracts that have initial terms that range from one to five years.  As of December 31, 2009, our total owned, joint venture and third-party managed portfolio was comprised of 136 properties with approximately 86,700 beds in approximately 29,500 units.

Business Objectives, Investment Strategies, and Operating Segments

Business Objectives

Our primary business objectives are to create long-term stockholder value by deploying capital to develop, redevelop, acquire and operate student housing communities, and to sell communities when they no longer meet our long-term investment strategy and when market conditions are favorable.  We believe we can achieve these objectives by continuing to implement our investment strategies and successfully manage our operating segments, which are described in more detail below.

Investment Strategies

We seek to own high quality, well designed and well located student housing properties. We seek to acquire or develop properties in markets that have stable or increasing student populations, are in submarkets with barriers to entry and provide opportunities for economic growth as a result of their product position and/or differentiated design and close proximity to campuses, or through our superior operational capabilities. We believe that our reputation and established relationships with universities give us an advantage in sourcing acquisitions and developments and obtaining municipal approvals and community support for our development projects.

GMH Acquisition:   On June 11, 2008, we completed the acquisition of GMH’s student housing business.  At the time of closing, the GMH student housing portfolio consisted of 42 wholly-owned properties containing 24,939 beds located in various markets throughout the country.  Two of the acquired properties totaling 1,468 beds were sold in the third quarter of 2008 and one property totaling 700 beds was sold on December 31, 2009.  The total consideration paid for GMH was approximately $1,018.7 million, inclusive of transaction costs.
 
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We believe our relationship with university systems and individual educational institutions, our knowledge of the student housing market and our prominence as the first publicly-traded REIT focused exclusively on student housing in the United States will afford us a competitive advantage in acquiring additional student housing properties.

Development:    Since 1996, we have developed 14 of our owned properties, consisting of 10 wholly-owned properties and four on-campus participating properties.  This includes one wholly-owned property that opened for occupancy in August 2009 and two wholly-owned properties that opened for occupancy in August 2008.

Our experienced development staff intends to continue to identify and acquire land parcels in close proximity to colleges and universities that offer location advantages or that allow for the development of unique products that offer a competitive advantage.  We expect to continue to benefit from opportunities derived from our extensive network with colleges and universities as well as our relationship with certain developers with whom we have previously developed off-campus student housing properties.

Operating Segments

We define business segments by their distinct customer base and service provided.  We have identified four reportable segments: Wholly-Owned Properties, On-Campus Participating Properties, Development Services and Property Management Services.  For a detailed financial analysis of our segments’ results of operations and financial position, please refer to Note 18 in the accompanying Notes to Consolidated Financial Statements contained in Item 8.

Property Operations

Unique Leasing Characteristics:  Student housing properties are typically leased by the bed on an individual lease liability basis, unlike multifamily housing where leasing is by the unit.  Individual lease liability limits each resident’s liability to his or her own rent without liability for a roommate’s rent.  A parent or guardian is required to execute each lease as a guarantor unless the resident provides adequate proof of income or financial aid.  The number of lease contracts that we administer is therefore equivalent to the number of beds occupied and not the number of units.  Unlike traditional multifamily housing, most of our leases for an individual property commence and terminate on the same dates and typically have terms of 9 or 12 months.  (Please refer to the property table contained in Item 2 – Properties for a listing of the typical lease terms at our properties.)  As an example, in the case of our typical 12-month leases, the commencement date coincides with the commencement of the respective university’s Fall academic term and the termination date is the last day of the subsequent summer school session.  As such, we must re-lease each property in its entirety each year.

Management Philosophy:  Our management philosophy is based upon meeting the following objectives:

●  
Satisfying the specialized needs of residents by providing the highest levels of customer service;

●  
Developing and maintaining an academically oriented environment via a premier residence life/student development program;

●  
Maintaining each project’s physical plant in top condition;

●  
Maximizing revenue through the development and implementation of a strategic annual marketing plan and leasing administration program; and

●  
Maximizing cash flow through maximizing revenue coupled with prudent control of expenses.

Wholly-Owned Properties:  As of December 31, 2009, our Wholly-Owned Properties segment consisted of 79 owned off-campus properties within close proximity to 59 colleges and universities in 23 states and two ACE owned on-campus properties operated under ground/facility leases with a related university system.  Off-campus properties are generally located in close proximity to the school campus, generally with pedestrian, bicycle, or university shuttle access.  Off-campus housing tends to offer more relaxed rules and regulations than on-campus housing, resulting in off-campus housing being generally more appealing to upper-classmen.  We believe that the support of colleges and universities can be beneficial to the success of our wholly-owned properties.  We actively seek to have these institutions recommend our facilities to their students or to provide us with mailing lists so that we may directly market to students and parents.  In some cases, the institutions actually promote our off-campus facilities in their recruiting and admissions literature.  In cases where the educational institutions do not provide mailing lists or recommendations for off-campus housing, most provide comprehensive lists of suitable properties to their students, and we continually work to ensure that our properties are on these lists in each of the markets that we serve.
 
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Off-campus housing is subject to competition for tenants with on-campus housing owned by colleges and universities, and vice versa.  Colleges and universities can generally avoid real estate taxes and borrow funds at lower interest rates than us (and other private sector operators), thereby decreasing their operating costs.  Residence halls owned and operated by the primary colleges and universities in the markets of our off-campus properties may charge lower rental rates, but typically offer fewer amenities than we offer at our properties.  Additionally, most universities are only able to house a small percentage of their overall enrollment, and are therefore highly dependant upon the off-campus market to provide housing for their students.  High-quality, well run off-campus student housing can be a critical component to an institution’s ability to attract and retain students.  Therefore, developing and maintaining good relationships with educational institutions can result in a privately owned off-campus facility becoming, in effect, an extension of the institution’s housing program, with the institution providing highly valued references and recommendations to students and parents.

This segment also competes with national and regional owner-operators of off-campus student housing in a number of markets as well as with smaller local owner-operators.  Therefore, the performance of this segment could be affected by the construction of new on-campus or off-campus residences, increases or decreases in the general levels of rents for housing in competing communities, increases or decreases in the number of students enrolled at one or more of the colleges or universities in the market of a property, and other general economic conditions.

American Campus Equity (ACE):  An emerging opportunity in the wholly-owned property segment is the equity investment and ownership of on-campus housing via traditional long-term ground leases.  Branded and marketed to colleges and universities as the ACE program, the transaction structure provides us with what we believe is a lower-risk opportunity compared to other off-campus projects, as our ACE projects will have premier on-campus locations with marketing and operational assistance from the university.  The subject university substantially benefits by increasing its housing capacity with modern, well-amenitized student housing with no or minimal impacts to its own credit ratios, preserving the university’s credit capacity to fund academic and research facilities.

On-Campus Participating Properties:  Our On-Campus Participating Properties segment includes on-campus properties owned by one of our TRSs that are operated under ground/facility leases with the related university systems. We participate with two university systems in the operations and cash flows of four on-campus participating properties under long-term ground/facility leases.  The subject universities hold title to both the land and improvements on these properties.

Under our ground/facility leases, we receive an annual distribution representing 50% of these properties’ net cash available for distribution after payment of operating expenses (which includes our management fees), debt service (which includes repayment of principal) and capital expenditures.  We also manage these properties under multi-year management agreements and are paid a management fee representing 5% of receipts.  We have developed each of our on-campus participating properties.  For purposes of our consolidated financial statements contained in Item 8, the development fee earned by our TRS during the construction period is deferred and recognized in revenue over the term of the underlying ground leases.  However, for purposes of our calculation of Funds from Operations – Modified for Operational Performance of On-Campus Participating Properties (“FFOM”) contained in Item 7, we reflect such development fees as earned over the construction period based on the percentage-of-completion method.

While the terms of each specific ground/facility lease agreement tend to vary in certain respects, the following terms are generally common to all: (i) a term of 30-40 years, subject to early termination upon repayment of the related financing, which generally has a 25-year amortization; (ii) ground/facility lease rent of a nominal amount (e.g., $100 per annum over the lease term) plus 50% of net cash flow; (iii)  the right of first refusal by the institution to purchase our leasehold interest in the event we propose to sell it to any third-party; (iv) an obligation by the educational institution to promote the project, include information relative to the project in brochures and mailings and to permit us to advertise the project; (v) the requirement to receive the educational institution’s consent to increase rental rates by a percentage greater than the percentage increase in our property operating expenses plus the amount of any increases in debt service, and (vi) the option of the institution to purchase our interest in and assume management of the facility, with the purchase price calculated at the discounted present cash value of our leasehold interest.

We do not have access to the cash flows and working capital of these on-campus participating properties except for the annual net cash distribution.  Additionally, a substantial portion of these properties’ cash flow is dedicated to capital reserves required under the applicable property indebtedness and to the amortization of such indebtedness.  These amounts do not increase our economic interest in these properties since our interest, including our right to share in the net cash available for distribution from the properties, terminates upon the amortization of their indebtedness.  Our economic interest in these properties is therefore limited to our interest in the net cash flow, management fees, and development fees from these properties.  Accordingly, when considering these properties’ contribution to our operations, we focus upon our share of these properties’ net cash available for distribution and the management/development fees that we receive from these properties rather than upon their contribution to our gross revenues and expenses for financial reporting purposes.
 
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Our on-campus participating properties are susceptible to some of the same risks as our wholly-owned properties, including: (i) seasonality in rents; (ii) annual re-leasing that is highly dependent on marketing and university admission policies; and (iii) competition for tenants from other on-campus housing operated by educational institutions or other off-campus properties.

Third-Party Services

Our third-party services consist of development services and management services and are typically provided to university and college clients.  Many of our third-party management services are provided to clients for whom we also provide development services.  While management evaluates the operational performance of our third-party services based on the distinct segments identified below, at times we also evaluate these segments on a combined basis.

Development Services:  Our Development Services segment consists of development and construction management services that we provide through one of our TRSs for third-party owners.  These services range from short-term consulting projects to long-term full-scale development and construction projects.  Development revenues are generally recognized based on a proportionate performance method based on contract deliverables and construction revenues are generally recognized based on the percentage-of-completion method.  We typically provide these services to colleges and universities seeking to modernize their on-campus student housing properties.  They look to us to bring our student housing experience and expertise to ensure they develop marketable, functional, and financially sustainable facilities.  Educational institutions usually seek to build housing that will enhance their recruitment and retention of students while facilitating their academic objectives.  Most of these development service contracts are awarded via a competitive request for proposal (“RFP”) process that qualifies developers based on their overall capability to provide specialized student housing design, development, construction management, financial structuring, and property management services.  Our development services typically include pre-development, design and financial structuring services.  Our pre-development services typically include feasibility studies for third-party owners and design services.  Feasibility studies include an initial feasibility analysis, review of conceptual design, and assistance with master planning.  Some of the documents produced in this process include the conceptual design documents, preliminary development and operating budgets, cash flow projections and a preliminary market assessment.  Our design services include coordination with the architect and other members of the design team, review of construction plans and assistance with project due diligence and project budgets.

Construction management services typically consist of hiring of project professionals and a general contractor, coordinating and supervising the construction, equipping and furnishing process on behalf of the project owner, including site visits, hiring of a general contractor and project professionals, and full coordination and administration of all activities necessary for project completion in accordance with plans and specifications and with verification of adequate insurance.

Our Development Services activities benefit our primary goal of owning and operating student housing properties in a number of ways.  By providing these services to others, we are able to expand and refine our unit plan and community design, the operational efficiency of our material specifications and our ability to determine market acceptance of unit and community amenities.  Our development and construction management personnel enable us to establish relationships with general contractors, architects and project professionals throughout the nation.  Through these services, we gain experience and expertise in residential and commercial construction methodologies under various labor conditions, including right-to-work labor markets, markets subject to prevailing wage requirements and fully unionized environments.  This segment is subject to competition from other specialized student housing development companies as well as from national real estate development companies.

Property Management Services:  Our Property Management Services segment, conducted by our TRSs, includes revenues generated from third-party management contracts in which we are typically responsible for all aspects of operations, including marketing, leasing administration, facilities maintenance, business administration, accounts payable, accounts receivable, financial reporting, capital projects, and residence life student development.  As of December 31, 2009, we provided third-party management and leasing services for 31 properties that represented approximately 23,300 beds in approximately 9,100 units, five of which we developed.  We provide these services pursuant to multi-year management agreements (generally ranging between one to five years).
 
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There are several housing options that compete with our third-party managed properties including, but not limited to, multifamily housing, for-rent single family dwellings, other off-campus specialized student housing and the aforementioned on-campus participating properties.
 
Americans with Disabilities Act and Federal Fair Housing Act

Many laws and governmental regulations are applicable to our properties and changes in the laws and regulations, or their interpretation by agencies and the courts, occur frequently.  Our properties must comply with Title III of the Americans with Disabilities Act, or ADA, to the extent that such properties are “public accommodations” as defined by the ADA.  The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable.  We believe that the existing properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA.  However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants.  The obligation to make readily achievable accommodations is an ongoing one, and we intend to continue to assess our properties and to make alterations as appropriate in this respect.

Under the federal and state fair housing laws, discrimination on the basis of certain protected classes is prohibited.  Violation of these laws can result in significant damage awards to victims.

Environmental Matters

Under various laws and regulations relating to the protection of the environment, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in its property.  These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances.  The presence of such substances may adversely affect the owner’s ability to rent or sell the property or use the property as collateral.  Independent environmental consultants conducted Phase I environmental site assessments (which involve visual inspection but not soil or groundwater analysis) on all of the wholly-owned properties and on-campus participating properties in our existing portfolio.  Phase I environmental site assessments did not reveal any environmental liabilities that would have a material adverse effect on us.  In addition, we are not aware of any environmental liabilities that management believes would have a material adverse effect on the Company.  There is no assurance that Phase I environmental site assessments would reveal all environmental liabilities or that environmental conditions not known to us may exist now or in the future which would result in liability to the Company for remediation or fines, either under existing laws and regulations or future changes to such requirements.

From time to time, the United States Environmental Protection Agency, or EPA, designates certain sites affected by hazardous substances as “Superfund” sites pursuant to CERCLA.  Superfund sites can cover large areas, affecting many different parcels of land.  Although CERCLA imposes joint and several liability for contamination on property owners and operators regardless of fault, the EPA may choose to pursue potentially responsible parties (“PRPs”) based on their actual contribution to the contamination.  PRPs are liable for the costs of responding to the hazardous substances.  Each of Villas on Apache, The Village on University (disposed of in December 2006) and University Village at San Bernardino (disposed of in January 2005) are located within federal Superfund sites.  The EPA designated these areas as Superfund sites because groundwater underneath these areas is contaminated.  We have not been named, and do not expect to be named, as a PRP with respect to these sites.  However, there can be no assurance regarding potential future developments concerning such sites.

Insurance

We carry comprehensive liability and property insurance on our properties, which we believe is of the type and amount customarily obtained on real property assets.  We intend to obtain similar coverage for properties we acquire in the future.  However, there are certain types of losses, generally of a catastrophic nature, such as losses from floods or earthquakes, which may be subject to limitations in certain areas.  When not otherwise contractually stipulated, we exercise our judgment in determining amounts, coverage limits, and deductibles, in an effort to maintain appropriate levels of insurance on our investments.  If we suffer a substantial loss, our insurance coverage may not be sufficient due to market conditions at the time or other unforeseen factors.  Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it infeasible to use insurance proceeds to replace a property after it has been damaged or destroyed.
 
5
 
Employees

As of December 31, 2009, we had approximately 2,183 employees, consisting of:

●  
approximately 1,020 on-site employees in our wholly-owned properties segment, including 430 Resident Assistants;

●  
approximately 97 on-site employees in our on-campus participating properties segment, including 44 Resident Assistants;

● 
approximately 947 employees in our property management services segment, including 860 on-site employees and 87 corporate office employees;

●  
approximately 39 corporate office employees in our development services segment; and

●  
approximately 80 executive, corporate administration and financial personnel.

Our employees are not currently represented by a labor union.

Offices and Website

Our principal executive offices are located at 805 Las Cimas Parkway, Suite 400, Austin, Texas 78746. Our telephone number at that location is (512) 732-1000.

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other reports required by Sections 13(a) and 15(d) of the Securities Exchange Act of 1934.  You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.  The address of that site is www.sec.gov.

Our website is located at www.americancampuscommunities.com or www.studenthousing.com. We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.  Our website also contains copies of our Corporate Governance Guidelines and Code of Business Ethics as well as the charters of our Nominating and Corporate Governance, Audit, and Compensation committees.  The information on our website is not part of this filing.

Forward-looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. We caution investors that any forward-looking statements presented in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions, do not relate solely to historical matters and are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you that forward-looking statements are not guarantees of future performance and will be impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they were made, to anticipate future results or trends.
 
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Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following: general risks affecting the real estate industry; risks associated with changes in University admission or housing policies; risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments; failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully; risks and uncertainties affecting property development and construction; risks associated with downturns in the national and local economies, volatility in capital and credit markets, increases in interest rates, and volatility in the securities markets; costs of compliance with the Americans with Disabilities Act and other similar laws; potential liability for uninsured losses and environmental contamination; risks associated with our Company’s potential failure to qualify as a REIT under the Internal Revenue Code of 1986 (the “Code”), as amended, and possible adverse changes in tax and environmental laws; and the other factors discussed in the “Risk Factors” contained in Item 1A of this report.
 
Item 1A.  Risk Factors
 
The following risk factors may contain defined terms that are different from those used in other sections of this report.  Unless otherwise indicated, when used in this section, the terms “we” and “us” refer to American Campus Communities, Inc. and its subsidiaries, including American Campus Communities Operating Partnership LP, our Operating Partnership, and the term “securities” refers to shares of common stock of American Campus Communities, Inc. and units of limited partnership interest in our Operating Partnership.
 
The factors described below represent the Company’s principal risks. Other factors may exist that the Company does not consider to be significant based on information that is currently available or that the Company is not currently able to anticipate.
 
Risks Related to Our Properties, Our Markets and Our Business
 
Volatility in capital and credit markets could adversely impact us.
 
The capital and credit markets have been experiencing volatility and disruption, which has made it more difficult to borrow money.  If current levels of market disruption and volatility continue or worsen, we may not be able to obtain new debt financing or refinance our existing debt on favorable terms or at all.  This market turmoil and tightening of credit have led to reduction of business activity generally, which may adversely impact us, including our ability to acquire and dispose of assets and continue our development pipeline.
 
Our results of operations are subject to an annual leasing cycle, short lease-up period, seasonal cash flows, changing university admission and housing policies and other risks inherent in the student housing industry.
 
We generally lease our owned properties under 12-month leases, and in certain cases, under nine-month or shorter-term semester leases.  As a result, we may experience significantly reduced cash flows during the summer months at properties leased under leases having terms shorter than 12 months.  Furthermore, all of our properties must be entirely re-leased each year, exposing us to increased leasing risk.  In addition, we are subject to increased leasing risk on our properties under construction and future acquired properties based on our lack of experience leasing those properties and unfamiliarity with their leasing cycles.  Student housing properties are also typically leased during a limited leasing season that usually begins in January and ends in August of each year.  We are therefore highly dependent on the effectiveness of our marketing and leasing efforts and personnel during this season.
 
Changes in university admission policies could adversely affect us.  For example, if a university reduces the number of student admissions or requires that a certain class of students, such as freshman, live in a university owned facility, the demand for beds at our properties may be reduced and our occupancy rates may decline.  While we may engage in marketing efforts to compensate for such change in admission policy, we may not be able to effect such marketing efforts prior to the commencement of the annual lease-up period or our additional marketing efforts may not be successful.
 
We rely on our relationships with colleges and universities for referrals of prospective student-tenants or for mailing lists of prospective student-tenants and their parents.  Many of these colleges and universities own and operate their own competing on-campus facilities.  Any failure to maintain good relationships with these colleges and universities could therefore have a material adverse effect on us.  If colleges and universities refuse to make their lists of prospective student-tenants and their parents available to us or increase the costs of these lists, there could be a material adverse effect on us.
 
Federal and state laws require colleges to publish and distribute reports of on-campus crime statistics, which may result in negative publicity and media coverage associated with crimes occurring on or in the vicinity of our on-campus properties.  Reports of crime or other negative publicity regarding the safety of the students residing on, or near, our properties may have an adverse effect on both our on-campus and off-campus business.
 
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We face significant competition from university-owned on-campus student housing, from other off-campus student housing properties and from traditional multifamily housing located within close proximity to universities.
 
On-campus student housing has certain inherent advantages over off-campus student housing in terms of physical proximity to the university campus and integration of on-campus facilities into the academic community.  Colleges and universities can generally avoid real estate taxes and borrow funds at lower interest rates than us and other private sector operators.  We also compete with national and regional owner-operators of off-campus student housing in a number of markets as well as with smaller local owner-operators.
 
Currently, the industry is fragmented with no participant holding a significant market share.  There are a number of student housing complexes that are located near or in the same general vicinity of many of our owned properties and that compete directly with us.  Such competing student housing complexes may be newer than our properties, located closer to campus, charge less rent, possess more attractive amenities or offer more services or shorter term or more flexible leases.
 
Rental income at a particular property could also be affected by a number of other factors, including the construction of new on-campus and off-campus residences, increases or decreases in the general levels of rents for housing in competing communities, increases or decreases in the number of students enrolled at one or more of the colleges or universities in the market of the property and other general economic conditions.
 
We believe that a number of other large national companies with substantial financial and marketing resources may be potential entrants in the student housing business.  The entry of one or more of these companies could increase competition for students and for the acquisition, development and management of other student housing properties.
 
We may be unable to successfully complete and operate our properties or our third-party developed properties.
 
We intend to continue to develop and construct student housing.  These activities may include any of the following risks:
 
●  
we may be unable to obtain financing on favorable terms or at all;
●  
we may not complete development projects on schedule, within budgeted amounts or in conformity with building plans and specifications;
●  
we may encounter delays or refusals in obtaining all necessary zoning, land use, building, occupancy and other required governmental permits and authorizations;
●  
occupancy and rental rates at newly developed or renovated properties may fluctuate depending on a number of factors, including market and economic conditions, and may reduce or eliminate our return on investment;
●  
we may become liable for injuries and accidents occurring during the construction process and for environmental liabilities, including off-site disposal of construction materials;
● 
we may decide to abandon our development efforts if we determine that continuing the project would not be in our best interests; and
●  
we may encounter strikes, weather, government regulations and other conditions beyond our control.

Our newly developed properties will be subject to risks associated with managing new properties, including lease-up and integration risks.  In addition, new development activities, regardless of whether or not they are ultimately successful, typically will require a substantial portion of the time and attention of our development and management personnel.  Newly developed properties may not perform as expected.
 
We anticipate that we will, from time to time, elect not to proceed with ongoing development projects.  If we elect not to proceed with a development project, the development costs associated therewith will ordinarily be charged against income for the then-current period.  Any such charge could have a material adverse effect on our results of operations in the period in which the charge is taken.
 
We may in the future develop properties nationally, internationally or in geographic regions other than those in which we currently operate.  We do not possess the same level of familiarity with development in these new markets, which could adversely affect our ability to develop such properties successfully or at all or to achieve expected performance.  Future development opportunities may not be available to us on terms that meet our investment criteria or we may be unsuccessful in capitalizing on such opportunities.  Our ability to capitalize on such opportunities will be largely dependent upon external sources of capital that may not be available to us on favorable terms or at all.
 
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We typically provide guarantees of timely completion of projects that we develop for third parties.  In certain cases, our contingent liability under these guarantees may exceed our development fee from the project.  Although we seek to mitigate this risk by, among other things, obtaining similar guarantees from the project contractor, we could sustain significant losses if development of a project were to be delayed or stopped and we were unable to cover our guarantee exposure with the guarantee received from the project contractor.
 
We may be unable to successfully acquire properties on favorable terms.
 
Our future growth will be dependent upon our ability to successfully acquire new properties on favorable terms.  With respect to recently acquired properties, and as we acquire additional properties, we will continue to be subject to risks associated with managing new properties, including lease-up and integration risks.  Newly developed and recently acquired properties may not perform as expected and may have characteristics or deficiencies unknown to us at the time of acquisition.  Future acquisition opportunities may not be available to us on terms that meet our investment criteria or we may be unsuccessful in capitalizing on such opportunities.  Our ability to capitalize on such opportunities will be largely dependent upon external sources of capital that may not be available to us on favorable terms or at all, especially under the current credit environment.
 
Our ability to acquire properties on favorable terms and successfully operate them involves the following significant risks:
 
●  
our potential inability to acquire a desired property may be caused by competition from other real estate investors;
●  
competition from other potential acquirers may significantly increase the purchase price and decrease expected yields;
●  
we may be unable to finance an acquisition on favorable terms or at all;
●  
we may have to incur significant unexpected capital expenditures to improve or renovate acquired properties;
●  
we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations;
●  
market conditions may result in higher than expected costs and vacancy rates and lower than expected rental rates; and
●  
we may acquire properties subject to liabilities but without any recourse, or with only limited recourse, to the sellers, or with liabilities that are unknown to us, such as liabilities for clean-up of undisclosed environmental contamination, claims by tenants, vendors or other persons dealing with the former owners of our properties and claims for indemnification by members, directors, officers and others indemnified by the former owners of our properties.
 
Our failure to finance property acquisitions on favorable terms, or operate acquired properties to meet our financial expectations, could adversely affect us.
 
Difficulties of selling real estate could limit our flexibility.
 
We intend to evaluate the potential disposition of assets that may no longer help us meet our objectives.  When we decide to sell an asset, we may encounter difficulty in finding buyers in a timely manner as real estate investments generally cannot be disposed of quickly, especially when market conditions are poor.  These difficulties have been exacerbated in the current credit environment because buyers have experienced difficulty in obtaining the necessary financing.  This may limit our ability to vary our portfolio promptly in response to changes in economic or other conditions.  In addition, in order to maintain our status as a REIT, the Internal Revenue Code imposes restrictions on our ability to sell properties held fewer than two years, which may cause us to incur losses thereby reducing our cash flows and adversely impacting distributions to shareholders.
 
Our debt level reduces cash available for distribution and could have other important adverse consequences.
 
As of December 31, 2009, our total consolidated indebtedness was approximately $1,228.2 million (excluding unamortized debt premiums and discounts).  Our debt service obligations expose us to the risk of default and reduce or eliminate cash resources that are available to operate our business or pay distributions that are necessary to maintain our qualification as a REIT.  There is no limit on the amount of indebtedness that we may incur except as provided by the covenants in our corporate-level debt.  We may incur additional indebtedness to fund future property development, acquisitions and other working capital needs, which may include the payment of distributions to our security holders.  The amount available to us and our ability to borrow from time to time under our corporate-level debt is subject to certain conditions and the satisfaction of specified financial covenants.  Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:
 
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We may be unable to borrow additional funds as needed or on favorable terms.
●  
We may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness.
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We may be forced to dispose of one or more of our properties, possibly on disadvantageous terms.
●  
We may default on our scheduled principal payments or other obligations as a result of insufficient cash flow or otherwise, and the lenders or mortgagees may foreclose on our properties that secure their loans and receive an assignment of rents and leases.
●  
Foreclosures could create taxable income without accompanying cash proceeds, a circumstance that could hinder our ability to meet the REIT distribution requirements imposed by the Internal Revenue Code.
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Compliance with the provisions of our debt agreements, including the financial and other covenants, such as the maintenance of specified financial ratios, could limit our flexibility and a default in these requirements, if uncured, could result in a requirement that we repay indebtedness, which could severely affect our liquidity and increase our financing costs.

We may be unable to renew, repay or refinance our outstanding debt.
 
We are subject to the risk that our indebtedness will not be able to be renewed, repaid or refinanced when due or that the terms of any renewal or refinancing will not be as favorable as the existing terms of such indebtedness.  If we were unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or more of our properties on disadvantageous terms, which might result in losses to us.  Such losses could have a material adverse effect on us and our ability to make distributions to our stockholders and pay amounts due on our debt.
 
Variable rate debt is subject to interest rate risk.
 
We have a construction loan with a varying interest rate that is dependent upon the market index.  In addition, we have a secured revolving credit facility and secured agency facility both bearing interest at a variable rate on all amounts drawn on the facilities.  We may incur additional variable rate debt in the future.  Increases in interest rates on variable rate debt would increase our interest expense, unless we make arrangements that hedge the risk of rising interest rates, which would adversely affect net income and cash available for payment of our debt obligations and distributions to stockholders.
 
We may incur losses on interest rate swap and hedging arrangements.
 
We may periodically enter into agreements to reduce the risks associated with increases in interest rates.  Although these agreements may partially protect against rising interest rates, they also may reduce the benefits to us if interest rates decline.  If an arrangement is not indexed to the same rate as the indebtedness that is hedged, we may be exposed to losses to the extent which the rate governing the indebtedness and the rate governing the hedging arrangement change independently of each other.  Finally, nonperformance by the other party to the arrangement may subject us to increased credit risks.
 
We face risks associated with land holdings.
 
We hold land for future development and may in the future acquire additional land holdings.  The risks inherent in owning or purchasing and developing land increase as demand for student housing, or rental rates, decrease.  As a result, we hold certain land and may in the future acquire additional land in our development pipeline at a cost we may not be able to recover fully or on which we cannot build and develop into a profitable student housing project.  Also, real estate markets are highly uncertain and, as a result, the value of undeveloped land has fluctuated significantly and may continue to fluctuate as a result of changing market conditions.  In addition, carrying costs can be significant and can result in losses or reduced margins in a poorly performing project.  Under current market conditions, we may have impairments of our land held for development.
 
We may not be able to recover pre-development costs for third-party university developments.
 
University systems and educational institutions typically award us development services contracts on the basis of a competitive award process, but such contracts are typically executed following the formal approval of the transaction by the institution’s governing body.  In the intervening period, we may incur significant pre-development and other costs in the expectation that the development services contract will be executed.  If an institution’s governing body does not ultimately approve our selection and the terms of the pending development contract, we may not be able to recoup these costs from the institution and the resulting losses could be material.
 
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Our awarded projects may not be successfully structured or financed and may delay our recognition of revenues.
 
The recognition and timing of revenues from our awarded development services projects will, among other things, be contingent upon successfully structuring and closing project financing as well as the timing of construction.  The development projects that we have been awarded have at times been delayed beyond the originally scheduled construction commencement date.  If such delays were to occur with our current awarded projects, our recognition of expected revenues and receipt of expected fees from these projects would be delayed.
 
We may encounter delays in completion or experience cost overruns with respect to our properties under construction.
 
Although we do not currently have any projects under construction, in the long term we intend to continue to construct student housing projects for our portfolio.  Properties under construction may be exposed to various risks referred to elsewhere in these risk factors, including the risks that we may encounter delays in completion and that any such project may experience cost overruns or may not be completed on time.  Additionally, if we do not complete the construction of properties on schedule, we may be required to provide alternative housing to the students with whom we have signed leases.  We generally do not make any arrangements for such alternative housing for these properties and we would likely incur significant expenses in the event we provide such housing.  If construction is not completed on schedule, students may attempt to break their leases and our occupancy at such properties for that academic year may suffer.
 
Our guarantees could result in liabilities in excess of our development fees.
 
In third-party developments, we typically provide guarantees of the obligations of the developer, including development budgets and timely project completion.  These guarantees include, among other things, the cost of providing alternate housing for students in the event we do not timely complete a development project.  These guarantees typically exclude delays resulting from force majeure and also, in third-party transactions, are typically limited in amount to the amount of our development fees from the project.  In certain cases, however, our contingent liability under these guarantees has exceeded our development fee from the project and we may agree to such arrangements in the future.  Our obligations under alternative housing guarantees typically expire five days after construction is complete.  Project cost guarantees are normally satisfied within one year after completion of the project.
 
Universities have the right to terminate our participating ground leases.
 
The ground leases through which we own our on-campus participating properties provide that the university lessor may purchase our interest in and assume the management of the facility, with the purchase price calculated at the discounted present value of cash flows from our leasehold interest.  The exercise of any such buyout would result in a reduction in our portfolio.
 
Changes in laws and litigation risks could affect our business.
 
We are generally not able to pass through to our residents under existing leases real estate taxes, income taxes or other taxes.  Consequently, any such tax increases may adversely affect our financial condition and limit our ability to satisfy our financial obligations and make distributions to security holders.  Changes that increase our potential liability under environmental laws or our expenditures on environmental compliance could have the same impact.
 
As a publicly traded owner of properties, we may become involved in legal proceedings, including consumer, employment, tort or commercial litigation, that if decided adversely to or settled by us, and not adequately covered by insurance, could result in liability that is material to our financial condition or results of operations.
 
Risks Related to the Real Estate Industry
 
Our performance and value are subject to risks associated with real estate assets and with the real estate industry.
 
Our ability to satisfy our financial obligations and make expected distributions to our security holders depends on our ability to generate cash revenues in excess of expenses and capital expenditure requirements.  Events and conditions generally applicable to owners and operators of real property that are beyond our control may decrease cash available for distribution and the value of our properties.  These events include:
 
●  
general economic conditions;
 
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rising level of interest rates;
●  
local oversupply, increased competition or reduction in demand for student housing;
●  
inability to collect rent from tenants;
●  
vacancies or our inability to rent units on favorable terms;
●  
inability to finance property development and acquisitions on favorable terms;
●  
increased operating costs, including insurance premiums, utilities, and real estate taxes;
●  
costs of complying with changes in governmental regulations;
●  
the relative illiquidity of real estate investments;
●  
decreases in student enrollment at particular colleges and universities;
●  
changes in university policies related to admissions and housing; and
●  
changing student demographics.

In addition, periods of economic slowdown or recession, such as are being currently experienced, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases, which would adversely affect us.
 
Potential losses may not be covered by insurance.
 
We carry fire, earthquake, terrorism, business interruption, vandalism, malicious mischief, boiler and machinery, commercial general liability and workers’ compensation insurance covering all of the properties in our portfolio under various policies.  We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice.  There are, however, certain types of losses, such as property damage from generally unsecured losses such as riots, wars, punitive damage awards or acts of God that may be either uninsurable or not economically insurable.  Some of our properties are insured subject to limitations involving large deductibles and policy limits that may not be sufficient to cover losses.  In addition, we may discontinue earthquake, terrorism or other insurance on some or all of our properties in the future if the cost of premiums from any of these policies exceeds, in our judgment, the value of the coverage discounted for the risk of loss.
 
If we experience a loss that is uninsured or that exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties.  In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged and require substantial expenditures to rebuild or repair.  In the event of a significant loss at one or more of our properties, the remaining insurance under our policies, if any, could be insufficient to adequately insure our other properties.  In such event, securing additional insurance, if possible, could be significantly more expensive than our current policies.
 
Unionization or work stoppages could have an adverse effect on us.
 
We are at times required to use unionized construction workers or to pay the prevailing wage in a jurisdiction to such workers.  Due to the highly labor intensive and price competitive nature of the construction business, the cost of unionization and/or prevailing wage requirements for new developments could be substantial.  Unionization and prevailing wage requirements could adversely affect a new development’s profitability.  Union activity or a union workforce could increase the risk of a strike, which would adversely affect our ability to meet our construction timetables.
 
We could incur significant costs related to government regulation and private litigation over environmental matters.
 
Under various environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), a current or previous owner or operator of real property may be liable for contamination resulting from the release or threatened release of hazardous or toxic substances or petroleum at that property, and an entity that arranges for the disposal or treatment of a hazardous or toxic substance or petroleum at another property may be held jointly and severally liable for the cost to investigate and clean up such property or other affected property.  Such parties are known as potentially responsible parties (“PRPs”).  Such environmental laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of the contaminants, and the costs of any required investigation or cleanup of these substances can be substantial.  PRPs are liable to the government as well as to other PRPs who may have claims for contribution.  The liability is generally not limited under such laws and could exceed the property’s value and the aggregate assets of the liable party.  The presence of contamination or the failure to remediate contamination at our properties may expose us to third-party liability for personal injury or property damage, or adversely affect our ability to sell, lease or develop the real property or to borrow using the real property as collateral.
 
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Environmental laws also impose ongoing compliance requirements on owners and operators of real property.  Environmental laws potentially affecting us address a wide variety of matters, including, but not limited to, asbestos-containing building materials (“ACBM”), storage tanks, storm water and wastewater discharges, lead-based paint, wetlands, and hazardous wastes.  Failure to comply with these laws could result in fines and penalties or expose us to third-party liability.  Some of our properties may have conditions that are subject to these requirements and we could be liable for such fines or penalties or liable to third parties.
 
Existing conditions at some of our properties may expose us to liability related to environmental matters.
 
Some of the properties in our portfolio may contain asbestos-containing building materials, or ACBMs.  Environmental laws require that ACBMs be properly managed and maintained, and may impose fines and penalties on building owners or operators for failure to comply with these requirements.  Also, some of the properties in our portfolio contain, or may have contained, or are adjacent to or near other properties that have contained or currently contain storage tanks for the storage of petroleum products or other hazardous or toxic substances.  These operations create a potential for the release of petroleum products or other hazardous or toxic substances.  Third parties may be permitted by law to seek recovery from owners or operators for personal injury associated with exposure to contaminants, including, but not limited to, petroleum products, hazardous or toxic substances, and asbestos fibers.  Also, some of the properties may contain regulated wetlands that can delay or impede development or require costs to be incurred to mitigate the impact of any disturbance.  Absent appropriate permits, we can be held responsible for restoring wetlands and be required to pay fines and penalties.
 
Over the past several years, there have been an increasing number of lawsuits against owners and managers of residential properties, although not against us, alleging personal injury and property damage caused by the presence of mold in residential real estate.  Some of these lawsuits have resulted in substantial monetary judgments or settlements.  Insurance carriers have reacted to these liability awards by excluding mold related programs designed to minimize the existence of mold in any of our properties as well as guidelines for promptly addressing and resolving reports of mold to minimize any impact mold might have on residents or the property.
 
We do not carry environmental insurance on our properties.  Environmental liability at any of our properties may have a material adverse effect on our financial condition, results of operations, cash flow, the trading price of our stock or our ability to satisfy our debt service obligations and pay dividends or distributions to our security holders.
 
We may incur significant costs complying with the Americans with Disabilities Act and similar laws.
 
Under the Americans with Disabilities Act of 1990, or the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons.  Additional federal, state and local laws also may require modifications to our properties, or restrict our ability to renovate our properties.  For example, the Fair Housing Amendments Act of 1988, or FHAA, requires apartment properties first occupied after March 13, 1990 to be accessible to the handicapped.  We have not conducted an audit or investigation of all of our properties to determine our compliance with present requirements.  Noncompliance with the ADA or FHAA could result in the imposition of fines or an award or damages to the government or private litigants and also could result in an order to correct any non-complying feature.  Also, discrimination on the basis of certain protected classes can result in significant awards to victims.  We cannot predict the ultimate amount of the cost of compliance with the ADA, FHAA or other legislation.  If we incur substantial costs to comply with the ADA, FHAA or any other legislation, we could be materially and adversely affected.
 
We may incur significant costs complying with other regulations.
 
The properties in our portfolio are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements.  If we fail to comply with these various requirements, we might incur governmental fines or private damage awards.  Furthermore, existing requirements could change and require us to make significant unanticipated expenditures that would materially and adversely affect us.
 
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Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between our co-venturers and us.
 
We have co-invested, and anticipate that we will continue in the future to co-invest, with third parties through partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a property, partnership, joint venture or other entity.  In connection with joint venture investments, we do not have sole decision-making control regarding the property, partnership, joint venture or other entity.  Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third-party not involved, including the possibility that our partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions.  Our partners or co-venturers also may have economic or other business interests or goals that are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our preferences, policies or objectives.  Such investments also will have the potential risk of impasses on decisions, such as a sale, because neither we nor our partners or co-venturers would have full control over the partnership or joint venture.  Disputes between us and our partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort exclusively on our business.  Consequently, actions by or disputes with our partners or co-venturers might result in subjecting properties owned by the partnership, joint venture or other entity to additional risk.  In addition, we may in certain circumstances be liable for the actions of our partners or co-venturers.
 
Risks Related to Our Organization and Structure
 
Our stock price will fluctuate.
 
The market price and volume of our common stock will fluctuate due not only to general stock market conditions but also to the risk factors discussed above and below and the following:
 
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operating results that vary from the expectations of securities analysts and investors;
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investor interest in our property portfolio;
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the reputation and performance of REITs;
●  
the attractiveness of REITs as compared to other investment vehicles;
●  
our financial condition and the results of our operations;
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the perception of our growth and earnings potential;
●  
dividend payment rates and the form of the payment;
●  
increases in market rates, which may lead purchasers of our common stock to demand a higher yield; and
●  
changes in financial markets and national economic and general market conditions.

To qualify as a REIT, we may be forced to limit the activities of a TRS.
 
To qualify as a REIT, no more than 25% of the value of our total assets may consist of the securities of one or more taxable REIT subsidiaries, or TRSs.  Certain of our activities, such as our third-party development, management and leasing services, must be conducted through a TRS for us to qualify as a REIT.  In addition, certain non-customary services must be provided by a TRS or an independent contractor.  If the revenues from such activities create a risk that the value of our TRS entities, based on revenues or otherwise, approaches the 25% threshold, we will be forced to curtail such activities or take other steps to remain under the 25% threshold.  Since the 25% threshold is based on value, it is possible that the IRS could successfully contend that the value of our TRS entities exceeds the 25% threshold even if the TRS accounts for less than 25% of our consolidated revenues, income or cash flow.  Our on-campus participating properties and our third-party services are held by a TRS.  Consequently, income earned from our on-campus participating properties and our third-party services will be subject to regular federal income taxation and state and local income taxation where applicable, thus reducing the amount of cash available for distribution to our security holders.
 
A TRS is not permitted to directly or indirectly operate or manage a “hotel, motel or other establishment more than one-half of the dwelling units in which are used on a transient basis.”  We believe that our method of operating our TRS entities will not be considered to constitute such an activity.  Future Treasury Regulations or other guidance interpreting the applicable provisions might adopt a different approach, or the IRS might disagree with our conclusion.  In such event we might be forced to change our method of operating our TRS entities, which could adversely affect us, or of one of our TRS entities could fail to qualify as a taxable REIT subsidiary, which would likely cause us to fail to qualify as a REIT.
 
Failure to qualify as a REIT would have significant adverse consequences to us and the value of our securities.
 
We intend to operate in a manner that will allow us to qualify as a REIT for federal income tax purposes under the Internal Revenue Code.  If we lose our REIT status, we will face serious tax consequences that would substantially reduce or eliminate the funds available for investment and for distribution to security holders for each of the years involved, because:
 
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we would not be allowed a deduction for dividends to security holders in computing our taxable income and such amounts would be subject to federal income tax at regular corporate rates;
●
we also could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and
 
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unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.

In addition, if we fail to qualify as a REIT, we will not be required to pay dividends to stockholders, and all dividends to stockholders will be subject to tax as ordinary income to the extent of our current and accumulated earnings and profits.  As a result of all these factors, our failure to qualify as a REIT also could impair our ability to expand our business and raise capital, and would adversely affect the value of our common stock.
 
Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial and administrative interpretations.  The complexity of these provisions and of the applicable Treasury Regulations that have been promulgated under the Internal Revenue Code is greater in the case of a REIT that, like us, holds its assets through a partnership or a limited liability company.  The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT.  In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the composition of our assets and two “gross income tests”: (a) at least 75% of our gross income in any year must be derived from qualified sources, such as rents from real property, mortgage interest, dividends from other REITs and gains from sale of such assets, and (b) at least 95% of our gross income must be derived from sources meeting the 75% income test above, and other passive investment sources, such as other interest and dividends and gains from sale of securities.  Also, we must pay dividends to stockholders aggregating annually at least 90% of our REIT taxable income, excluding any net capital gains.  In addition, legislation, new regulations, administrative interpretations or court decisions may adversely affect our investors, our ability to qualify as a REIT for federal income tax purposes or the desirability of an investment in a REIT relative to other investments.
 
Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property and, in certain cases, a 100% penalty tax, in the event we sell property as a dealer or if a TRS enters into agreements with us or our tenants on a basis that is determined to be other than an arm’s length basis.
 
To qualify as a REIT, we may be forced to borrow funds on a short-term basis during unfavorable market conditions.
 
In order to qualify as a REIT, we are required under the Internal Revenue Code to distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain.  A TRS may, in its discretion, retain any income it generates net of any tax liability it incurs on that income without affecting the 90% distribution requirements to which we are subject as a REIT.  Net income of our TRS entities is included in REIT taxable income and increases the amount required to be distributed, only if such amounts are paid out as a dividend by a TRS.  If a TRS distributes any of its after-tax income to us, that distribution will be included in our REIT taxable income.  In addition, we will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income, including any net capital gains.  Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow.  Consequently, we will be compelled to rely on third-party sources to fund our capital needs.  We may not be able to obtain this financing on favorable terms or at all.  Any additional indebtedness that we incur will increase our leverage.  Our access to third-party sources of capital depends, in part, on:
 
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general market conditions;
●  
our current debt levels and the number of properties subject to encumbrances;
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our current performance and the market’s perception of our growth potential;
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our cash flow and cash dividends; and
●  
the market price per share of our stock.
 
 
If we cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, satisfy our debt service obligations or make cash distributions to our security holders, including those necessary to qualify as a REIT.
 
Our charter contains restrictions on the ownership and transfer of our stock.
 
Our charter provides that, subject to certain exceptions, no person or entity may beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Internal Revenue Code, more than 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding shares of our common stock or more than 9.8% by value of all our outstanding shares, including both common and preferred stock.  We refer to this restriction as the “ownership limit.”  A person or entity that becomes subject to the ownership limit by virtue of a violative transfer that results in a transfer to a trust is referred to as a “purported beneficial transferee” if, had the violative transfer been effective, the person or entity would have been a record owner and beneficial owner or solely a beneficial owner of our stock, or is referred to as a “purported record transferee” if, had the violative transfer been effective, the person or entity would have been solely a record owner of our stock.
 
15
 
The constructive ownership rules under the Internal Revenue Code are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity.  As a result, the acquisition of less than 9.8% of our stock (or the acquisition of an interest in an entity that owns, actually or constructively, our stock) by an individual or entity, could, nevertheless cause that individual or entity, or another individual or entity, to own constructively in excess of 9.8% of our outstanding stock and thereby subject the stock to the ownership limit.  Our charter, however, requires exceptions to be made to this limitation if our board of directors determines that such exceptions will not jeopardize our tax status as a REIT.  This ownership limit could delay, defer or prevent a change of control or other transaction that might involve a premium price for our common stock or otherwise be in the best interest of our security holders.
 
Certain tax and anti-takeover provisions of our charter and bylaws may inhibit a change of our control.
 
Certain provisions contained in our charter and bylaws and the Maryland General Corporation Law may discourage a third-party from making a tender offer or acquisition proposal to us.  If this were to happen, it could delay, deter or prevent a change in control or the removal of existing management.  These provisions also may delay or prevent the security holders from receiving a premium for their securities over then-prevailing market prices.  These provisions include:
 
●  
the REIT ownership limit described above;
●  
authorization of the issuance of our preferred shares with powers, preferences or rights to be determined by our board of directors;
●  
the right of our board of directors, without a stockholder vote, to increase our authorized shares and classify or reclassify unissued shares;
●  
advance-notice requirements for stockholder nomination of directors and for other proposals to be presented to stockholder meetings; and
●  
the requirement that a majority vote of the holders of common stock is needed to remove a member of our board of directors for “cause.”

The Maryland business statutes also impose potential restrictions on a change of control of our company.
 
Various Maryland laws may have the effect of discouraging offers to acquire us, even if the acquisition would be advantageous to security holders.  Our bylaws exempt us from some of those laws, such as the control share acquisition provisions, but our board of directors can change our bylaws at any time to make these provisions applicable to us.
 
Our rights and the rights of our security holders to take action against our directors and officers are limited.
 
Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believe to be in our best interests and with the care that an ordinary prudent person in a like position would use under similar circumstances.  In addition, our charter eliminates our directors’ and officers’ liability to us and our stockholders for money damages except for liability resulting from actual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a final judgment and which is material to the cause of action.  Our bylaws require us to indemnify directors and officers for liability resulting from actions taken by them in those capacitates to the maximum extent permitted by Maryland law.  As a result, we and our security holders may have more limited rights against our directors and officers than might otherwise exist under common law.  In addition, we may be obligated to fund the defense costs incurred by our directors and officers.
 
Item 1B.  Unresolved Staff Comments

There were no unresolved comments from the staff of the SEC at December 31, 2009.
 
16
 
Item 2.   Properties

The following table presents certain summary information about our properties.  Our properties generally are modern facilities, and amenities at most of our properties include a swimming pool, basketball courts and a large community center featuring a fitness center, computer center, tanning beds, study areas, and a recreation room with billiards and other games. Some properties also have a jacuzzi/hot tub, volleyball courts, tennis courts and in-unit washers and dryers.  Callaway House also has a food service facility.  One wholly-owned property completed construction and opened in August 2009.  Lease terms are generally 12 months at wholly-owned properties and 9 months at our on-campus participating properties.  These properties are included in the Wholly-Owned Properties and On-Campus Participating Properties segments discussed in Item 1 and the accompanying Notes to Consolidated Financial Statements contained in Item 8.  All dollar amounts in this table and others herein, except share and per share amounts, are stated in thousands unless otherwise indicated.

We own fee title to all of these properties except for:

● 
University Village at TU, which is subject to a 75-year ground lease with Temple University (with four additional six-year extensions);
 
●  
University Centre, which is subject to a 95-year ground lease;
 
●  
Vista del Sol, which is subject to a 65-year ground/facility lease with Arizona State University (with two additional ten-year extensions);
 
●  
Barrett Honors College, which is subject to a 65-year ground/facility lease with Arizona State University (with two additional ten-year extensions); and
 
●  
Four on-campus participating properties held under ground/facility leases with two university systems.
 
 
17
 

Property
  
Year
Built
  
Date
Acquired/ Developed
  
Primary University Served
  
Typical
Lease
Term (Mos)
  
Year Ended
December
31, 2009
Revenue
  
Average Monthly Revenue/
Bed (1)
  
2009 Average
Occupancy (1)
  
Occupancy
as of
12/31/09
  
# of
Buildings
  
# of Units
  
# of Beds
                                             
WHOLLY-OWNED PROPERTIES
                                          
                                             
Villas on Apache
  
 
1987
  
May-99
  
Arizona State University Main Campus
  
12
  
 
$           1,794
  
 
$        568
  
 
86.4%
  
 
69.8%
  
 
6
  
 
111
  
 
288
                                             
The Village at Blacksburg
  
1990/ 1998
  
Dec-00
  
Virginia Polytechnic Institute and State University
  
12
  
 
4,952
  
 
381
  
 
99.4%
  
 
99.4%
  
 
26
  
288
  
1,056
                                             
River Club Apartments
  
1996
  
Aug-99
  
The University of Georgia - Athens
  
12
  
3,301
  
365
  
92.8%
  
96.0%
  
18
  
266
  
792
                                             
River Walk Townhomes
  
1998
  
Aug-99
  
The University of Georgia - Athens
  
12
  
1,421
  
362
  
94.7%
  
98.5%
  
20
  
100
  
336
                                             
The Callaway House (2)
  
1999
  
Mar-01
  
Texas A&M University
  
9
  
7,083
(3)
n/a
(3)
103.5%
  
103.5%
  
1
  
173
  
538
                                             
The Village at Alafaya
Club
  
1999
  
Jul-00
  
The University of Central Florida
  
12
  
6,093
  
576
  
99.3%
  
99.4%
  
20
  
228
  
839
                                             
The Village at Science Drive
  
2000
  
Nov-01
  
The University of Central Florida
  
12
  
5,372
  
586
  
99.4%
  
99.6%
  
17
  
192
  
732
                                             
University Village at Boulder Creek
  
2002
  
Aug-02
  
The University of Colorado at Boulder
  
 
12
  
 
2,703
  
 
697
  
 
98.5%
  
 
98.4%
  
 
4
  
82
  
309
                                             
University Village at Fresno
  
2004
  
Aug-04
  
California State University - Fresno
  
12
  
2,690
  
510
  
98.5%
  
98.3%
  
9
  
105
  
406
                                             
University Village at TU (4)
  
2004
  
Aug-04
  
Temple University
  
12
  
6,544
  
669
  
99.1%
  
99.2%
  
3
  
220
  
749
                                             
University Village at Sweet Home
  
2005
  
Aug-05
  
State University of New York – Buffalo
  
12
  
 
6,076
  
 
641
  
 
93.7%
  
 
99.4%
  
11
  
269
  
828
                                             
University Club Tallahassee (5)
  
2000
  
Feb-05
  
Florida State University
  
12
  
4,217
  
436
  
99.1%
  
99.0%
  
19
  
152
  
608
                                             
The Grove at University Club (5)
  
2002
  
Feb-05
  
Florida State University
  
12
  
888
  
448
  
96.5%
  
93.8%
  
8
  
64
  
128
                                             
College Club Tallahassee (5)
  
2001
  
Feb-05
  
Florida A&M University
  
12
  
2,068
  
374
  
87.9%
  
94.0%
  
12
  
96
  
384
                                             
The Greens at College Club (5)
  
2004
  
Feb-05
  
Florida A&M University
  
12
  
862
  
366
  
89.7%
  
95.6%
  
5
  
40
  
160
                                             
University Club Gainesville
  
1999
  
Feb-05
  
University of Florida
  
12
  
2,260
  
426
  
96.7%
  
94.7%
  
9
  
94
  
376
                                             
The Estates
  
2002
  
Mar-05
  
University of Florida
  
12
  
7,105
  
566
  
96.1%
  
96.9%
  
20
  
396
  
1,044
                                             
City Parc at Fry Street
  
2004
  
Mar-05
  
University of North Texas
  
12
  
2,923
  
566
  
98.6%
  
98.3%
  
8
  
136
  
418
                                             
Entrada Real
  
2000
  
Mar-06
  
University of Arizona
  
12
  
2,420
  
526
  
99.0%
  
99.2%
  
8
  
98
  
363
                                             
Royal Oaks (5)
  
1990
  
Mar-06
  
Florida State University
  
12
  
1,222
  
434
  
97.7%
  
99.1%
  
4
  
82
  
224
                                             
Royal Pavilion (5)
  
1991
  
Mar-06
  
Florida State University
  
12
  
1,113
  
427
  
99.3%
  
99.5%
  
4
  
60
  
204
                                             
Royal Village Tallahassee (5)
  
1992
  
Mar-06
  
Florida State University
  
12
  
1,571
  
432
  
98.1%
  
98.3%
  
4
  
75
  
288
                                             
Royal Village Gainesville
  
1996
  
Mar-06
  
University of Florida
  
12
  
2,838
  
507
  
97.8%
  
97.8%
  
8
  
118
  
448
                                             
Northgate Lakes
  
1997/98
  
Mar-06
  
The University of Central Florida
  
12
  
4,881
  
551
  
98.7%
  
98.5%
  
13
  
194
  
710
                                             
Royal Lexington
  
1994
  
Mar-06
  
The University of Kentucky
  
12
  
1,884
  
399
  
97.9%
  
95.9%
  
4
  
94
  
364
                                             
The Woods at Greenland
  
2001
  
Mar-06
  
Middle Tennessee State University
  
12
  
1,344
  
402
  
97.4%
  
96.0%
  
3
  
78
  
276
                                             
Raider’s Crossing
  
2002
  
Mar-06
  
Middle Tennessee State University
  
12
  
1,438
  
423
  
98.2%
  
98.2%
  
4
  
96
  
276
                                             
Raider’s Pass
  
2002/03
  
Mar-06
  
Texas Tech University
  
12
  
4,556
  
443
  
99.1%
  
98.9%
  
12
  
264
  
828
                                             
Aggie Station
  
2003
  
Mar-06
  
Texas A&M University
  
12
  
2,696
  
488
  
99.7%
  
99.8%
  
5
  
156
  
450
                                             
The Outpost San Marcos
  
2003/04
  
Mar-06
  
Texas State University – San Marcos
  
12
  
2,761
  
456
  
99.1%
  
98.8%
  
5
  
162
  
486
                                             
The Outpost San Antonio
  
2005
  
Mar-06
  
University of Texas – San Antonio
  
12
  
5,563
  
517
  
99.6%
  
100.0%
  
10
  
276
  
828
 
18
 
Property
  
Year
Built
  
Date
Acquired/
Developed
  
Primary University Served
  
Typical
Lease
Term (Mos)
  
Year Ended December
31, 2009
Revenue
  
Average
Monthly
Revenue/
Bed (1)
  
2009 Average
Occupancy (1)
  
Occupancy
as of
12/31/09
  
# of
Buildings
  
# of Units
  
# of Beds
                                             
Callaway Villas
  
2006
  
Aug-06
  
Texas A&M University
  
12
  
5,357
  
646
  
92.8%
  
83.9%
  
20
  
236
  
704
                             
 
Village on Sixth
  
2000/
2006
  
Jan-07
  
 
Marshall University
  
12
  
 
3,827
  
 
430
  
 
95.6%
  
 
97.5%
  
 
14
  
248
  
752
                                             
Newtown Crossing
  
2005/
2007
  
Feb-07
  
 
University of Kentucky
  
12
  
 
5,637
  
 
539
  
 
88.8%
  
 
88.5%
  
7
  
356
  
942
                                             
Olde Town University Square
  
2005
  
Feb-07
  
University of  Toledo
  
12
  
3,691
  
533
  
98.3%
  
97.3%
  
4
  
224
  
550
                                             
Peninsular Place
  
2005
  
Feb-07
  
Eastern Michigan University
  
12
  
2,743
  
479
  
92.6%
  
94.8%
  
2
  
183
  
478
                                             
University Centre
  
2007
  
Aug-07
  
Rutgers University, NJIT, Essex CCC
  
9/12
  
6,585
  
753
  
81.2%
  
89.4%
  
2
  
234
  
838
                           
Subtotal – Same Store Wholly-Owned Properties (6)
130,479
  
515
  
96.1%
  
96.5%
  
349
  
6,246
  
20,000
                                             
Sunnyside Commons
  
1925-2001
  
Feb-08
  
 
West Virginia University
  
12
  
 
791
  
 
404
  
 
98.7%
  
 
98.8%
  
9
  
68
  
161
                                             
Pirate’s Place
  
1996
  
Feb-08
  
East Carolina University
  
12
  
1,727
  
265
  
87.7%
  
83.0%
  
12
  
144
  
528
                                             
The Highlands
  
2004
  
June-08
  
University of Nevada at Reno
  
12
  
3,121
  
426
  
80.0%
  
98.8%
  
17
  
216
  
732
                                             
Jacob Heights I (5)
  
2004
  
June-08
  
Minnesota State University
  
12
  
816
  
548
  
74.0%
  
72.8%
  
11
  
42
  
162
                                             
Jacob Heights III (5)
  
2006
  
June-08
  
Minnesota State University
  
12
  
484
  
505
  
80.3%
  
72.9%
  
14
  
24
  
96
                                             
The Summit (5)
  
2003
  
June-08
  
Minnesota State University
  
12
  
3,386
  
421
  
96.3%
  
98.2%
  
9
  
192
  
672
                                             
GrandMarc – Seven Corners
  
2000
  
June-08
  
University of Minnesota
  
12
  
4,284
  
745
  
93.6%
  
110.0%
  
1
  
186
  
440
                                             
University Village – Sacramento
  
1979
  
June-08
  
California State University –
  Sacramento
  
12
  
 
2,509
  
 
571
  
 
90.3%
  
 
90.1%
  
41
  
250
  
394
                                             
Aztec Corner
  
1995
  
June-08
  
San Diego State University
  
12
  
4,855
  
650
  
99.3%
  
99.3%
  
3
  
180
  
606
                                             
University Crossings
  
1926/
2003
  
June-08
  
 
University of Pennsylvania / Drexel
  
12
  
 
7,627
  
 
523
  
 
97.7%
  
 
98.7%
  
1
  
260
  
1,016
                                             
Campus Corner
  
1997
  
June-08
  
Indiana University
  
12
  
3,189
  
400
  
80.0%
  
97.4%
  
23
  
254
  
796
                                             
Tower at 3rd
  
1973
  
June-08
  
University of Illinois
  
12
  
2,719
  
655
  
97.5%
  
99.0%
  
1
  
147
  
295
                                             
University Mills
  
2002
  
June-08
  
University of Northern Iowa
  
12
  
2,132
  
369
  
95.5%
  
98.8%
  
11
  
121
  
481
                                             
Pirates Cove
  
2000
  
June-08
  
East Carolina University
  
12
  
3,653
  
321
  
83.3%
  
95.8%
  
26
  
264
  
1,056
                                             
University Manor
  
2002
  
June-08
  
East Carolina University
  
12
  
2,544
  
351
  
92.7%
  
99.3%
  
18
  
168
  
600
                                             
Brookstone Village
  
1993
  
June-08
  
UNC – Wilmington
  
12
  
1,248
  
429
  
94.8%
  
100.4%
  
12
  
124
  
238
                                             
Campus Walk – Wilmington
  
1989
  
June-08
  
UNC – Wilmington
  
12
  
1,875
  
545
  
93.2%
  
86.2%
  
12
  
289
  
290
                                             
Cambridge at Southern
  
2006
  
June-08
  
Georgia Southern University
  
12
  
3,139
  
508
  
88.4%
  
96.1%
  
13
  
228
  
564
                                             
Campus Club – Statesboro
  
2003
  
June-08
  
Georgia Southern University
  
12
  
4,704
  
411
  
90.7%
  
95.2%
  
26
  
276
  
984
                                             
University Pines
  
2001
  
June-08
  
Georgia Southern University
  
12
  
2,685
  
415
  
92.1%
  
97.1%
  
13
  
144
  
552
                                             
Lakeside
  
1991
  
June-08
  
University of Georgia
  
12
  
3,478
  
384
  
92.9%
  
92.7%
  
20
  
244
  
776
                                             
The Club
  
1989
  
June-08
  
University of Georgia
  
12
  
1,696
  
306
  
93.4%
  
98.3%
  
17
  
120
  
480
                                             
The Edge
  
1999
  
June-08
  
Central Florida
  
12
  
6,358
  
554
  
96.1%
  
99.5%
  
21
  
306
  
930
                                             
University Place
  
2003
  
June-08
  
University of Virginia
  
12
  
2,161
  
400
  
83.1%
  
89.0%
  
12
  
144
  
528
 
19
 
Property
  
Year
Built
  
Date
Acquired/
Developed
  
Primary University Served
  
Typical
Lease
Term
(Mos)
  
Year Ended December
31, 2009
Revenue
  
Average Monthly Revenue/
Bed (1)
  
2009 Average
Occupancy (1)
  
Occupancy
as of
12/31/09
  
# of
Buildings
  
# of
Units
  
 
# of Beds
                                             
Southview
  
1998
  
June-08
  
James Madison University
  
12
  
5,092
  
436
  
98.2%
  
96.5%
  
21
  
240
  
960
                                             
Stonegate
  
2000
  
June-08
  
James Madison University
  
12
  
3,645
  
447
  
98.9%
  
97.9%
  
15
  
168
  
672
                                             
The Commons
  
1991
  
June-08
  
James Madison University
  
12
  
2,352
  
389
  
91.7%
  
84.8%
  
11
  
132
  
528
                                             
University Gables
  
2001
  
June-08
  
Middle Tennessee State University
  
12
  
2,659
  
351
  
88.7%
  
96.1%
  
15
  
168
  
648
                                             
Campus Ridge
  
2003
  
June-08
  
East Tennessee State University
  
12
  
2,204
  
361
  
90.7%
  
90.0%
  
10
  
132
  
528
                                             
The Enclave I
  
2002
  
June-08
  
Bowling Green State University
  
12
  
1,337
  
280
  
78.8%
  
99.2%
  
11
  
120
  
480
                                             
Hawks Landing
  
1994
  
June-08
  
Miami University of Ohio
  
12
  
1,780
  
449
  
66.6%
  
83.3%
  
13
  
122
  
484
                                             
Willowtree Apartments (5)
  
1968
  
June-08
  
University of Michigan
  
12
  
3,003
  
480
  
89.7%
  
84.9%
  
13
  
310
  
568
                                             
Willowtree Towers (5)
  
1974
  
June-08
  
University of Michigan
  
12
  
1,496
  
480
  
89.6%
  
84.8%
  
3
  
163
  
283
                                             
Abbott Place
  
1999
  
June-08
  
Michigan State University
  
12
  
3,085
  
400
  
94.3%
  
99.4%
  
9
  
222
  
654
                                             
University Centre – Kalamazoo
  
2004
  
June-08
  
Western Michigan University
  
12
  
2,516
  
366
  
78.1%
  
98.4%
  
23
  
232
  
700
                                             
University Meadows
  
2001
  
June-08
  
Central Michigan University
  
12
  
2,340
  
355
  
83.8%
  
96.6%
  
23
  
184
  
616
                                             
Campus Way
  
1993
  
June-08
  
University of Alabama
  
12
  
3,293
  
400
  
96.3%
  
98.5%
  
9
  
196
  
684
                                             
Campus Walk – Oxford
  
2001
  
June-08
  
University of Mississippi
  
12
  
1,505
  
366
  
75.6%
  
91.9%
  
10
  
108
  
432
                                             
Campus Trails
  
1991
  
June-08
  
Mississippi State University
  
12
  
2,038
  
350
  
96.9%
  
98.5%
  
14
  
156
  
480
                                             
University Pointe
  
2004
  
June-08
  
Texas Tech University
  
12
  
4,210
  
506
  
97.4%
  
98.8%
  
11
  
204
  
682
                                             
University Trails
  
2003
  
June-08
  
Texas Tech University
  
12
  
3,930
  
465
  
97.9%
  
98.4%
  
20
  
240
  
684
                                             
Vista del Sol  (7)
  
2008
  
Aug-08
  
Arizona State University
  
12
  
14,921
  
602
  
97.5%
  
95.2%
  
12
  
613
  
1,866
                                             
Villas at Chestnut Ridge
  
2008
  
Aug-08
  
State University of New York –  Buffalo
  
12
  
 
4,449
  
 
670
  
 
98.6%
  
 
99.3%
  
12
  
196
  
552
                                             
Barrett Honors College (7)(8)
  
2009
  
Aug-09
  
Arizona State University
  
12
  
5,538
  
716
  
95.3%
  
95.5%
  
7
  
602
  
1,721
                                             
Subtotal – New Wholly-
Owned Properties
          
142,574
  
465
  
91. 3%
  
95.6%
  
 605
  
8,899
  
27,599
                                             
Total – Wholly-Owned
Properties
          
273,053
  
486
  
93.3%
  
96.0%
  
954
  
15,145
  
47,599
                                             
ON-CAMPUS PARTICIPATING PROPERTIES (9) (10)
                                    
                                             
University Village –  PVAMU
  
1996/ 97/98
  
Aug-96
Aug-98
  
Prairie View A&M University
  
9
  
 
8,744
  
 
502
  
 
72.5%
  
 
97.7%
  
30
  
612
  
1,920
                                             
University College –  PVAMU
  
2000/
2003
  
Aug-00
Aug-03
  
Prairie View A&M University
  
9
  
 
6,398
  
 
489
  
 
69.6%
  
 
99.7%
  
14
  
756
  
1,470
                                             
University Village –  TAMIU
  
1997
  
Aug-97
  
Texas A&M International University
  
9
  
1,253
  
489
  
85.1%
  
93.2%
  
4
  
84
  
250
                                             
Cullen Oaks
  
2001/
2005
  
Aug-01
Aug-05
  
The University of Houston
  
9
  
 
6,332
  
 
684
  
 
85.3%
  
 
98.0%
  
4
  
411
  
879
                                             
Total - On-Campus Participating  Properties
          
22,727
  
533
  
74.7%
  
98.1%
  
52
  
1,863
  
4,519
                                             
Grand Total- All Properties
          
$               295,780
  
$        490
(11)
91.7%
  
96.2%
  
1,006
  
17,008
  
52,118
                                     

 
20
 

(1)  
Average monthly revenue per bed is calculated based upon our base rental revenue earned during typical lease terms for the year ended December 31, 2009 divided by average occupied beds over the typical lease term.  Average occupancy is calculated based on the average number of occupied beds during typical lease terms for the year ended December 31, 2009 divided by total beds.
 
(2)  
Although we hold an 80% interest in the property, because of our preferred distribution rights, we currently receive substantially all of the property’s net cash flow.
 
(3)  
As rent at this property includes food services, revenue is not comparable to the other properties in this chart.
 
(4)  
Subject to a 75-year ground lease with Temple University.
 
(5)  
For lease administration purposes, University Club Tallahassee and The Grove at University Club are reported combined, College Club Tallahassee and The Greens at College Club are reported combined, Royal Oaks, Royal Pavilion, and Royal Village Tallahassee are reported combined, Jacob Heights I, Jacob Heights III, and The Summit are reported combined, and Willowtree Apartments and Willowtree Towers are reported combined.  As a result, revenue for the year ended December 31, 2009 is allocated to the respective properties based on relative bed count.
 
(6)  
Our same store wholly-owned portfolio represents properties that were owned by us for both of the full years ended December 31, 2009 and 2008.
 
(7)  
Subject to a 65-year ground/facility lease with Arizona State University.
 
(8)  
This property completed construction and opened in the Fall 2009 semester.  Average occupancy is calculated based on the period this property was operating in 2009.
 
(9)  
Although our on-campus participating properties accounted for 11.0% of our units, 8.7% of our beds and 7.7% of our revenues for the year ended December 31, 2009, because of the structure of their ownership and financing we have only received approximately $1.0 million in distributions of excess cash flow during the year ended December 31, 2009. The ground/facility leases through which we own our on-campus participating properties provide that the university lessor may purchase our interest in and assume the management of the facility.
 
(10)  
Subject to ground/facility leases with their primary university systems.  Average occupancy is calculated based on the nine month academic year (excluding the summer months).
 
(11)  
Does not include revenues from The Callaway House because of its food service component.
 
 
21
 

Item 3. Legal Proceedings

From time to time, we are subject to various lawsuits, claims and proceedings arising in the ordinary course of business.  As of December 31, 2009, none of these were expected to have a material adverse effect on our cash flows, financial condition, or results of operations.

Item 4.  Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our stockholders during the quarter ended December 31, 2009.

 
22
 

PART II
 
Item 5.  Market for the Registrant’s Common Equity and Related Stockholder Matters

Market Information

The Company’s common stock has been listed and is traded on the New York Stock Exchange (“NYSE”) under the symbol “ACC”.  The following table sets forth, for the periods indicated, the high and low sale prices in dollars on the NYSE for our common stock and the distributions we declared with respect to the periods indicated.

   
High
    
Low
    
Distributions
Declared
  
Quarter ended March 31, 2008
   $ 29.50     $ 24.84     $ 0.3375  
Quarter ended June 30, 2008
   $ 32.08     $ 26.53     $ 0.3375  
Quarter ended September 30, 2008
   $ 34.75     $ 27.28     $ 0.3375  
Quarter ended December 31, 2008
   $ 37.00     $ 15.05     $ 0.3375  
Quarter ended March 31, 2009
   $ 23.43     $ 14.88     $ 0.3375  
Quarter ended June 30, 2009
   $ 24.17     $ 16.65     $ 0.3375  
Quarter ended September 30, 2009
   $ 29.09     $ 19.33     $ 0.3375  
Quarter ended December 31, 2009
   $ 28.86     $ 25.62     $ 0.3375  

Holders

As of January 31, 2010, there were approximately 16,500 holders of record of the Company’s common stock and 52,208,669 shares of common stock outstanding.

Distributions

We intend to continue to declare quarterly distributions on our common stock. The actual amount, timing and form of payment of distributions, however, will be at the discretion of our Board of Directors and will depend upon our financial condition in addition to the requirements of the Code, and no assurance can be given as to the amounts, timing or form of payment of future distributions.  The payment of distributions is subject to restrictions under the Company’s corporate-level debt described in Note 11 to the Consolidated Financial Statements in Item 8 and discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 under Liquidity and Capital Resources.

Equity Compensation Plans

We have adopted the 2004 Incentive Award Plan (the “Plan”). The Plan provides for the grant of various stock-based incentive awards to selected employees and directors of the Company and the Company’s affiliates.  The Company has reserved a total of 1,210,000 shares of the Company’s common stock for issuance pursuant to the Plan, subject to certain adjustments for changes in the Company’s capital structure, as defined in the Plan.  Refer to Note 12 in the accompanying Notes to Consolidated Financial Statements in Item 8 for a more detailed description of the Plan.  As of December 31, 2009, the total units and shares issued under the Plan were as follows:

 
23
 

   
# of Securities to be
Issued Upon Exercise
of Outstanding
Options, Warrants,
and Rights
    
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants, and
Rights
    
# of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans
  
Equity Compensation Plans  Approved by Security Holders
     855,440   (1) $ -0-     354,560  
Equity Compensation Plans Not Approved by Security Holders
     n/a       n/a     n/a  

(1)  
Consists of restricted stock units granted to non-employee Board of Director members, restricted stock awards granted to executive officers and certain employees and common units of limited partnership interest in the Operating Partnership.
 
 
24
 

Item 6.  Selected Financial Data

The following table sets forth selected financial and operating data on a consolidated historical basis for the Company.

The following data should be read in conjunction with the Notes to Consolidated Financial Statements in Item 8 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7.

   
As of and for the Year Ended December 31,
  
   
2009
    
2008
    
2007
    
2006
    
2005
  
Statements of Operations Information:
                              
Revenues
   $ 309,590     $ 233,579     $ 147,135     $ 118,953     $ 82,522  
(Loss) income from continuing operations
     (2,392 )     (12,474 )     (1,431 )     3,700       1,915  
Discontinued operations:
                                        
(Loss) income attributable to discontinued operations
      (710 )     (345 )     -       2,287       2,028  
(Loss) gain from disposition of real estate
     (9,358 )     -       -       18,648       5,883  
Net (loss) income
     (12,460 )     (12,819 )     (1,431 )     24,635       9,826  
Income attributable to noncontrolling interests
     (380 )     (236 )     (255 )     (2,038 )     (164 )
Net (loss) income attributable to common shareholders
     (12,840 )     (13,055 )      (1,686 )     22,597       9,662  
                                         
Per Share and Distribution Data:
                                        
Earnings per diluted share:
                                        
(Loss) income from continuing operations
   $ (0.08 )   $ (0.35 )   $ (0.08 )   $ 0.08     $ 0.11  
Discontinued operations
     (0.20 )     (0.01 )     -       1.08       0.53  
Net (loss) income
     (0.28 )     (0.36 )     (0.08 )     1.16       0.64  
Cash distributions declared per share / unit
     1.35       1.35       1.35       1.35       1.35  
Cash distributions declared
     64,492       50,563       32,931       25,287       20,180  
                                         
Balance Sheet Data:
                                        
Total assets
   $ 2,234,981     $ 2,183,909     $ 1,076,296     $ 884,381     $ 550,862  
Secured mortgage, construction and bond debt
     1,029,455       1,162,221       533,430       432,294       291,646  
Senior secured term loan
     100,000       100,000       -       -       -  
Secured revolving credit facilities
     94,000       14,700       9,600       -       -  
Capital lease obligations
     2,314       2,555       2,798       2,348       1,679  
Stockholders’ equity
     899,030       785,119       428,562       341,944       221,799  
                                         
Selected Owned Property Information:
                                        
Owned properties
     85       86       44       38       25  
Units
     17,008       17,212       9,519       7,711       5,620  
Beds
     52,118       52,817       28,657       23,663       17,109  
Occupancy as of December 31,
     96.2 %     92.4 %     95.1 %     96.2 %     97.0 %
                                         
Net cash provided by operating activities
   $ 79,562     $ 32,887     $ 29,047     $ 35,237     $ 20,429  
Net cash used in investing activities
     (122,125 )     (432,410 )     (187,591 )     (102,718 )     (111,755 )
Net cash provided by financing activities
     83,056       413,050       91,510       121,947       111,332  
                                         
Funds From Operations (“FFO”):
                                        
Net (loss) income attributable to common shareholders
   $ (12,840 )   $ (13,055 )   $ (1,686 )   $ 22,597     $ 9,662  
Noncontrolling interests
     380       236       255       2,038       164  
Loss (gain) from disposition of real estate
     9,358       -       -       (18,648 )     (5,883 )
Loss from unconsolidated joint ventures
     2,073       1,619       108       -       -  
FFO from unconsolidated joint ventures
     246       (487 )     (108 )     -       -  
Real estate related depreciation and amortization
     75,814       56,459       29,824       24,956       16,032  
Funds from operations (1) (2)
   $ 75,031     $ 44,772     $ 28,393     $ 30,943     $ 19,975  
 
25
 
(1)
As defined by the National Association of Real Estate Investment Trusts or NAREIT, funds from operations or FFO represents income (loss) before allocation to minority interests (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization (excluding amortization of loan origination costs) and after adjustments for unconsolidated partnerships and joint ventures. We present FFO because we consider it an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income.
 
We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. Further, FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties. FFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay distributions.
 
(2)  
When considering our FFO, we believe it is also a meaningful measure of our performance to make certain adjustments   related to our on-campus participating properties. See Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations in Item 7 contained herein.
 
Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Company and Our Business

Overview

We are one of the largest owners, managers and developers of high quality student housing properties in the United States in terms of beds owned and under management.  We are a fully integrated, self-managed and self-administered equity REIT with expertise in the acquisition, design, financing, development, construction management, leasing and management of student housing properties.

On June 11, 2008, we completed the acquisition of GMH’s student housing business.  At the time of closing, the GMH student housing portfolio consisted of 42 wholly-owned properties containing 24,939 beds located in various markets throughout the country.  Two of the acquired properties totaling 1,468 beds were sold in the third quarter of 2008 and one property totaling 700 beds was sold on December 31, 2009.  The total consideration paid for GMH was approximately $1,018.7 million, inclusive of transaction costs.

Property Portfolio

As of December 31, 2009, our total property portfolio contained 85 student housing properties with approximately 52,100 beds and 17,000 apartment units, all of which we manage.  Our communities contain modern housing units and are supported by a resident assistant system and other student-oriented programming, with many offering resort-style amenities.

As of December 31, 2009, our property portfolio included 81 wholly-owned properties, which consisted of 79 owned off-campus properties that are in close proximity to 59 colleges and universities in 23 states and two owned on-campus properties.  The net operating income of these student housing communities, which is one of the financial measures that we use to evaluate community performance, is affected by the demand and supply dynamics within our markets, which drives our rental rates and occupancy levels and is affected by our ability to control operating costs.  Our overall operating performance is also impacted by the general availability and cost of capital and the performance of our newly developed and acquired student housing communities.  Our primary business objectives are to create long-term stockholder value by accessing capital on cost effective terms, deploying that capital to develop, redevelop and acquire student housing communities and selling communities when they no longer meet our long-term investment strategy and when market conditions are favorable.
 
26
 
The construction of our two owned on-campus properties was funded with our equity through the ACE program which enables colleges and universities to preserve their credit capacity to fund core academic infrastructure.  Each of these properties operate under a ground/facility lease with a related university system.

Additionally, we participate with two university systems in the ownership of four on-campus properties under long-term ground/facility leases; we refer to these properties as our “on-campus participating properties.”

Third-Party Development and Management Services

We also provide development and construction management services for student housing properties owned by universities, 501(c) 3 foundations and others.  Our clients have included some of the nation’s most prominent systems of higher education, including the State University of New York System, the University of California System, the University of Houston System, the Texas A&M University System, the Texas State University System, the University of Georgia System, the University of North Carolina System, the Purdue University System, the University of Colorado System, and the West Virginia University System.  We have developed student housing properties for these clients and a majority of the time have been retained to manage these properties following their opening.  Since 1996, we have developed and assisted in securing financing for 35 third-party student housing properties.  As of December 31, 2009, we were under contract on three projects that are currently in progress and whose fees range from $2.5 million to $7.6 million.  As of December 31, 2009, fees of approximately $2.8 million remained to be earned by us with respect to these projects, which have scheduled completion dates of March 2010 through August 2011.

As of December 31, 2009, we owned a noncontrolling interest in two joint ventures that owned an aggregate of 20 student housing properties with approximately 11,300 beds in approximately 3,400 units.  We also provided third-party management and leasing services for 31 properties that represented approximately 23,300 beds in approximately 9,100 units, five of which we developed.  Our third-party management and leasing services are typically provided pursuant to multi-year management contracts that have an initial term that ranges from one to five years.  As of December 31, 2009, our total owned, joint venture and third-party managed portfolio was comprised of 136 properties that represented approximately 86,700 beds in approximately 29,500 units.

We believe that the ownership and operation of student housing communities in close proximity to selected colleges and universities presents an attractive long-term investment opportunity for our investors.  We intend to continue to execute our strategy of identifying existing differentiated, typically highly amenitized, student housing communities or development opportunities in close proximity to university campuses with high barriers to entry which are projected to experience substantial increases in enrollment and/or are under-serviced in terms of existing on and/or off-campus student housing.  While fee revenue from our third-party development, construction management and property management services allows us to develop strong and key relationships with colleges and universities, this area has over time become a smaller portion of our operations due to the continued focus on and growth of our wholly-owned property portfolio.  Nevertheless, we believe these services continue to provide synergies with respect to our ability to identify, close, and successfully operate student housing properties.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated and combined financial statements and related notes. In preparing these financial statements, management has utilized all available information, including its past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments of certain amounts included in the consolidated and combined financial statements, giving due consideration to materiality. It is possible that the ultimate outcome anticipated by management in formulating its estimates may not be realized. Application of the critical accounting policies below involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. In addition, other companies in similar businesses may utilize different estimation policies and methodologies, which may impact the comparability of our results of operations and financial condition to those companies.

Revenue and Cost Recognition of Third-Party Development and Management Services

Development revenues are generally recognized based on a proportionate performance method based on contract deliverables, while construction revenues are recognized using the percentage of completion method, as determined by construction costs incurred relative to total estimated construction costs.  Costs associated with such projects are deferred and recognized in relation to the revenues earned on executed contracts.  For projects where our fee is based on a fixed price, any cost overruns incurred during construction, as compared to the original budget, will reduce the net fee generated on those projects.  Incentive fees are generally recognized when the project is complete and performance has been agreed upon by all parties, or when performance has been verified by an independent third-party.
 
27
 
We also evaluate the collectibility of fee income and expense reimbursements generated through the provision of development and construction management services based upon the individual facts and circumstances, including the contractual right to receive such amounts in accordance with the terms of the various projects, and reserve any amounts that are deemed to be uncollectible.

Pre-development expenditures such as architectural fees, permits and deposits associated with the pursuit of third-party and owned development projects are expensed as incurred, until such time that management believes it is probable that the contract will be executed and/or construction will commence.  Because we frequently incur these pre-development expenditures before a financing commitment and/or required permits and authorizations have been obtained, we bear the risk of loss of these pre-development expenditures if financing cannot ultimately be arranged on acceptable terms or we are unable to successfully obtain the required permits and authorizations.  As such, management evaluates the status of third-party and owned projects that have not yet commenced construction on a periodic basis and expenses any deferred costs related to projects whose current status indicates the commencement of construction is unlikely and/or the costs may not provide future value to us in the form of revenues.  Such write-offs are included in third-party development and management services expenses (in the case of third-party development projects) or general and administrative expenses (in the case of owned development projects) on the accompanying consolidated statements of operations.

Third-party management fees are generally received and recognized on a monthly basis and are computed as a percentage of property receipts, revenues or a fixed monthly amount, in accordance with the applicable management contract. Incentive management fees are recognized when the contractual criteria have been met.

Student Housing Rental Revenue Recognition and Accounts Receivable

Student housing rental revenue is recognized on a straight-line basis over the term of the contract. Ancillary and other property related income is recognized in the period earned.  In estimating the collectibility of our accounts receivable, we analyze the aging of resident receivables, historical bad debts, and current economic trends. These estimates have a direct impact on our net income, as an increase in our allowance for doubtful accounts reduces our net income.

Allocation of Fair Value to Acquired Properties

The price that we pay to acquire a property is impacted by many factors, including the condition of the buildings and improvements, the occupancy of the building, favorable or unfavorable financing, and numerous other factors. Accordingly, we are required to make subjective assessments to allocate the purchase price paid to acquire investments in real estate among the assets acquired and liabilities assumed based on our estimate of the fair values of such assets and liabilities. This includes, among other items, determining the value of the buildings and improvements, land, in-place tenant leases, and any debt assumed from the seller. Each of these estimates requires a great deal of judgment and some of the estimates involve complex calculations. Our calculation methodology is summarized in Note 2 to our consolidated financial statements contained in Item 8 herein. These allocation assessments have a direct impact on our results of operations because if we were to allocate more value to land there would be no depreciation with respect to such amount or if we were to allocate more value to the buildings as opposed to allocating to the value of in-place tenant leases, this amount would be recognized as an expense over a much longer period of time, since the amounts allocated to buildings are depreciated over the estimated lives of the buildings whereas amounts allocated to in-place tenant leases are amortized over the terms of the leases (generally less than one year).

Long-Lived Assets–Impairment

On a periodic basis, management is required to assess whether there are any indicators that the value of our real estate properties may be impaired. A property’s value is considered impaired if management’s estimate of the aggregate future undiscounted cash flows to be generated by the property are less than the carrying value of the property. These estimates of cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the property, thereby reducing our net income.
 
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Outperformance Bonus Plan

The Outperformance Bonus Plan was adopted upon consummation of our IPO in August 2004, and consisted of awards to key employees equal to the value of 367,682 shares of our common stock.  Compensation related to these awards was not recorded until 2007 when management determined that certain of the required performance measures were probable of achievement.  Such awards vested on the third anniversary of the IPO (August 2007), upon our achievement of specified performance measures.  Upon vesting, the Compensation Committee of the Board of Directors exercised its permitted discretion and granted 132,400 of the awards to selected recipients in the form of profits interest units (“PIUs”), with the remainder of the awards paid in cash in the amount of $6.7 million.  A compensation charge of approximately $10.4 million was recorded during the year ended December 31, 2007, to reflect the value of such awards.

Capital Expenditures

We distinguish between capital expenditures necessary for the ongoing operations of our properties and acquisition-related improvements incurred within one to two years of acquisition of the related property.  (Acquisition-related improvements are expenditures that have been identified at the time the property is acquired, and which we intended to incur in order to position the property to be consistent with our physical standards). We capitalize non-recurring expenditures for additions and betterments to buildings and land improvements.  In addition, we generally capitalize expenditures for exterior painting, roofing, and other major maintenance projects that substantially extend the useful life of the existing assets.  The cost of ordinary repairs and maintenance that do not improve the value of an asset or extend its useful life are charged to expense when incurred.  Planned major repair, maintenance and improvement projects are capitalized when performed. In some circumstances, lenders require us to maintain a reserve account for future repairs and capital expenditures. These amounts are classified as restricted cash on the accompanying consolidated balance sheets, as the funds are not available to us for current use.

 
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Results of Operations

Comparison of the Years Ended December 31, 2009 and December 31, 2008

The following table presents our results of operations for the years ended December 31, 2009 and 2008, including the amount and percentage change in these results between the two periods.

   
Year Ended December 31,
              
   
2009
    
2008
    
Change ($)
    
Change (%)
  
Revenues:
                        
Wholly-owned properties
   $ 271,938     $ 194,701     $ 77,237       39.7 %
On-campus participating properties
     22,727       22,042       685       3.1 %
Third-party development services
     5,015       7,922       (2,907 )     (36.7 %)
Third-party management services
     8,795       6,578       2,217       33.7 %
Resident services
     1,115       2,336       (1,221 )     (52.3 %)
Total revenues
     309,590       233,579       76,011       32.5 %
                                 
Operating expenses:
                                
Wholly-owned properties
     132,965       101,804       31,161       30.6 %
On-campus participating properties
     10,200       10,771       (571 )     (5.3 %)
Third-party development and management services
     11,250       11,123       127       1.1 %
General and administrative
     10,955       11,274       (319 )     (2.8 %)
Depreciation and amortization
     76,201       56,853       19,348       34.0 %
Ground/facility leases
     2,107       1,778       329       18.5 %
Total operating expenses
     243,678       193,603       50,075       25.9 %
                                 
Operating income
     65,912       39,976       25,936       64.9 %
                                 
Nonoperating income and (expenses):
                                
Interest income
     120       1,131       (1,011 )     (89.4 %)
Interest expense
     (62,747 )     (49,497 )     (13,250 )     26.8 %
Amortization of deferred financing costs
     (3,466 )     (2,563 )     (903 )     35.2 %
Loss from unconsolidated joint ventures
     (2,073 )     (1,619 )     (454 )     28.0 %
Other nonoperating income
     402       486       (84 )     (17.3 %)
Total nonoperating expenses
     (67,764 )     (52,062 )     (15,702 )     30.2 %
                                 
Loss before income taxes and discontinued operations
      (1,852 )     (12,086 )      10,234       (84.7 %)
Income tax provision
     (540 )     (388 )     (152 )     39.2 %
Loss from continuing operations
     (2,392 )     (12,474 )     10,082       (80.8 %)
                                 
Discontinued operations:
                                
Loss attributable to discontinued operations
     (710 )     (345 )     (365 )     105.8 %
Loss from disposition of real estate
     (9,358 )     -       (9,358 )     100.0 %
Total discontinued operations
     (10,068 )     (345 )     (9,723 )     2,818.3 %
                                 
Net loss
     (12,460 )     (12,819 )     359       (2.8 %)
Income attributable to noncontrolling interests
     (380 )     (236 )     (144 )     61.0 %
Net loss attributable to common shareholders
   $ (12,840 )   $ (13,055 )   $ 215       (1.6 %)

Wholly-Owned Properties Operations

Revenues from our wholly-owned properties for the year ended December 31, 2009 compared to the year ended December 31, 2008 increased by $77.2 million primarily due to the acquisition of GMH’s student housing business in June 2008, the completion of construction and opening of Vista del Sol and Villas at Chestnut Ridge in August 2008, and the completion of construction and opening of Barrett Honors College in August 2009.  Operating expenses increased approximately $31.2 million for the year ended December 31, 2009 as compared to the prior year, primarily due to the same factors which affected the increase in revenues.
 
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New Property Operations.  For the year ended December 31, 2009, the GMH student housing properties contributed an additional $55.6 million of revenues and an additional $24.6 million of operating expenses.  In addition, we acquired two properties in February 2008: Pirate’s Place, located near the campus of East Carolina University in Greenville, North Carolina, and Sunnyside Commons, located near the campus of West Virginia University in Morgantown, West Virginia.  In August 2008, we completed construction of and opened Vista del Sol and Villas at Chestnut Ridge, and in August 2009 we completed construction of and opened Barrett Honors College.  These five non-GMH new properties contributed an additional $18.1 million of revenues and an additional $5.4 million of operating expenses during the year ended December 31, 2009 as compared to the year ended December 31, 2008.

Same Store Property Operations (Excluding New Property Activity).  We had 37 properties containing 20,000 beds which were operating during both the years ended December 31, 2009 and 2008.  These properties produced revenues of $130.5 million and $128.2 million during the years ended December 31, 2009 and 2008, respectively, an increase of $2.3 million.  This increase was primarily due to an increase in average rental rates during the year ended December 31, 2009 as compared to the prior year, in addition to an increase in average occupancy from 95.1% during the year ended December 31, 2008 to 95.5% during the year ended December 31, 2009.  Future revenues will be dependent on our ability to maintain our current leases in effect for the 2009/2010 academic year and our ability to obtain appropriate rental rates and desired occupancy for the 2010/2011 academic year at our various properties during our leasing period, which typically begins in January and ends in August.

At these existing same store properties, operating expenses increased from $60.1 million for the year ended December 31, 2008 to $61.2 million for the year ended December 31, 2009, an increase of $1.1 million.  This increase was primarily due to an increase in marketing costs incurred to stimulate leasing velocity for the 2009/2010 academic year.  We anticipate that operating expenses for our same store property portfolio in 2010 will increase slightly as compared with 2009 as a result of expected increases in utility costs, employee benefit costs, property taxes and general inflation.

On-Campus Participating Properties (“OCPP”) Operations

We had four participating properties containing 4,519 beds which were operating during both the years ended December 31, 2009 and 2008.  Revenues from our participating properties increased to $22.7 million during the year ended December 31, 2009 from $22.0 million for the year ended December 31, 2008, an increase of $0.7 million.  This increase was primarily a result of an increase in average rental rates during the year ended December 31, 2009 as compared to the prior year.

At these properties, operating expenses decreased from $10.8 million for the year ended December 31, 2008 to $10.2 million for the year ended December 31, 2009, a decrease of $0.6 million.  This decrease was primarily due to hurricane costs incurred during the year ended December 31, 2008 that were not incurred in the current year.  We anticipate that operating expenses in 2010 will increase slightly as compared with 2009 as a result of expected increases in utility costs, employee benefit costs and general inflation.

Third Party Development Services Revenue

Third party development services revenue decreased by $2.9 million, from $7.9 million during the year ended December 31, 2008 to $5.0 million for the year ended December 31, 2009.  This decrease was primarily related to the closing and commencement of construction of the University of California, Irvine Phase III project in August 2008, which contributed an additional $2.2 million to third party development services revenue during the year ended December 31, 2008 compared to the year ended December 31, 2009.  In addition, the University of Hawaii – Manoa and Concordia University projects were completed in August 2008 and closing and commencement of construction occurred for The Highlands at Edinboro University of Pennsylvania project in February 2008.  These three projects combined contributed $2.4 million of additional third party development services revenue during the year ended December 31, 2008 as compared to the year ended December 31, 2009.  These decreases were offset by the commencement of construction of the Cleveland State University Phase II project in August 2009, which resulted in $1.5 million in third party development services revenue recognized during the year ended December 31, 2009.  Closing of third-party development services projects during 2010 will be dependent upon the Company’s university clients obtaining project financing, which has been adversely affected by current capital market conditions.

Development services revenues are dependent on our ability to successfully be awarded such projects, the amount of the contractual fee related to the project and the timing and completion of the development and construction of the project.  In addition, to the extent projects are completed under budget, we may be entitled to a portion of such savings, which are recognized as revenue when performance has been agreed upon by all parties, or when performance has been verified by an independent third-party.  It is possible that projects for which we have deferred pre-development costs will not close and that we will not be reimbursed for such costs.  The pre-development costs associated therewith will ordinarily be charged against income for the then-current period.
 
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Third Party Management Services Revenue

Third party management services revenues increased by $2.2 million from $6.6 million for the year ended December 31, 2008 to $8.8 million for the year ended December 31, 2009.  This increase was primarily due to an additional $1.6 million in management fees recognized during the year ended December 31, 2009 from third party management contracts assumed as part of the GMH acquisition in June 2008, including 20 properties owned in two joint ventures with Fidelity in which we have a 10% interest.  Additionally, we assumed management of four properties located in Canada, which contributed an additional $0.2 million of third party management services revenue for the year ended December 31, 2009.  Finally, during 2008 and 2009 we assumed management of additional phases at our Hampton Roads military housing project, which also contributed an additional $0.2 million of third party management services revenue during the year ended December 31, 2009. We anticipate that third-party management services revenues in 2010 will increase as compared with 2009 as a result of new contracts obtained during 2009 and contracts anticipated to commence in 2010.
 
Resident Services Revenue

Revenue from resident services represents certain services and resident amenities deemed to be noncustomary for a property’s geographic region that are required under federal tax laws to be provided by our TRS entities.  Resident services revenues decreased approximately $1.2 million, from $2.3 million for the year ended December 31, 2008 to $1.1 million for the year ended December 31, 2009.  This decrease was primarily due to a decrease in the type and level of such services provided during the year ended December 31, 2009 as compared to the prior year.
 
Third Party Development and Management Services Expenses

Third party development and management services expenses increased by $0.1 million, from $11.1 million during the year ended year ended December 31, 2008 to $11.2 million for the year ended December 31, 2009.  This increase was primarily due to an increase in payroll and related costs as a result of an increase in activity for potential ACE projects and new management contracts assumed from GMH.  Third-party development and management services expenses for 2010 will be dependent on the level of awards we pursue, the level of new management contracts obtained, and as previously mentioned, any pre-development costs charged against income for projects which do not close.
 
General and Administrative

General and administrative expenses decreased approximately $0.3 million, from $11.3 million during the year ended December 31, 2008 to $11.0 million for the year ended December 31, 2009.  This decrease was primarily due to merger costs incurred during the year ended year ended December 31, 2008 related to our acquisition of GMH in June 2008.  We anticipate general and administrative expenses to increase in 2010 as a result of an increase in employee benefit costs and general inflation.

Depreciation and Amortization

Depreciation and amortization increased by $19.3 million, from $56.9 million during the year ended December 31, 2008 to $76.2 million for the year ended December 31, 2009.  This increase was primarily due to the acquisition of the GMH student housing business in June 2008, which contributed an additional $14.1 million to depreciation and amortization expense for the year ended December 31, 2009, of which $0.7 million related to the valuation assigned to in-place leases for such properties.  The increase was also due to the completion of construction and opening of Vista del Sol and Villas at Chestnut Ridge in August 2008 and Barrett Honors College in August 2009, which contributed an additional $4.5 million to depreciation and amortization expense for the year ended December 31, 2009.  We expect depreciation and amortization expense to decrease in 2010 as a result of the value assigned to in-place leases at the time of the GMH acquisition being fully amortized in 2009, which should be slightly offset by increased depreciation on both Barrett Honors College, placed in service during 2009, and renovations during 2009 at several GMH properties.

Ground Lease Expense

Ground lease expense increased $0.3 million from $1.8 million during the year ended December 31, 2008 to $2.1 million for the year ended December 31, 2009, primarily due to ground/facility lease costs incurred for Vista del Sol and Barrett Honors College, which completed construction and opened in August 2008 and August 2009, respectively.  We expect ground lease expense in 2010 to increase slightly due to anticipated improved operating results of the on-campus participating properties which should increase our portion of cash flow available for distribution.
 
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Interest Income

Interest income decreased by $1.0 million, from $1.1 million for the year ended December 31, 2008 to $0.1 million for the year ended December 31, 2009.  This decrease was primarily due to interest earned on proceeds from our April 2008 equity offering, which were not utilized until the closing of our acquisition of GMH in June 2008, as well as a decrease in interest rates during the year ended December 31, 2009 as compared to the prior year.

Interest Expense

Interest expense increased $13.2 million, from $49.5 million during the year ended December 31, 2008 to $62.7 million for the year ended December 31, 2009.  This increase was primarily due to $598.8 million of mortgage debt assumed from GMH in June 2008, which contributed an additional $12.8 million of interest expense for the year ended December 31, 2009.  We also incurred an additional $0.9 million of interest expense during the year ended December 31, 2009 related to the senior secured term loan entered into in May 2008, as well as an additional $0.8 million of interest expense related to the $125 million secured Freddie Mac revolving credit facility entered into in September 2009.  These increases were offset by a $1.8 million decrease to interest expense related to the pay-off of $80.8 million of mortgage loans during the year ended December 31, 2009. Assuming that variable interest rates only increase slightly during 2010,  we expect interest expense in 2010 to be consistent with 2009 due to the pay-off of mortgage debt scheduled to mature in 2010, which would be offset by additional interest expense incurred on anticipated borrowings from our corporate-level debt.

Amortization of Deferred Financing Costs

Amortization of deferred financing costs increased approximately $0.9 million from $2.6 million during the year ended December 31, 2008 to $3.5 million for the year ended December 31, 2009, primarily due to the amortization of additional finance costs incurred to assume debt on properties acquired from GMH, the senior secured term loan entered into in May 2008, and the Freddie Mac revolving credit facility entered into in September 2009.  We anticipate that amortization of deferred financing costs will increase in 2010 due to the refinancing of our existing secured revolving credit facility in August 2009, and the secured agency facility entered into in September 2009.

Loss from Unconsolidated Joint Ventures

Loss from unconsolidated joint ventures represents our share of the net loss from the Hampton Roads military housing joint venture in which we have a minimal economic interest, as well as our 10% share of the loss from two joint ventures owning 20 properties formed or assumed as part of our acquisition of GMH in June 2008.

Loss from unconsolidated joint ventures increased approximately $0.5 million from $1.6 million during the year ended December 31, 2008 to $2.1 million for the year ended December 31, 2009.  This increase was primarily due to the loss from the two joint ventures formed or assumed as part of our acquisition of GMH in June 2008.

Income Tax Provision

The Company’s provision for income taxes increased by $0.1 million, from $0.4 million for the year ended December 31, 2008 to $0.5 million for the year ended December 31, 2009.  This increase was primarily a result of additional state tax liabilities accrued related to the acquisition of the GMH portfolio in June 2008.

Discontinued Operations

Riverside Estates, a wholly-owned property, was sold in December 2009 for $18.2 million and the resulting loss from disposition of $9.4 million is included in discontinued operations for the year ended December 31, 2009.  In addition, as part of the acquisition of GMH on June 11, 2008, the Company acquired two properties (The Courtyards and The Verge) that were under contract to be sold as of such date.  The Courtyards was sold in July 2008 for approximately $17.4 million, and The Verge was sold in August 2008 for approximately $36.4 million.  There was no gain or loss recorded on these dispositions for book purposes.  The net loss attributable to these three properties is included in discontinued operations for the years ended December 31, 2009 and 2008.  Refer to Note 6 in the accompanying Notes to Consolidated Financial Statements contained in Item 8 herein for a table summarizing the results of operations of the properties sold during the years ended December 31, 2009 and 2008.

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Noncontrolling Interests

Noncontrolling interests represent holders of common and preferred units in our Operating Partnership as well as certain third-party partners in joint ventures consolidated by us for financial reporting purposes.  Accordingly, these external partners are allocated their share of income/loss during the respective reporting periods.  See Note 9 in the accompanying Notes to Consolidated Financial Statements contained in Item 8 herein for a detailed discussion of noncontrolling interests.

Comparison of the Years Ended December 31, 2008 and December 31, 2007

The following table presents our results of operations for the years ended December 31, 2008 and 2007, including the amount and percentage change in these results between the two periods.

   
Year Ended December 31,
              
   
2008
    
2007
    
Change($)
    
Change(%)
  
Revenues:
                        
  Wholly-owned properties
   $ 194,701     $ 116,286     $ 78,415       67.4 %
  On-campus participating properties
     22,042       20,966       1,076       5.1 %
  Third-party development services
     7,922       5,490       2,432       44.3 %
  Third-party management services
     6,578       2,821       3,757       133.2 %
  Resident services
     2,336       1,572       764       48.6 %
Total revenues
     233,579       147,135       86,444       58.8 %
                                 
Operating expenses:
                                
  Wholly-owned properties
     101,804       55,155       46,649       84.6 %
  On-campus participating properties
     10,771       9,379       1,392       14.8 %
  Third-party development and management services
     11,123       5,708       5,415       94.9 %
  General and administrative
     11,274       17,660       (6,386 )     (36.2 %)
  Depreciation and amortization
     56,853       30,444       26,409       86.7 %
  Ground/facility lease
     1,778       1,622       156       9.6 %
Total operating expenses
     193,603       119,968       73,635       61.4 %
                                 
Operating income
     39,976       27,167       12,809       47.1 %
                                 
Nonoperating income and (expenses):
                                
  Interest income
     1,131       1,477       (346 )     (23.4 %)
  Interest expense
     (49,497 )     (27,871 )     (21,626 )     77.6 %
  Amortization of deferred financing costs
     (2,563 )     (1,340 )     (1,223 )     91.3 %
  Loss from unconsolidated joint ventures
     (1,619 )     (108 )     (1,511 )     1,399.1 %
  Other nonoperating income
     486       -       486       100.0 %
Total nonoperating expenses
     (52,062 )     (27,842 )     (24,220 )     87.0 %
                                 
Loss before income taxes and discontinued operations
     (12,086 )     (675 )     (11,411 )     1,690.5 %
Income tax provision
     (388 )     (756 )     368       (48.7 %)
Loss from continuing operations
     (12,474 )     (1,431 )     (11,043 )     771.7 %
Loss from discontinued operations
     (345 )     -       (345 )     100.0 %
                                 
Net loss
     (12,819 )     (1,431 )     (11,388 )     795.8 %
Income attributable to noncontrolling interests
     (236 )     (255 )     19       (7.5 %)
Net loss attributable to common shareholders
   $ (13,055 )   $ (1,686 )   $ (11,369 )     674.3 %

Wholly-Owned Properties Operations

Revenues from our wholly-owned properties increased by $78.4 million in 2008 as compared to 2007 primarily due to the acquisition of GMH’s student housing business in June 2008, the acquisition of two properties during the first quarter 2008, the completion of construction and opening of Vista del Sol and Villas at Chestnut Ridge in August 2008, and the completion of construction and opening of University Centre in August 2007.  Operating expenses increased by approximately $46.6 million in 2008 compared to 2007, primarily due to the same factors which affected the increase in revenues.

New Property Operations.  On June 11, 2008, we acquired GMH’s student housing business, including 42 properties containing 24,939 beds located in various markets throughout the country.  Of the 42 properties acquired, two were under contract to be sold on the acquisition date and were sold in July and August 2008 and another property was sold on December 31, 2009.  The sold properties’ net loss through the date of disposition is reflected as discontinued operations for 2008.  During 2008, the remaining 39 properties acquired from GMH contributed an additional $59.5 million of revenues and an additional $38.3 million of operating expenses.  In addition, we acquired two properties in February 2008, Pirate’s Place and Sunnyside Commons.  In August 2008, we completed construction of and opened Vista del Sol and Villas at Chestnut Ridge.  Additionally, in August 2007, we completed construction of and opened University Centre, serving students attending Rutgers University, NJIT and various surrounding educational institutions.  These non-GMH new properties contributed an additional $16.1 million of revenues and an additional $6.2 million of operating expenses during 2008 as compared to 2007.
 
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Same Store Property Operations (Excluding New Property Activity).  We had 32 properties containing 16,440 beds which were operating during both 2008 and 2007.  These properties produced revenues of $106.2 million and $102.6 million during 2008 and 2007, respectively, an increase of $3.6 million.  This increase was primarily due to an increase in average rental rates during 2008 as compared to 2007.  The average occupancy for this group of properties remained relatively flat at 96.9% for both 2008 and 2007.

At these same store properties, operating expenses increased by $2.1 million, to $49.0 million in 2008 as compared to $46.9 million in 2007.  This increase was primarily due to marketing costs, costs associated with the 2008 hurricane season, property taxes, and utilities.

On-Campus Participating Properties (“OCPP”) Operations

Same Store OCPP Operations.  We had four participating properties containing 4,519 beds which were operating during both 2008 and 2007.  Revenues from our same store participating properties increased to $22.0 million in 2008 from $21.0 million in 2007, an increase of $1.0 million.  This increase was primarily due to an increase in average rental rates, offset by a decrease in average occupancy from 78.2% in 2007 to 73.7% in 2008.

At these properties, operating expenses increased to $10.8 million in 2008 from $9.4 million in 2007, an increase of $1.4 million.  This increase was primarily due to costs associated with the 2008 hurricane season and utilities.

Third-Party Development Services Revenue

Third-party development services revenue increased by $2.4 million from $5.5 million in 2007 to $7.9 million in 2008.  This increase was primarily due to projects with larger fees in progress during 2008 as compared to 2007.  We had six projects in progress during 2008 with an average contractual fee of approximately $3.1 million, as compared to 2007 during which we had seven projects in progress with an average contractual fee of approximately $1.7 million.

Third-Party Management Services Revenue

Third-party management services revenues increased by $3.8 million from $2.8 million in 2007 to $6.6 million in 2008.  This increase was primarily due to an additional $2.5 million in management fees recognized during 2008 from third party management contracts assumed as part of the GMH acquisition, including 21 properties owned in two joint ventures in which we have a 10% interest.  The remainder of the increase was primarily the result of the commencement of five management contracts in the fourth quarter of 2007 and the commencement of six management contracts in the second quarter of 2008.

Resident Services

Revenue from resident services increased approximately $0.7 million from $1.6 million in 2007 to $2.3 million in 2008.  This increase was primarily due to additional revenue earned during 2008 from the acquired properties discussed above and the timing of completion of construction and opening of wholly-owned properties.

Third Party Development and Management Services Expenses

Third party development and management services expenses increased by $5.4 million, from $5.7 million in 2007 to $11.1 million in 2008.  This increase was primarily due to an increase in payroll and related costs as a result of an increase in activity for potential ACE projects and new management contracts assumed from GMH.

General and Administrative

General and administrative expenses decreased approximately $6.4 million, from $17.7 million in 2007 to $11.3 million in 2008.  This decrease was primarily due to a $10.4 million compensation charge recorded in 2007 related to the Company’s 2004 Outperformance Bonus Plan.  This decrease was offset by additional transition and integration expenses related to the acquisition of GMH and additional staffing, benefits, rent and public company costs related to both the GMH acquisition and company growth experienced during 2008.
 
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Depreciation and Amortization

Depreciation and amortization increased approximately $26.4 million from $30.4 million in 2007 to $56.8 million in 2008.  This increase was primarily due to the acquisition of the GMH student housing business in June 2008, the acquisition of two properties during the first quarter 2008, the completion of construction and opening of Vista del Sol and Villas at Chestnut Ridge in August 2008, and the completion of construction and opening of University Centre in August 2007.  The GMH properties contributed an additional $22.0 million to depreciation expense in 2008, of which $8.7 million related to the valuation assigned to in-place leases for such properties.

Amortization of deferred financing costs increased approximately $1.2 million from $1.3 million in 2007 to $2.5 million in 2008, primarily due to the amortization of additional finance costs incurred to assume debt on properties acquired from GMH and the senior secured term loan entered into in May 2008.

Ground Lease Expense

Ground lease expense increased by $0.2 million, from $1.6 million in 2007 to $1.8 million in 2008, primarily due to ground/facility lease costs incurred for Vista del Sol which completed construction and opened in August 2008.

Interest Income

Interest income decreased by approximately $0.4 million, from $1.5 million in 2007 to $1.1 million in 2008.  This decrease was primarily due to interest earned during 2007 on the remaining proceeds from our September 2006 equity offering and net proceeds from the disposition of an owned off-campus property in December 2006, which was offset by interest earned during 2008 on proceeds from our April 2008 equity offering.

Interest Expense

Interest expense increased approximately $21.6 million, from $27.9 million in 2007 to $49.5 million in 2008.  This increase was primarily due to $598.8 million of mortgage debt assumed from GMH in June 2008 at a weighted average rate of 5.43% (including a net discount of $9.4 million to reflect the fair market value of debt assumed.)  The debt assumed for properties acquired from GMH contributed an additional $17.4 million of interest expense in 2008.  We also incurred an additional $2.4 million of interest expense related to the senior secured term loan entered into in May 2008 to fund a portion of the cash consideration paid in our acquisition of GMH.  An additional $1.9 million of interest expense was incurred during 2008 related to the loans for Vista del Sol and Villas at Chestnut Ridge, which completed construction and were placed into service in August 2008.  Acquisitions during 2007 and 2008 also contributed an additional $0.9 million of interest expense during 2008.  These increases were offset by a decrease in interest expense of approximately $0.4 million associated with the pay-down of the construction loan for University Centre in October 2007, as well as a decrease of approximately $0.2 million associated with a lower interest rate incurred on our variable rate revolving credit facility.

Loss from unconsolidated joint ventures

Loss from unconsolidated joint ventures represents our share of the net income (loss) from the Hampton Roads military housing joint venture in which we have a minimal economic interest, as well as our 10 % share of the income (loss) from two joint ventures owning 21 properties formed or assumed as part of our acquisition of GMH in June 2008.

The loss from unconsolidated joint ventures of $1.6 million for 2008 was primarily due to the loss from a 15-property joint venture entered into in connection with our acquisition of GMH.  The joint venture recognized a net loss for 2008 primarily because of the amortization recorded on the value assigned to in-place leases on the joint venture formation date.  In addition, this 15-property joint venture includes two properties located in Louisiana that incurred significant maintenance costs during 2008 associated with the hurricane season.
 
Other Nonoperating Income
 
Other nonoperating income of $0.5 million for 2008 represents tax incentive amounts received in cash during the period related to a property we acquired in February 2007 located in Ypsilanti, Michigan.  Upon acquisition of this property, any future potential benefit of such tax incentive was assumed from the seller.
 
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Income Tax Provision

The provision for income taxes decreased by $0.4 million, from $0.8 million in 2007 to $0.4 million in 2008.  This decrease was primarily related to the write-off of the Company’s deferred tax asset in the amount of $0.5 million during 2007 in order to account for the tax impact of the 2004 Outperformance Bonus Plan.

Cash Flows

Comparison of Years Ended December 31, 2009 and December 31, 2008

Operating Activities

For the year ended December 31, 2009, net cash provided by operating activities was approximately $79.6 million, as compared to $32.9 million for the year ended December 31, 2008, an increase of $46.7 million.  This increase was primarily due to operating cash flows provided from the timing of the acquisition of the GMH student housing business on June 11, 2008 and the completion of construction and opening of Vista del Sol and Villas at Chestnut Ridge in August 2008 and Barrett Honors College in August 2009.

Investing Activities

Investing activities utilized $122.1 million and $432.4 million for the years ended December 31, 2009 and 2008, respectively.  The $310.3 million decrease in cash utilized in investing activities during the year ended December 31, 2009 related primarily to a $276.5 million decrease in the use of cash to acquire properties and undeveloped land.  We acquired a total of 44 properties during the year ended December 31, 2008 and no properties during the year ended December 31, 2009.  In June 2008, we used approximately $269.4 million of cash to acquire the GMH student housing business, including 42 properties containing 24,939 beds located in various markets throughout the country.  We also experienced a $50.5 million decrease in cash used to fund the construction of our wholly-owned development properties.  During the year ended December 31, 2009, one wholly-owned property was under development, which was completed and opened for occupancy in August 2009, while three properties were under development during the year ended December 31, 2008, two of which were completed and opened for occupancy in August 2008.  These decreases in cash utilized in investing activities were offset by a $25.6 million increase in cash used for capital expenditures at our wholly-owned properties during the year ended December 31, 2009, as we continued with renovations at several GMH properties.  For the years ended December 31, 2009, 2008 and 2007, our cash utilized in investing activities was comprised of the following:
 
 
   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Property dispositions
   $ 1,485     $ 4,418     $ -  
Property and land acquisitions
     (7,385 )     (283,871 )     (53,205 )
Capital expenditures for on-campus participating properties
     (739 )     (719 )     (480 )
Capital expenditures for wholly-owned properties
     (40,992 )     (15,346 )     (8,097 )
Investments in wholly-owned properties under development
     (73,737 )     (124,224 )     (123,723 )
Purchase of corporate furniture, fixtures, and equipment
     (606 )     (2,178 )     (486 )
Investment in unconsolidated joint ventures
     (401 )     (10,610 )     (1,600 )
Distributions received from unconsolidated joint ventures
     250       120       -  
Total
   $ (122,125 )   $ (432,410 )   $ (187,591 )

Financing Activities

Cash provided by financing activities totaled $83.1 million and $413.1 million for the years ended December 31, 2009 and 2008, respectively.  The $330.0 million decrease in cash provided by financing activities was primarily a result of the following: (i) the May 2009 equity offering which raised $198.3 million, net of offering costs, as compared to $252.2 million, net of offering costs, raised in our April 2008 equity offering; (ii) the $100 million senior secured term loan which was fully funded on June 11, 2008, the proceeds of which were used to pay a portion of the cash consideration for the acquisition of GMH; (iii) the contribution of 15 GMH student housing properties in 2008 to a joint venture in which we received $74.4 million in proceeds and retained a 10% equity interest in the joint venture; (iv) a $75.8 million decrease in proceeds from construction loans used to fund the construction of Vista del Sol, an owned ACE development property, and Villas at Chestnut Ridge, an owned off-campus development property, which both opened for occupancy in August 2008; (v) the pay-off of $110.9 million in mortgage and construction loan debt that matured during the year ended December 31, 2009, as compared to the pay-off of $24.4 million in mortgage loan debt during the year ended December 31, 2008; (vi) a $74.2 million increase in proceeds (net of paydowns) received from our secured revolving credit facilities as a result of us closing a $125 million secured agency facility in September 2009, of which we borrowed $94 million at closing; and (vii) a $13.9 million increase in distributions to stockholders as a result of issuances of common stock in our April 2008 and May 2009 equity offerings and as partial consideration for the acquisition of GMH in 2008.

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Comparison of Years Ended December 31, 2008 and December 31, 2007

Operating Activities

For the year ended December 31, 2008, net cash provided by operating activities before changes in working capital accounts provided $50.3 million, as compared to $34.5 million for the year ended December 31, 2007, an increase of $15.8 million.  Changes in working capital accounts utilized $17.5 million and $5.5 million for the years ended December 31, 2008 and 2007, respectively, an increase of $12.0 million.  This increase in cash utilized for operating activities was primarily due to increased activity in accounts payable, accrued expenses, and lender escrow accounts resulting from the additional properties acquired from GMH and overall company growth.

Investing Activities

Investing activities utilized $432.4 million and $187.6 million for the years ended December 31, 2008 and 2007, respectively.  The $244.8 million increase in cash utilized in investing activities during the year ended December 31, 2008 related primarily to a $230.7 million increase in the use of cash to acquire GMH in 2008 compared to the acquisition of four properties during 2007.  We experienced a $7.8 million increase in cash used in 2008 for capital expenditures at our wholly-owned properties as we began renovations at several GMH properties.  Finally, in connection with the acquisition of GMH, we contributed 15 GMH properties to a joint venture in exchange for cash and a 10% minority interest in the joint venture, and assumed GMH’s 10% equity interest in an existing joint venture that owns six properties.  These increases in cash utilized in investing activities were offset by proceeds received from the disposition of two properties in July and August 2008.
 
Financing Activities

Cash provided by financing activities totaled $413.1 million and $91.5 million for the years ended December 31, 2008 and 2007, respectively.  The $321.6 million increase in cash provided by financing activities was a result of the following: (i) the April 2008 equity offering which raised $252.2 million, net of offering costs, as compared to $98.8 million, net of offering costs, raised in our October 2007 equity offering; (ii) the pay-off of a construction loan with $43.9 million of proceeds from our October 2007 equity offering; (iii) the $100 million senior secured term loan which was fully funded on June 11, 2008, the proceeds of which were used to pay a portion of the cash consideration for the acquisition of GMH; (iv) the contribution of 15 GMH student housing properties in 2008 to a joint venture in which we received $74.4 million in proceeds and retained a 10% equity interest in the joint venture; and (v) the $15.0 million increase in proceeds from construction loans used to fund the construction of Vista del Sol, an owned ACE development property, and Villas at Chestnut Ridge, an owned off-campus development property, which both opened for occupancy in August 2008.  These increases were partially offset by the following: (i) the pay-off of $24.4 million in mortgage loan debt assumed in connection with the acquisition of GMH; (ii) a $17.7 million increase in distributions to stockholders as a result of our October 2007 and April 2008 equity offerings and the issuance of common stock as partial consideration for the acquisition of GMH in 2008; (iii) a $12.7 million decrease in our construction accounts payable balance as a result of the completion of Vista del Sol and Villas at Chestnut Ridge in August 2008; (iv) a $4.5 million decrease in proceeds (net of paydowns) received from our revolving credit facility; and (v) a $4.2 million increase in debt issuance and assumption costs associated with mortgage debt assumed in connection with acquisitions of properties and fees paid to obtain the secured term loan in May 2008.

Structure of Owned On-campus Properties

We have entered into two 65-year ground/facility leases (each with two ten-year extensions available) with a university system to finance, construct, and manage two student housing facilities.  Under the terms of these ground/facility leases, the university system owns both the land and improvements, and we make annual minimum rent payments to the university system during the first five years of operation for one property and the first ten years of operation for the other property.  In addition, we pay the university system variable rent payments based upon the operating performance of the properties.

Structure of On-campus Participating Properties

At our on-campus participating properties, the subject universities own both the land and improvements.  We then have a leasehold interest under a ground/facility lease.  Under the lease, we receive an annual distribution representing 50% of these properties’ net cash available for distribution after payment of operating expenses (which includes our management fees), debt service (which includes repayment of principal) and capital expenditures.  We also manage these properties under multi-year management agreements and are paid a management fee representing 5% of receipts.
 
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We do not have access to the cash flows and working capital of these participating properties except for the annual net cash distribution as described above.  Additionally, a substantial portion of these properties’ cash flow is dedicated to capital reserves required under the applicable property indebtedness and to the amortization of such indebtedness.  These amounts do not increase our economic interest in these properties since our interest, including our right to share in the net cash available for distribution from the properties, terminates upon the amortization of their indebtedness.  Our economic interest in these properties is therefore limited to our interest in the net cash flow and management and development fees from these properties, as reflected in our calculation of Funds from Operations modified for the operational performance of on-campus participating properties (“FFOM”) contained herein.  Accordingly, when considering these properties’ contribution to our operations, we focus upon our share of these properties’ net cash available for distribution and the management fees that we receive from these properties, rather than upon their contribution to our gross revenues and expenses for financial reporting purposes.

The following table reflects the amounts related to our on-campus participating properties included in our consolidated financial statements for the years ended December 31, 2009, 2008, and 2007:

   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Revenues
   $ 22,727     $ 22,042     $ 20,966  
Direct operating expenses (1)
     (9,650 )     (10,073 )     (8,701 )
Amortization
     (4,351 )     (4,322 )     (4,263 )
Amortization of deferred financing costs
     (180 )     (185 )     (189 )
Ground/facility lease (2)
     (1,086 )     (1,401 )     (1,622 )
Net operating income
     7,460       6,061       6,191  
Interest income
     42       206       359  
Interest expense (3)
     (6,183 )     (6,166 )     (6,225 )
Net income
   $ 1,319     $ 101     $ 325  

(1)  
Excludes property management fees of $1.0 million for each of the years ended December 31, 2009, 2008, and 2007.  This expense and the corresponding fee revenue recognized by us have been eliminated in consolidation.  Also excludes allocation of expenses related to corporate management and oversight.
 
(2)  
Represents the universities’ 50% share of the properties’ net cash available for distribution after payment of operating expenses, debt service (including payment of principal) and capital expenditures.
 
(3)  
Debt service expenditures for these properties totaled $8.4 million for each of the years ended December 31, 2009, 2008 and 2007.
 
Liquidity and Capital Resources

Cash Balances and Liquidity

As of December 31, 2009, excluding our on-campus participating properties, we had $87.5 million in cash and cash equivalents and restricted cash as compared to $48.6 million in cash and cash equivalents and restricted cash as of December 31, 2008.  Restricted cash primarily consists of escrow accounts held by lenders and resident security deposits, as required by law in certain states.  This increase in cash and cash equivalents was primarily due to the completion of our equity offering in May 2009 and the closing of a $125 million secured agency facility in September 2009.  Our May 2009 equity offering generated net proceeds of approximately $198.3 million.  We used approximately $102.6 million of the offering proceeds to paydown the outstanding balance on our secured revolving credit facility and an additional $81.1 million of cash proceeds to pay-off mortgage and construction debt.  In addition, we used these proceeds to fund development costs on our recently completed ACE property serving students at Arizona State University.  Upon closing of our secured agency facility in September, we borrowed $94 million and used $27.5 million to paydown the outstanding balance on our secured revolving credit facility.  Additionally, restricted cash as of December 31, 2009 also included $0.1 million of funds held in escrow in connection with potential development opportunities.
 
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As of December 31, 2009, our short-term liquidity needs included, but were not limited to, the following: (i) anticipated distribution payments to our common and restricted stockholders totaling approximately $71.1 million based on an assumed annual cash distribution of $1.35 per share based on the number of our shares outstanding as of December 31, 2009, (ii) anticipated distribution payments to our Operating Partnership unitholders totaling approximately $1.8 million based on an assumed annual distribution of $1.35 per common unit of limited partnership interest (“Common Unit”) and a cumulative preferential per annum cash distribution rate of 5.99% on our preferred units of limited partnership interest (“Series A Preferred Units”) based on the number of units outstanding as of December 31, 2009, (iii) payments of approximately $83.6 million of fixed-rate mortgage debt scheduled to mature during the next 12 months, and (iv) funds for capital improvements at acquired properties and other potential development projects.  As of December 31, 2009, we had $100.0 million of outstanding variable rate construction debt scheduled to mature in December 2010.  We expect to extend the maturity date into December 2011 by exercising the remaining 12-month extension option available to us.  In August 2009, we amended our existing $160 million revolving credit facility to increase the size of the facility to $225 million, extend the maturity date through August 2012 and currently secure the facility with seven of our wholly-owned properties.  In September 2009, we closed on a $125 million secured revolving credit facility with Freddie Mac.  The facility has a five-year term and is currently secured by 11 of our wholly-owned properties.  We expect to meet our short-term liquidity requirements by (i) borrowing under our existing secured revolving credit facilities discussed above, (ii) potentially disposing of properties depending on market conditions, and (iii) utilizing net cash provided by operations.
 
We may seek additional funds to undertake initiatives not contemplated by our business plan or obtain additional cushion against possible shortfalls.  We also may pursue additional financing as opportunities arise.  Future financings may include a range of different sizes or types of financing, including the incurrence of additional secured debt and the sale of additional debt or equity securities.  These funds may not be available on favorable terms or at all.  Our ability to obtain additional financing depends on several factors, including future market conditions, our success or lack of success in penetrating our markets, our future creditworthiness, and restrictions contained in agreements with our investors or lenders, including the restrictions contained in the agreements governing our revolving credit facilities and term loan.  These financings could increase our level of indebtedness or result in dilution to our equity holders.

2009 Equity Offering

On May 11, 2009, we completed an equity offering, consisting of the sale of 9,775,000 shares of our common stock at a price of $21.25 per share, including 1,275,000 shares issued as a result of the exercise of the underwriters’ overallotment option in full at closing.  The offering generated gross proceeds of $207.7 million.  The aggregate proceeds, net of the underwriting discount and expenses of the offering, were approximately $198.3 million.

Secured Revolving Credit Facility

In August 2009, the Operating Partnership renewed its revolving credit facility and increased the size of the facility from $160 million to $225 million.  The facility may be expanded by up to an additional $75 million upon the satisfaction of certain conditions.  The maturity date of the facility is August 14, 2012 and can be extended 12 months through August 2013.  The facility is currently secured by seven of our wholly-owned properties.
 
Availability under the revolving credit facility is limited to an “aggregate borrowing base amount” equal to the lesser of (i) 50% to 65% of the value of certain properties, calculated as set forth in the credit facility, and (ii) the adjusted net operating income from these properties divided by a formula amount.  The facility bears interest at a variable rate, at our option, based upon a base rate or one-, two-, or three-month LIBOR, with a LIBOR floor of 2.0%, plus, in each case, a spread based upon our total leverage.  Additionally, we are required to pay an unused commitment fee of 0.35% per annum.  In September 2009, we paid off the entire balance on the revolving credit facility using proceeds from the secured agency facility discussed below.  As of December 31, 2009, availability under the facility totaled $155.0 million.

The terms of the facility include certain restrictions and covenants, which limit, among other items, the incurrence of additional indebtedness, liens, and the disposition of assets. The facility contains customary affirmative and negative covenants and also contains financial covenants that, among other things, require us to maintain certain minimum ratios of “EBITDA” (earnings before interest, taxes, depreciation and amortization) to fixed charges and total indebtedness.  We may not pay distributions that exceed a specified percentage of funds from operations, as adjusted, for any four consecutive quarters.  The financial covenants also include consolidated net worth and leverage ratio tests.  As of December 31, 2009, we were in compliance with all such covenants.

Secured Agency Facility

In September 2009, we closed a $125 million secured revolving credit facility with a Freddie Mac lender.  The facility has a five-year term and is currently secured by 11 properties referred to as the “Collateral Pool.”  The facility bears interest at one- or three-month LIBOR plus a spread that varies based on the debt service ratio of the Collateral Pool.  Additionally, we are required to pay an unused commitment fee of 1.0% per annum.  As of December 31, 2009, the balance outstanding on the facility totaled $94.0 million, bearing interest at a weighted average rate of 2.2%.  The secured agency facility includes certain financial covenants which are the same as are required for the secured revolving credit facility, described above.

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Senior Secured Term Loan

On May 23, 2008, the Operating Partnership obtained a $100 million senior secured term loan.  The secured term loan has an initial term of 36 months and can be extended through May 2012 through the exercise of a 12-month extension period.  The secured term loan bears interest at a variable rate, at our option, based upon a base rate or one-, two-, three-, or six-month LIBOR plus, in each case, a spread based upon our total leverage.  On June 11, 2008, we borrowed in full from the secured term loan and used the proceeds to fund a portion of the total cash consideration for the GMH acquisition.  As of December 31, 2009, the balance outstanding on the secured term loan was $100 million.

On February 23, 2009, we entered into two $50.0 million interest rate swap agreements effective March 20, 2009 through February 20, 2012, which are both used to hedge our exposure to fluctuations in interest payments on its LIBOR-based senior secured term loan.  Under the terms of the two interest rate swap agreements, we pay an average fixed rate of 1.7925% and receive one-month LIBOR floating rate.  As a result of these two interest rate swaps, we have effectively fixed the interest rate on our senior secured term loan to 3.55% as of December 31, 2009 (1.7925% + 1.75% spread).  In the event that the swaps at any time have a negative fair value below a certain threshold level, we could be required to post cash into a collateral account pledged to the interest rate swap providers.   As of December 31, 2009, we had deposited approximately $0.7 million into a collateral account related to one of the interest rate swaps.  Refer to Note 14 in the accompanying Notes to Consolidated Financial Statements in Item 8 for a more detailed discussion of our derivative instruments and hedging activities.

Distributions

We are required to distribute 90% of our REIT taxable income (excluding capital gains) on an annual basis in order to qualify as a REIT for federal income tax purposes.  Distributions to common stockholders are at the discretion of the Board of Directors. We may use borrowings under our secured revolving credit facility to fund distributions.  The Board of Directors considers a number of factors when determining distribution levels, including market factors and our Company’s performance in addition to REIT requirements.

On January 29, 2010, we declared a fourth quarter 2009 distribution per share of $0.3375, which was paid on February 26, 2010 to all common stockholders of record as of February 15, 2010.  At the same time, the Operating Partnership paid an equivalent amount per unit to holders of Common Units, as well as the quarterly cumulative preferential distribution to holders of Series A Preferred Units.

Recurring Capital Expenditures

Our properties require periodic investments of capital for general capital expenditures and improvements.  Our policy is to capitalize costs related to the acquisition, development, rehabilitation, construction, and improvement of properties, including interest and certain internal personnel costs related to the communities under rehabilitation and construction.  Capital improvements are costs that increase the value and extend the useful life of an asset.  Ordinary repair and maintenance costs that do not extend the useful life of the asset are expensed as incurred.  Recurring capital expenditures represent non-incremental building improvements required to maintain current revenues and typically include: appliances, carpeting and flooring, HVAC equipment, kitchen/bath cabinets, new roofs, site improvements and various exterior building improvements.  Non-recurring capital expenditures include expenditures that were taken into consideration when underwriting the purchase of a property which were considered necessary to bring the property up to “operating standard,” and incremental improvements that include, among other items: community centers, new windows, and kitchen/bath apartment upgrades.  Additionally, we are required by certain of our lenders to contribute amounts to reserves for capital repairs and improvements at their mortgaged properties.  These annual contributions may exceed the amount of capital expenditures actually incurred in such year at such properties.

Our historical recurring capital expenditures at our wholly-owned properties are set forth below:

   
As of and for the Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Average beds
     47,223       45,069       19,125  
Total recurring capital expenditures
   $ 9,190     $ 8,032     $ 3,390  
Average per bed
   $ 195     $ 178     $ 177  
                         
 
 
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Pre-Development Expenditures
 
Our third-party and owned development activities have historically required us to fund pre-development expenditures such as architectural fees, permits and deposits.  The closing and/or commencement of construction of these development projects is subject to a number of risks such as our inability to obtain financing on favorable terms and delays or refusals in obtaining necessary zoning, land use, building, and other required governmental permits and authorizations  As such, we cannot always predict accurately the liquidity needs of these activities.  We frequently incur these pre-development expenditures before a financing commitment and/or required permits and authorizations have been obtained.  Accordingly, we bear the risk of the loss of these pre-development expenditures if financing cannot ultimately be arranged on acceptable terms or we are unable to successfully obtain the required permits and authorizations.  Historically, our third-party and owned development projects have been successfully structured and financed; however, these developments have at times been delayed beyond the period initially scheduled, causing revenue to be recognized in later periods.  As of December 31, 2009, we have deferred approximately $7.5 million in pre-development costs related to third-party and owned development projects that have not yet commenced construction.

Indebtedness

As of December 31, 2009, we had approximately $1,228.2 million of outstanding consolidated indebtedness (excluding net unamortized debt discounts and debt premiums of approximately $8.5 million and $3.8 million, respectively), comprised of a $100.0 million balance on our senior secured term loan, $94.0 million balance on our secured agency facility, $950.1 million in mortgage and construction loans secured by our wholly-owned properties, $32.7 million in mortgage loans secured by two phases of an on-campus participating property, and $51.4 million in bond issuances secured by three of our on-campus participating properties.  The weighted average interest rate on our consolidated indebtedness as of December 31, 2009 was 5.06% per annum.  As of December 31, 2009, approximately 15.9% of our total consolidated indebtedness was variable rate debt, comprised of our secured agency facility and the Vista del Sol construction loan discussed below.

Wholly-Owned Properties

The weighted average interest rate of the $950.1 million of wholly-owned mortgage and construction debt was 5.31% per annum as of December 31, 2009.  Each of the mortgage loans is a non-recourse obligation subject to customary exceptions.  Each of these mortgages has a 30-year amortization, and none are cross-defaulted or cross-collateralized to any other indebtedness. The loans generally may not be prepaid prior to maturity; in certain cases prepayment is allowed, subject to prepayment penalties.
 
In August 2008, we completed the final stages of construction on Vista del Sol, an ACE property.  The development and construction of Vista del Sol was partially financed with a $100.0 million construction loan.  For each borrowing we had the option of choosing the Prime rate or one-, two-, or three-month LIBOR plus 1.45%.  The interest rate was reduced to LIBOR plus 1.20% in October 2009 upon the satisfaction of certain operations hurdles.  The loan requires payments of interest only during the term of the loan and any accrued interest and outstanding borrowings become due on the maturity date.  In October 2009, we elected to exercise the first of two extension options available to us, which extended the maturity date to December 2010.  As of December 31, 2009, the balance outstanding on the construction loan totaled $100.0 million, bearing interest at a rate of 1.45% per annum.
 
In August 2008, we completed the final stages of construction on Villas at Chestnut Ridge, an owned off-campus property.  The development and construction of Villas at Chestnut was partially financed with a $31.6 million construction loan.  For each borrowing we had the option of choosing the Prime rate or one-, two-, three-, or six-month LIBOR plus 1.25%.  The loan required payments of interest only during the term of the loan and any accrued interest and outstanding borrowings became due on the maturity date.  We extended the term of the loan to August 4, 2009, at which time we paid off the outstanding balance.

On-Campus Participating Properties

Three of our on-campus participating properties are 100% financed with $51.4 million of outstanding project-based taxable bonds.  Under the terms of these financings, one of our special purpose subsidiaries publicly issued three series of taxable bonds and loaned the proceeds to three special purpose subsidiaries that each hold a separate leasehold interest.  Although a default in payment by these special purpose subsidiaries could result in a default under one or more series of bonds, the indebtedness of any of these special purpose subsidiaries is not cross-defaulted or cross-collateralized with indebtedness of the Company, the Operating Partnership or other special purpose subsidiaries.  Repayment of principal and interest on these bonds is insured by MBIA, Inc.  The loans encumbering the leasehold interests are non-recourse, subject to customary exceptions.
 
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Cullen Oaks Phase I and Phase II loans are currently encumbered by mortgage loans with balances as of December 31, 2009 of approximately $16.3 million and $16.4 million, respectively.  In February 2007, we extended the maturity date of these loans to February 2014.  The loans bear interest at a rate of LIBOR plus 1.35% and required payments of interest only through May 2008 and monthly payments of principal and interest from May 2008 through the maturity date.  In connection with these loan extensions, we terminated the existing interest rate swap agreement on the Cullen Oaks Phase I loan and entered into a new interest rate swap agreement effective February 15, 2007 through February 15, 2014, that is designated to hedge our exposure to fluctuations on interest payments attributed to changes in interest rates associated with payments on the Cullen Oaks Phase I and Phase II loans.  Under the terms of the interest rate swap agreement, we pay a fixed rate of 6.69% per annum and receive a floating rate of LIBOR plus 1.35%.  Pursuant to the Leases, in the event the leasehold estate does not achieve Financial Break Even (defined as revenues less operating expenses, excluding management fees, less debt service), the applicable Lessor would be required to make a rental payment, also known as the Contingent Payment, sufficient to achieve Financial Break Even.  The Contingent Payment provision remains in effect until such time as any financing placed on the facilities would receive an investment grade rating without the Contingent Payment provision.  In the event that the Lessor is required to make a Contingent Payment, future net cash flow distributions would be first applied to repay such Contingent Payments and then to unpaid management fees prior to normal distributions.  We have guaranteed payment of this property’s indebtedness.

The weighted average interest rate of the indebtedness encumbering our on-campus participating properties was 7.18% at December 31, 2009.

Off Balance Sheet Items

As discussed in Note 17 in the accompanying Notes to Consolidated Financial Statements contained in Item 1 herein, we hold a 10% equity interest in two unconsolidated joint ventures with mortgage debt outstanding of approximately $330.4 million as of December 31, 2009.  Our Operating Partnership serves as non-recourse, carve-out guarantor of this debt, which means we are liable to the lender for any loss, damage, cost, expense, liability, claim or other obligation incurred by the lender arising out of or in connection with certain non-recourse exceptions in connection with the debt.  Pursuant to the  limited liability company agreements of the joint ventures, the joint ventures agreed to indemnify, defend and hold harmless the Operating Partnership with respect to such obligations, except to the extent such obligations were caused by the willful misconduct, gross negligence, fraud or bad faith of the Operating Partnership or its employees, agents or affiliates.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2009:

   
Total
    
2010
      
2011
    
2012
    
2013
    
2014
    
Thereafter
  
Long-term debt (1)
   $ 1,469,074     $ 254,498  (2)     $ 253,644     $ 124,243     $ 118,870     $ 249,258     $ 468,561  
Operating leases (3)
     45,239       1,902         1,530       1,531       771       661       38,844  
Capital leases
     2,565       1,053         826       439       148       99       -  
    $ 1,516,878     $ 257,453       $ 256,000     $ 126,213     $ 119,789     $ 250,018     $ 507,405  

(1)  
Long-term debt obligations reflect the payment of both principal and interest.  For long-term obligations with a variable interest rate, the rate in effect at December 31, 2009 was assumed to remain constant over all periods presented.
 
(2)  
Assumes we do not exercise the extension option available to us on our $100 million Vista del Sol construction loan, which is more fully discussed in Note 11 in the accompanying Notes to Consolidated Financial Statements contained in Item 8 herein.
 
(3)  
Includes minimum annual lease payments under the ground/facility leases for University Village at TU, University Centre, Vista del Sol and Barrett Honors College.
 
 
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Funds From Operations

As defined by NAREIT, FFO represents income (loss) before allocation to noncontrolling interests (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization (excluding amortization of loan origination costs) and after adjustments for unconsolidated partnerships and joint ventures. We present FFO because we consider it an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income.

We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. Further, FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties. FFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions.

The following table presents a reconciliation of our FFO to our net loss attributable to common shareholders:

   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Net loss attributable to common shareholders
   $ (12,840 )   $ (13,055 )   $ (1,686 )
Noncontrolling interests
     380       236       255  
Loss from disposition of real estate
     9,358       -       -  
Loss from unconsolidated joint ventures
     2,073       1,619       108  
FFO from unconsolidated joint ventures  (1)
     246       (487 )     (108 )
Real estate related depreciation and amortization
     75,814       56,459       29,824  
Funds from operations (“FFO”)  (2)
   $ 75,031     $ 44,772     $ 28,393  
                         
FFO per share – diluted  (2)
   $ 1.49     $ 1.16     $ 1.08  
                         
Weighted average common shares outstanding -  diluted
     50,451,767       38,595,230       26,266,836  

  (1)  
Represents our share of the FFO from three joint ventures in which we are a noncontrolling partner.  Includes the Hampton Roads Military Housing joint venture in which we have a minimal economic interest as well as our 10% noncontrolling interest in two joint ventures formed or assumed as part of the company’s acquisition of GMH.
 
  (2)  
During the year ended December 31, 2007, we recorded a compensation charge and related tax impact of approximately $10.9 million, or $0.42 per fully diluted share, related to the 2004 Outperformance Bonus Plan.  Excluding this compensation charge and related tax impact, FFO for the year ended December 31, 2007 would have been $39.3 million, or $1.50 per fully diluted share.  For a detailed discussion of the 2004 Outperformance Bonus Plan, refer to Note 12 in the accompanying Notes to Consolidated Financial Statements contained in Item 8 herein.
 
While our on-campus participating properties contributed $22.7 million, $22.0 million and $21.0 million to our revenues for the years ended December 31, 2009, 2008, and 2007, respectively, under our participating ground leases, we and the participating university systems each receive 50% of the properties’ net cash available for distribution after payment of operating expenses, debt service (which includes significant amounts towards repayment of principal) and capital expenditures. A substantial portion of our revenues attributable to these properties is reflective of cash that is required to be used for capital expenditures and for the amortization of applicable property indebtedness. These amounts do not increase our economic interest in these properties or otherwise benefit us since our interest in the properties terminates upon the repayment of the applicable property indebtedness.

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As noted above, FFO excludes GAAP historical cost depreciation and amortization of real estate and related assets because these GAAP items assume that the value of real estate diminishes over time. However, unlike the ownership of our owned off-campus properties, the unique features of our ownership interest in our on-campus participating properties cause the value of these properties to diminish over time. For example, since the ground/facility leases under which we operate the participating properties require the reinvestment from operations of specified amounts for capital expenditures and for the repayment of debt while our interest in these properties terminates upon the repayment of the debt, such capital expenditures do not increase the value of the property to us and mortgage debt amortization only increases the equity of the ground lessor. Accordingly, when considering our FFO, we believe it is also a meaningful measure of our performance to modify FFO to exclude the operations of our on-campus participating properties and to consider their impact on performance by including only that portion of our revenues from those properties that are reflective of our share of net cash flow and the management fees that we receive, both of which increase and decrease with the operating measure of the properties, a measure referred to herein as FFOM.

Funds From Operations—Modified (“FFOM”):

   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Funds from operations
   $ 75,031     $ 44,772     $ 28,393  
Elimination of operations of on-campus participating properties and unconsolidated joint venture:
                        
   Net income from on-campus participating properties
     (1,319 )     (101 )     (325 )
   Amortization of investment in on-campus participating Properties
     (4,350 )     (4,322 )     (4,263 )
FFO from Hampton Roads unconsolidated joint venture (1)
     (288 )     419       108  
      69,074       40,768       23,913  
Modifications to reflect operational performance of on-campus participating properties:
                        
Our share of net cash flow  (2)
     979       1,409       1,398  
Management fees
     1,042       1,006       973  
  Impact of on-campus participating properties
     2,021       2,415       2,371  
                         
  Elimination of our share of impairment charges recorded for unconsolidated joint ventures (3)
     464       -       -  
                         
  Funds from operations –  modified (“FFOM”) (4)
   $ 71,559     $ 43,183     $ 26,284  
                         
  FFOM per share – diluted  (4)
   $ 1.42     $ 1.12     $ 1.00  
                         
 Weighted average common shares outstanding - diluted
     50,451,767       38,595,230       26,266,836  

(1)  
Our share of the FFO from the Hampton Roads Military Housing unconsolidated joint venture is excluded from the calculation of the FFOM, as management believes this amount does not accurately reflect the company’s participation in the economics of this transaction.
 
(2)  
50% of the properties’ net cash available for distribution after payment of operating expenses, debt service (including repayment of principal) and capital expenditures.  Amounts represent actual cash received for the year-to-date periods and amounts accrued for the interim periods.  As a result of using accrual-based results in interim periods and cash-based results for year-to-date periods, the sum of reported interim results may not agree to annual cash received.
 
(3)  
Represents our share of impairment charges recorded in the third quarter 2009 for two properties owned through our unconsolidated Fidelity Joint Ventures.
 
(4)  
During the year ended December 31, 2007, we recorded a compensation charge and related tax impact of approximately $10.9 million, or $0.42 per fully diluted share, related to the 2004 Outperformance Bonus Plan.  Excluding this compensation charge and related tax impact, FFOM for the year ended December 31, 2007 would have been $37.2 million, or $1.42 per fully diluted share.  For a detailed discussion of the 2004 Outperformance Bonus Plan, refer to Note 12 in the accompanying Notes to Consolidated Financial Statements contained in Item 8 herein.
 
This narrower measure of performance measures our profitability for these properties in a manner that is similar to the measure of our profitability from our services business where we similarly incur no initial or ongoing capital investment in a property and derive only consequential benefits from capital expenditures and debt amortization. We believe, however, that this narrower measure of performance is inappropriate in traditional real estate ownership structures where debt amortization and capital expenditures enhance the property owner’s long-term profitability from its investment.
 
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Our FFOM may have limitations as an analytical tool because it reflects the unique contractual calculation of net cash flow from our on-campus participating properties, which is different from that of our off campus owned properties.  Additionally, FFOM reflects features of our ownership interests in our on-campus participating properties that are unique to us. Companies that are considered to be in our industry may not have similar ownership structures; and therefore those companies may not calculate a FFOM in the same manner that we do, or at all, limiting its usefulness as a comparative measure. We compensate for these limitations by relying primarily on our GAAP and FFO results and using our modified FFO only supplementally.

Inflation

Our leases do not typically provide for rent escalations. However, they typically do not have terms that extend beyond 12 months. Accordingly, although on a short term basis we would be required to bear the impact of rising costs resulting from inflation, we have the opportunity to raise rental rates at least annually to offset such rising costs. However, a weak economic environment or declining student enrollment at our principal universities may limit our ability to raise rental rates.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

We use fixed and floating rate debt to finance acquisitions, developments and maturing debt.  These borrowings expose us to market risk related to changes in interest rates.  For fixed rate debt, interest rate changes affect the fair market value but do not impact net income to common stockholders or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact net income to common stockholders and cash flows, assuming other factors are held constant.

At December 31, 2009 and 2008 we had fixed rate debt of $882.8 million and $988.8 million, respectively (excluding net unamortized debt discounts and debt premiums).  Holding other variables constant (such as debt levels), a one percentage point increase in interest rates (100 basis points) would cause a $32.5 million and $39.5 million decline in the fair value of our fixed rate debt as of December 31, 2009 and 2008, respectively.  Conversely, a one percentage point decrease in interest rates would cause a $34.2 million and $41.8 million increase in the fair value of our fixed rate debt as of December 31, 2009 and 2008, respectively.  Due to the structure of our floating rate debt and interest rate protection instruments, the impact of a one percentage point increase or decrease in interest rates on our net income to common stockholders and cash flows would not be significant at December 31, 2009 or 2008.

All of our outstanding indebtedness is effectively fixed rate except for our secured revolving credit facilities and our Vista del Sol construction loan.  Our secured agency facility had an outstanding balance of $94.0 million at December 31, 2009 and bears interest at one- or three-month LIBOR plus a spread that varies based on the debt service ratio of the Collateral Pool.  The Vista del Sol construction loan had an outstanding balance of $100.0 million at December 31, 2009 and bears interest at the lender’s Prime rate or LIBOR plus 1.20%, at our election.  We have in place two $50.0 million interest rate swap agreements, designated as cash flow hedges, which effectively fix the interest rate on the outstanding balance of the senior secured term loan at 3.55% through maturity in May 2011.  In addition, we have in place an interest rate swap agreement, designated as a cash flow hedge, which effectively fixes the interest rate on the outstanding balance of the Cullen Oaks Phase I and Phase II mortgage loans at 6.69% through maturity in 2014.  We anticipate incurring additional variable rate indebtedness in the future, including draws under our secured revolving credit facilities.  We may in the future use derivative financial instruments to manage, or hedge, interest rate risks related to such variable rate borrowings.  We do not, and do not expect to, use derivatives for trading or speculative purposes, and we expect to enter into contracts only with major financial institutions.

Item 8.  Financial Statements and Supplementary Data

The information required herein is included as set forth in Item 15 (a) – Financial Statements.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed,  summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
 
46
 
As required by SEC Rule 13a-15(b), we have carried out an evaluation, under the supervision of and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures for the period covered by this report were effective.
 
There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting
     
The management of American Campus Communities, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. We have designed our internal control over financial reporting to provide reasonable assurance that our published financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles.

Our management is required by paragraph (c) of Rule 13a-15 of the Securities Exchange Act of 1934, as amended, to assess the effectiveness of our internal control over financial reporting as of the end of each fiscal year. In making this assessment, our management used the Internal Control — Integrated Framework issued in July 1994 by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
     
Our management conducted the required assessment of the effectiveness of our internal control over financial reporting as of December 31, 2009. Based upon this assessment, our management believes that our internal control over financial reporting is effective as of December 31, 2009.  Ernst & Young LLP, an independent registered public accounting firm, has issued an attestation report regarding the effectiveness of our internal control over financial reporting, which is included herein.

 
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PART III

Item 10.  Directors, Executive Officers and Corporate Governance

Information with respect to this Item 10 is incorporated by reference from our Proxy Statement, which we intend to file on or before March 26, 2010 in connection with the Annual Meeting of Stockholders to be held May 6, 2010.

Item 11.  Executive Compensation

Information with respect to this Item 11 is incorporated by reference from our Proxy Statement, which we intend to file on or before March 26, 2010 in connection with the Annual Meeting of Stockholders to be held May 6, 2010.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information with respect to this Item 12 is incorporated by reference from our Proxy Statement, which we intend to file on or before March 26, 2010 in connection with the Annual Meeting of Stockholders to be held May 6, 2010.

Item 13.  Certain Relationships, Related Transactions and Director Independence

Information with respect to this Item 13 is incorporated by reference from our Proxy Statement, which we intend to file on or before March 26, 2010 in connection with the Annual Meeting of Stockholders to be held May 6, 2010.

Item 14.  Principal Accounting Fees and Services

Information with respect to this Item 14 is incorporated by reference from our Proxy Statement, which we intend to file on or before March 26, 2010 in connection with the Annual Meeting of Stockholders to be held May 6, 2010.

 
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PART IV

Item 15.  Exhibits and Financial Statement Schedules
 
(a)  Financial Statements

The following consolidated financial information is included as a separate section of this Annual Report on Form 10-K:

 
Page No.
Report of Independent Registered Public Accounting Firm – Internal Control over Financial Reporting
F-1
Report of Independent Registered Public Accounting Firm - Audit
F-2
Consolidated Balance Sheets as of  December 31, 2009 and December 31, 2008
F-3
Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007
F-4
Consolidated Statements of Changes in Equity for the years ended December 31, 2009, 2008 and 2007
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007
F-6
Notes to Consolidated Financial Statements
F-7
 
(b)  Exhibits
 
Exhibit
Number
  
Description of Document
  
2.1
  
Agreement and Plan of Merger, dated as of February 11, 2008, among GMH Communities Trust, GMH Communities, Inc., GMH Communities, LP, American Campus Communities, Inc., American Campus Communities Operating Partnership LP, American Campus Communities Acquisition LLC and American Campus Communities Acquisition Limited Partnership.  Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on February 14, 2008.
     
3.1
  
Articles of Amendment and Restatement of American Campus Communities, Inc.  Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
3.2
  
Bylaws of American Campus Communities, Inc.  Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
4.1
  
Form of Certificate for Common Stock of American Campus Communities, Inc.  Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
10.1
  
Form of Amended and Restated Partnership Agreement of American Campus Communities Operating Partnership LP.  Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
10.2
  
Form of First Amendment to Amended and Restated Agreement of Limited Partnership of American Campus Communities Operating Partnership LP, dated as of March 1, 2006, between American Campus Communities Holdings LLC and those persons who have executed such amendment as limited partners.  Incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on March 7, 2006.
     
10.3*
  
American Campus Communities, Inc. 2004 Incentive Award Plan.  Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
10.4*
  
Amendment No. 1 to American Campus Communities, Inc. 2004 Incentive Award Plan.  Incorporated by reference to Exhibit 99.7 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on November 5, 2007.
     
10.5*
  
Amendment No. 2 to American Campus Communities, Inc. 2004 Incentive Award Plan.  Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on March 11, 2008.
 
49
 
10.6
  
American Campus Communities, Inc. 2004 Outperformance Bonus Plan.  Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
10.7
  
Form of PIU Grant Notice (including Registration Rights).  Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
10.8
  
Form of PIU Grant Notice (including Registration Rights), dated as of August 20, 2007.  Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on August 23, 2007.
     
10.9
  
Form of Indemnification Agreement between American Campus Communities, Inc. and certain of its directors and officers.  Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
10.10
  
Form of Employment Agreement between American Campus Communities, Inc. and William C. Bayless, Jr.  Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
10.11
  
Amendment No. 1 to Employment Agreement, dated as of April 28, 2005, between American Campus Communities, Inc. and William C. Bayless, Jr.  Incorporated by reference to Exhibit 99.6 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on May 3, 2005.
     
10.12
  
Amendment No. 2 to Employment Agreement, dated as of November 1, 2007, between American Campus Communities, Inc. and William C. Bayless, Jr.  Incorporated by reference to Exhibit 99.3 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on November 5, 2007.
     
10.13
  
Form of Employment Agreement between American Campus Communities, Inc. and Brian B. Nickel.  Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
10.14
  
Amendment No. 1 to Employment Agreement, dated as of April 28, 2005, between American Campus Communities, Inc. and Brian B. Nickel.  Incorporated by reference to Exhibit 99.7 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on May 3, 2005.
     
10.15
  
Amendment No. 2 to Employment Agreement, dated as of November 1, 2007, between American Campus Communities, Inc. and Brian B. Nickel.  Incorporated by reference to Exhibit 99.4 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on November 5, 2007.
     
10.16
  
Separation Agreement, dated as of November 5, 2009, between American Campus Communities, Inc. and Brian B. Nickel.  Incorporated by reference to Exhibit 99.41to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on November 5, 2009.
     
10.17
  
Employment Agreement, dated as of April 18, 2005, between American Campus Communities, Inc. and James C. Hopke.  Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on May 3, 2005.
     
10.18
  
Amendment No. 1 to Employment Agreement, dated as of November 1, 2007, between American Campus Communities, Inc. and James C. Hopke.  Incorporated by reference to Exhibit 99.6 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on November 5, 2007.
     
10.19
  
Employment Agreement, dated as of April 28, 2005, between American Campus Communities, Inc. and Greg A. Dowell.  Incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on May 3, 2005.
     
10.20
  
Amendment No. 1 to Employment Agreement, dated as of November 1, 2007, between American Campus Communities, Inc. and Greg A. Dowell.  Incorporated by reference to Exhibit 99.5 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on November 5, 2007.
 
50
 
10.21
  
Employment Agreement, dated as of November 1, 2007, between American Campus Communities, Inc. and Jonathan A. Graf.  Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on November 5, 2007.
     
10.22
  
Form of Confidentiality and Noncompetition Agreement.  Incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-11 (Registration No. 333-114813) of American Campus Communities, Inc.
     
10.23
  
Form of Second Amended and Restated Credit Agreement, dated as of August 14, 2009, among American Campus Communities Operating Partnership LP, as Borrower, American Campus Communities, Inc., as Parent Guarantor,  the Subsidiary  Guarantors  listed on the  signature  pages  thereto, the banks, financial institutions and other institutional lenders listed on the signature pages thereto as Initial Lenders, KeyBank National  Association, as the initial issuer  of Letters of Credit, Swing Line Bank and Administrative  Agent, JPMorgan Chase Bank, N.A. and Bank of America, N.A., as Co-Syndication Agents, Deutsche Bank Trust Company Americas and U.S. Bank National Association, as Co-Documentation Agents, and KeyBank Capital Markets Inc., as Lead Arranger.  Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on August 14, 2009.
     
10.24
  
Form of Senior Secured Term Loan Agreement among American Campus Communities, Inc., as Parent Guarantor, American Campus Communities Operating Partnership LP, as Borrower, the Subsidiary Guarantors named therein, the Initial Lenders named therein, KeyBank National Association, as Administrative Agent, and KeyBanc Capital Markets Inc., as Lead Arranger.  Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on May 29, 2008.
     
10.25
  
Form of Contribution and Sale Agreement, dated as of December 2, 2005, among Royal Tallahassee Partnership, Royal Tallahassee Partnership II Limited Partnership, Royal Tallahassee III Partnership, Royal Gainesville Limited Partnership, Royal Orlando Limited Partnership, Royal Lexington Limited Partnership, Royal Tucson Entrada Real Limited Partnership, Royal Texas-Tennessee Limited Partnership, Royal Texas-Tennessee II Limited Partnership, Raiders Pass Phase II Limited Partnership, Royal San Marcos Limited Partnership and Royal San Antonio Limited Partnership, on the one hand, and American Campus Communities, Inc. and American Campus Communities Operating Partnership LP, on the other hand.  Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on February 13, 2006.
     
10.26
  
Form of First Amendment to Contribution and Sale Agreement, dated as of December 16, 2005, among Royal Tallahassee Partnership, Royal Tallahassee Partnership II Limited Partnership, Royal Tallahassee III Partnership, Royal Gainesville Limited Partnership, Royal Orlando Limited Partnership, Royal Lexington Limited Partnership, Royal Tucson Entrada Real Limited Partnership, Royal Texas-Tennessee Limited Partnership, Royal Texas-Tennessee II Limited Partnership, Raiders Pass Phase II Limited Partnership, Royal San Marcos Limited Partnership and Royal San Antonio Limited Partnership, on the one hand, and American Campus Communities, Inc. and American Campus Communities Operating Partnership LP, on the other hand.  Incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on February 13, 2006.
     
10.27
  
Form of Second Amendment to Contribution and Sale Agreement, dated as of January 30, 2006, among Royal Tallahassee Partnership, Royal Tallahassee Partnership II Limited Partnership, Royal Tallahassee III Partnership, Royal Gainesville Limited Partnership, Royal Orlando Limited Partnership, Royal Lexington Limited Partnership, Royal Tucson Entrada Real Limited Partnership, Royal Texas-Tennessee Limited Partnership, Royal Texas-Tennessee II Limited Partnership, Raiders Pass Phase II Limited Partnership, Royal San Marcos Limited Partnership and Royal San Antonio Limited Partnership, on the one hand, and American Campus Communities, Inc. and American Campus Communities Operating Partnership LP, on the other hand.  Incorporated by reference to Exhibit 99.3 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on February 13, 2006.
     
10.28
  
Form of Third Amendment to Contribution and Sale Agreement, dated as of February 7, 2006, among Royal Tallahassee Partnership, Royal Tallahassee Partnership II Limited Partnership, Royal Tallahassee III Partnership, Royal Gainesville Limited Partnership, Royal Orlando Limited Partnership, Royal Lexington Limited Partnership, Royal Tucson Entrada Real Limited Partnership, Royal Texas-Tennessee Limited Partnership, Royal Texas-Tennessee II Limited Partnership, Raiders Pass Phase II Limited Partnership, Royal San Marcos Limited Partnership and Royal San Antonio Limited Partnership, on the one hand, and American Campus Communities, Inc. and American Campus Communities Operating Partnership LP, on the other hand.  Incorporated by reference to Exhibit 99.4 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on February 13, 2006.
 
51
 
10.29
  
Form of Fourth Amendment to Contribution and Sale Agreement, dated as of February 8, 2006, among Royal Tallahassee Partnership, Royal Tallahassee Partnership II Limited Partnership, Royal Tallahassee III Partnership, Royal Gainesville Limited Partnership, Royal Orlando Limited Partnership, Royal Lexington Limited Partnership, Royal Tucson Entrada Real Limited Partnership, Royal Texas-Tennessee Limited Partnership, Royal Texas-Tennessee II Limited Partnership, Raiders Pass Phase II Limited Partnership, Royal San Marcos Limited Partnership and Royal San Antonio Limited Partnership, on the one hand, and American Campus Communities, Inc. and American Campus Communities Operating Partnership LP, on the other hand.  Incorporated by reference to Exhibit 99.5 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on February 13, 2006.
     
10.30
  
Form of Registration Rights and Lock-Up Agreement, dated as of March 1, 2006, between American Campus Communities, Inc. and each of the persons who are signatory thereto.  Incorporated by reference to Exhibit 99.3 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on March 7, 2006.
     
10.31
  
Form of Tax Matters Agreement, dated as of March 1, 2006, among American Campus Communities Operating Partnership LP, American Campus Communities, Inc., American Campus Communities Holdings LLC and each of the limited partners of American Campus Communities Operating Partnership LP who have executed a signature page thereto.  Incorporated by reference to Exhibit 99.4 to Current Report on Form 8-K of American Campus Communities, Inc. (File No. 001-32265) filed on March 7, 2006.
     
21.1
  
List of Subsidiaries of the Registrant.
     
23.2
  
Consent of Ernst & Young LLP.
     
31.1
  
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2
  
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1
  
Certification of Chief Executive Officer Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2
  
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*     Indicates management compensation plan.

 
52
 

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
                                                                
March 1, 2010  AMERICAN CAMPUS COMMUNITIES, INC.
       
 
By:
/s/ William C. Bayless, Jr.   
  President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
Name
      
Title
      
Date
  
         
/s/ William C. Bayless, Jr.
  
President, Chief Executive Officer and Director (Principal Executive Officer)
  
March 1, 2010
William C. Bayless, Jr.
      
         
/s/ Brian B. Nickel
  
Senior Executive Vice President, Chief Investment Officer, Secretary and Director
  
March 1, 2010
Brian B. Nickel
      
         
/s/ Jonathan A. Graf
  
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
  
March 1, 2010
Jonathan A. Graf
      
         
/s/ R.D. Burck
  
Chairman of the Board of Directors
  
March 1, 2010
R.D. Burck
        
         
/s/ G. Steven Dawson
  
Director
    
G. Steven Dawson
      
March 1, 2010
         
/s/ Cydney Donnell
  
Director
    
Cydney Donnell
      
March 1, 2010
         
/s/ Edward Lowenthal
  
Director
    
Edward Lowenthal
      
March 1, 2010
         
/s/ Joseph Macchione
  
Director
    
Joseph Macchione
      
March 1, 2010
         
/s/ Winston W. Walker
  
Director
    
Winston W. Walker
      
March 1, 2010

 
53
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of 
American Campus Communities, Inc. 
 
We have audited American Campus Communities Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). American Campus Communities Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
In our opinion, American Campus Communities, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of American Campus Communities, Inc. and Subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2009 of American Campus Communities, Inc. and Subsidiaries and our report dated March 1, 2010 expressed an unqualified opinion thereon.
 
                                                                                     /s/ Ernst & Young LLP
 
Austin, Texas
March 1, 2010
 
F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 The Board of Directors and Shareholders of
American Campus Communities, Inc.
 
We have audited the accompanying consolidated balance sheets of American Campus Communities, Inc. and Subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, equity and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Campus Communities, Inc. and Subsidiaries at December 31, 2009 and 2008 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
 
As discussed in Note 3 to the consolidated financial statements, during 2009 the Company changed its method of calculating and disclosing earnings per share as a result of adopting new guidance applicable to the allocation of undistributed earnings to participating securities. Additionally, as discussed in Note 9 to the consolidated financial statements, during 2009 the Company changed its method of disclosing noncontrolling interests as a result of adopting new guidance requiring the disclosure of noncontrolling interests as a component of shareholders’ equity.
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2010 expressed an unqualified opinion thereon.
 
/s/ Ernst & Young LLP
 
Austin, Texas
March 1, 2010
 
F-2

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

   
   December 31, 2009
    
 December 31, 2008
  
             
Assets
            
             
Investments in real estate:
            
  Wholly-owned properties, net
   $ 2,014,970     $ 1,986,833  
  On-campus participating properties, net
     65,690       69,302  
Investments in real estate, net
     2,080,660       2,056,135  
                 
Cash and cash equivalents
     66,093       25,600  
Restricted cash
     29,899       32,558  
Student contracts receivable, net
     5,381       5,185  
Other assets
     52,948       64,431  
                 
Total assets
   $ 2,234,981     $ 2,183,909  
                 
Liabilities and equity
                
                 
Liabilities:
                
  Secured mortgage, construction and bond debt
   $ 1,029,455     $ 1,162,221  
  Senior secured term loan
     100,000       100,000  
  Secured revolving credit facility
     -       14,700  
  Secured agency facility
     94,000       -  
  Accounts payable and accrued expenses
     26,543       35,440  
  Other liabilities
     45,487       56,052  
Total liabilities
     1,295,485       1,368,413  
                 
Redeemable noncontrolling interests
     36,722       26,286  
                 
Equity:
                
  American Campus Communities, Inc. stockholders’ equity:
     Common stock, $.01 par value, 800,000,000 shares authorized, 52,203,893 and 42,354,283 shares issued and outstanding at December 31, 2009 and 2008, respectively
         521           423  
     Additional paid in capital
     1,092,030       901,641  
     Accumulated earnings and dividends
     (189,165 )     (111,828 )
     Accumulated comprehensive loss
     (4,356 )     (5,117 )
     Total American Campus Communities, Inc. stockholders’ equity
     899,030       785,119  
  Noncontrolling interests
     3,744       4,091  
Total equity
     902,774       789,210  
                 
Total liabilities and equity
   $ 2,234,981     $ 2,183,909  
 
See accompanying notes to consolidated financial statements.
 
F-3
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
 
   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Revenues:
                  
  Wholly-owned properties
   $ 271,938     $ 194,701     $ 116,286  
  On-campus participating properties
     22,727       22,042       20,966  
  Third-party development services
     5,015       7,922       5,490  
  Third-party management services
     8,795       6,578       2,821  
  Resident services
     1,115       2,336       1,572  
Total revenues
     309,590       233,579       147,135  
                         
Operating expenses:
                        
  Wholly-owned properties
     132,965       101,804       55,155  
  On-campus participating properties
     10,200       10,771       9,379  
  Third-party development and management services
     11,250       11,123       5,708  
  General and administrative
     10,955       11,274       17,660  
  Depreciation and amortization
     76,201       56,853       30,444  
  Ground/facility leases
     2,107       1,778       1,622  
Total operating expenses
     243,678       193,603       119,968  
                         
Operating income
     65,912       39,976       27,167  
                         
Nonoperating income and (expenses):
                        
  Interest income
     120       1,131       1,477  
  Interest expense
     (62,747 )     (49,497 )     (27,871 )
  Amortization of deferred financing costs
     (3,466 )     (2,563 )     (1,340 )
  Loss from unconsolidated joint ventures
     (2,073 )     (1,619 )     (108 )
  Other nonoperating income
     402       486       -  
Total nonoperating expenses
     (67,764 )     (52,062 )     (27,842 )
                         
Loss before income taxes and discontinued operations
     (1,852 )     (12,086 )     (675 )
Income tax provision
     (540 )     (388 )     (756 )
Loss from continuing operations
     (2,392 )     (12,474 )     (1,431 )
                         
Discontinued operations:
                        
  Loss attributable to discontinued operations
     (710 )     (345 )     -  
  Loss from disposition of real estate
     (9,358 )     -       -  
Total discontinued operations
     (10,068 )     (345 )     -  
                         
Net loss
     (12,460 )     (12,819 )     (1,431 )
  Income attributable to noncontrolling interests
     (380 )     (236 )     (255 )
Net loss attributable to common shareholders
   $ (12,840 )   $ (13,055 )   $ (1,686 )
                         
Loss per share attributable to common shareholders –
  Basic and diluted:
                        
    Loss from continuing operations per share
   $ (0.08 )   $ (0.35 )   $ (0.08 )
    Net loss per share
   $ (0.28 )   $ (0.36 )   $ (0.08 )
                         
Weighted-average common shares outstanding:
                        
  Basic and diluted
     48,706,480       36,947,656       24,186,213  
                         
Distributions declared per common share
   $ 1.35     $ 1.35     $ 1.35  
                         
 
See accompanying notes to consolidated financial statements.
 
F-4

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except share data)
 
   
Preferred
Stock
    
Common
Shares
    
Par Value of
Common
Shares
    
Additional
Paid in Capital
    
Accumulated
Earnings and
Distributions
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Noncontrolling
Interests
    
Total
  
Equity, December 31, 2006
   $ -       22,903,073     $ 229     $ 382,367     $ (13,533 )   $ 411     $ 1,208     $ 370,682  
Net proceeds from sale of common stock
     -       3,500,000       35       98,593       -       -       -       98,628  
Issuance of fully vested restricted stock units
     -       -       -       160       -       -       -       160  
Reclassification of noncontrolling interests
     -       -       -       (22,292 )     -       -       -       (22,292 )
Amortization of restricted stock awards
     -       -       -       1,095       -       -       -       1,095  
Vesting of restricted stock awards
     -       22,102       -       (262 )     -       -       -       (262 )
Distributions to common and restricted stockholders
     -       -       -       -       (32,962 )     -       -       (32,962 )
Land contribution by joint venture partner
     -       -       -       -       -       -       2,756       2,756  
Distributions to joint venture partners
     -       -       -       -       -       -       (126 )     (126 )
Conversion of common units to common stock
     -       850,316       9       18,684       -       -       -       18,693  
Amortization of gain on swap termination to earnings
     -       -       -       -       -       (211 )     -       (211 )
Comprehensive loss:
                                                                
Change in fair value of interest rate swaps
     -       -       -       -       -       (2,075 )     -       (2,075 )
Net loss
     -       -       -       -       (1,686 )     -       303       (1,383 )
Total comprehensive loss
                                                             (3,458 )
Equity, December 31, 2007
     -       27,275,491       273       478,345       (48,181 )     (1,875 )     4,141       432,703  
Net proceeds from sale of common stock
     -       9,200,000       92       251,994       -       -       -       252,086  
Common stock consideration for GMH
     -       5,442,801       54       154,643       -       -       -       154,697  
Issuance of preferred stock
     131       -       -       -       -       -       -       131  
Redemption of preferred stock
     (131 )     -       -       -       -       -       -       (131 )
Reclassification of noncontrolling interests
     -       -       -       7,201       -       -       -       7,201  
Amortization of restricted stock awards
     -       -       -       1,908       -       -       -       1,908  
Vesting of restricted stock awards
     -       44,409       -       (147 )     -       -       -       (147 )
Distributions to common, preferred and restricted stockholders
     -       -       -       -       (50,592 )      -       -       (50,592 )
Distributions to joint venture partners
     -       -       -       -       -       -       (316 )     (316 )
Conversion of common units to common stock
     -       391,582       4       7,697       -       -       -       7,701  
Amortization of gain on swap termination to earnings
     -       -       -       -       -       (211 )     -       (211 )
Comprehensive loss:
                                                                
Change in fair value of interest rate swaps
     -       -       -       -       -       (3,031 )     -       (3,031 )
Net loss
     -       -       -       -       (13,055 )     -       266       (12,789 )
Total comprehensive loss
                                                             (15,820 )
Equity, December 31, 2008
      -       42,354,283       423       901,641       (111,828 )     (5,117 )     4,091       789,210  
Net proceeds from sale of common stock
     -       9,775,000       98       198,252       -       -       -       198,350  
Reclassification of noncontrolling interests
     -       -       -       (10,676 )     -       -       -       (10,676 )
Amortization of restricted stock awards
     -       -       -       2,709       -       -       -       2,709  
Vesting of restricted stock awards
     -       59,210       -       (257 )     -       -       -       (257 )
Distributions to common and restricted stockholders
     -       -       -       -       (64,497 )     -       -       (64,497 )
Distributions to joint venture partners
     -       -       -       -       -       -       (840 )     (840 )
Conversion of common units to common stock
     -       15,400       -       361       -       -       -       361  
Comprehensive loss:
                                                                
Change in fair value of interest rate swaps
     -       -       -       -       -       761       -       761  
Net loss
     -       -       -       -       (12,840 )     -       493       (12,347 )
Total comprehensive loss
                                                             (11,586 )
Equity, December 31, 2009
   $ -       52,203,893     $ 521     $ 1,092,030     $ (189,165 )   $ (4,356 )   $ 3,744     $ 902,774  

See accompanying notes to consolidated financial statements.
 
F-5
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Operating activities
                  
Net loss attributable to common shareholders
   $ (12,840 )   $ (13,055 )   $ (1,686 )
Adjustments to reconcile net loss to net cash provided by operating activities:
                        
     Loss from disposition of real estate
     9,358       -       -  
     Income attributable to noncontrolling interests
     380       236       255  
     Depreciation and amortization
     77,348       57,555       30,444  
     Amortization of deferred financing costs and debt premiums/discounts
     3,430       1,734       (127 )
     Share-based compensation
     2,811       2,099       4,962  
     Loss from unconsolidated joint ventures
     2,073       1,619       108  
     Amortization of gain on interest rate swap termination
     -       (211 )     (211 )
     Income tax provision
     540       375       756  
     Changes in operating assets and liabilities:
                        
              Restricted cash
     2,561       (4,433 )     (1,946 )
              Student contracts receivable, net
     (290 )     (34 )     (478 )
              Other assets
     3,359       (6,998 )     (5,386 )
              Accounts payable and accrued expenses
     (9,387 )     (3,177 )     (222 )
              Other liabilities
     219       (2,823 )     2,578  
Net cash provided by operating activities
     79,562       32,887       29,047  
Investing activities
                        
     Net proceeds from disposition of real estate
     1,485       4,418       -  
     Cash paid for GMH acquisition
     -       (269,358 )     -  
     Cash paid for property acquisitions
     -       (11,287 )     (42,760 )
     Cash paid for land acquisitions
     (7,385 )     (3,226 )     (10,445 )
     Investments in wholly-owned properties
     (114,729 )     (139,570 )     (131,820 )
     Investments in on-campus participating properties
     (739 )     (719 )     (480 )
     Investments in unconsolidated joint ventures
     (401 )     (10,610 )     (1,600 )
     Purchase of corporate furniture, fixtures and equipment
     (606 )     (2,178 )     (486 )
 Distributions received from unconsolidated joint ventures
     250       120       -  
     Net cash used in investing activities
     (122,125 )     (432,410 )     (187,591 )
Financing activities
                        
     Proceeds from sale of common stock
     207,719       264,500       99,015  
     Offering costs
     (9,369 )     (12,249 )     (243 )
     Proceeds from sale of preferred stock
     -       131       -  
     Redemption of preferred stock
     -       (131 )     -  
     Pay-off of mortgage and construction loans
     (110,949 )     (24,362 )     (43,862 )
     Proceeds from contribution of properties to joint venture
     -       74,368       -  
     Proceeds from secured term loan
     -       100,000       -  
     Proceeds from secured agency facility
     94,000       -       -  
     Secured revolving credit facility, net
     (14,700 )     5,100       9,600  
     Proceeds from construction loans
     5,334       81,167       66,128  
     Principal payments on debt
     (10,963 )     (10,243 )     (7,792 )
     Change in construction accounts payable
     (2,747 )     (6,591 )     6,077  
     Debt issuance and assumption costs
     (8,094 )     (5,808 )     (1,638 )
     Distributions to common and restricted stockholders
     (64,565 )     (50,637 )     (32,985 )
     Distributions to noncontrolling partners
     (2,610 )     (2,195 )     (2,790 )
     Net cash provided by financing activities
     83,056       413,050       91,510  
Net change in cash and cash equivalents
     40,493       13,527       (67,034 )
Cash and cash equivalents at beginning of period
     25,600       12,073       79,107  
Cash and cash equivalents at end of period
   $ 66,093     $ 25,600     $ 12,073  
                         
Supplemental disclosure of non-cash investing and financing activities
                        
     Loans assumed in connection with company and property acquisitions
   $ -     $ (615,175 )   $ (88,307 )
     Issuance of common stock in connection with company acquisition
   $ -     $ (154,697 )   $ -  
     Issuance of Common Units in connection with company acquisition
   $ -     $ (199 )   $ -  
     Issuance of Common Units in connection with land acquisition
   $ (2,005 )   $ -     $ -  
     Financing of equipment through capital lease obligations
   $ 629     $ -     $ 1,491  
     Change in fair value of derivative instruments, net
   $ 761     $ (3,031 )   $ (2,075 )
     Contribution of land from noncontrolling partner in development joint venture
   $ -     $ -     $ 2,756  
Supplemental disclosure of cash flow information
                        
     Interest paid
   $ 62,263     $ 52,108     $ 31,222  
     Income taxes paid
   $ 642     $ 282     $ 64  
 
See accompanying notes to consolidated financial statements.
 
F-6

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.     Organization and Description of Business 

American Campus Communities, Inc. (the “Company”) is a real estate investment trust (“REIT”) that was incorporated on March 9, 2004 and commenced operations effective with the completion of an initial public offering (“IPO”) on August 17, 2004.  Through the Company’s controlling interest in American Campus Communities Operating Partnership LP (the “Operating Partnership”), the Company is one of the largest owners, managers and developers of high quality student housing properties in the United States in terms of beds owned and under management.  The Company is a fully integrated, self-managed and self-administered equity REIT with expertise in the acquisition, design, financing, development, construction management, leasing and management of student housing properties.

As of December 31, 2009, the Company’s property portfolio contained 85 student housing properties with approximately 52,100 beds and approximately 17,000 apartment units, including 39 properties containing approximately 22,800 beds and approximately 7,300 units added as a result of the Company’s acquisition on June 11, 2008 of the student housing business of GMH Communities Trust (“GMH”), as more fully discussed in Note 5 herein.  The Company’s property portfolio consisted of 79 owned off-campus properties that are in close proximity to colleges and universities, two American Campus Equity (“ACETM”) properties operated under ground/facility leases with a related university system and four on-campus participating properties operated under ground/facility leases with the related university systems.  As of December 31, 2009, the Company also owned a noncontrolling interest in two joint ventures that owned an aggregate of 20 student housing properties with approximately 11,300 beds in approximately 3,400 units.  The Company’s communities contain modern housing units and are supported by a resident assistant system and other student-oriented programming, with many offering resort-style amenities.

Through the Company’s taxable REIT subsidiaries (“TRS”), it also provides construction management and development services, primarily for student housing properties owned by colleges and universities, charitable foundations, and others.  As of December 31, 2009, the Company provided third-party management and leasing services for 31 properties (five of which the Company served as the third-party developer and construction manager) that represented approximately 23,300 beds in approximately 9,100 units.  Third-party management and leasing services are typically provided pursuant to multi-year management contracts that have initial terms that range from one to five years.  As of December 31, 2009, the Company’s total owned, joint venture and third-party managed portfolio included 136 properties with approximately 86,700 beds in approximately 29,500 units.

2.   Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the financial position, results of operations and cash flows of the Company, the Operating Partnership and subsidiaries of the Operating Partnership, including joint ventures in which the Company has a controlling interest.  Third-party equity interests in the Operating Partnership and consolidated joint ventures are reflected as noncontrolling interests in the consolidated financial statements.  The Company also has a noncontrolling interest in three unconsolidated joint ventures, which are accounted for under the equity method.  All intercompany amounts have been eliminated.  All dollar amounts in the tables herein, except share and per share amounts, are stated in thousands unless otherwise indicated.  Certain prior period amounts have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Codification (the “Codification”).  Effective July 1, 2009, the Codification is the single source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in accordance with GAAP.  The guidance explicitly recognizes rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for SEC registrants.  Adoption of the Codification did not materially impact the Company’s consolidated financial statements.
 
F-7
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
In December 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-17, “Consolidations (Topic 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities,” which codified the previously issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R).”  ASU 2009-17 changes the consolidation analysis for Variable Interest Entities (“VIE’s”) and requires a qualitative analysis to determine the primary beneficiary.  The determination of the primary beneficiary of a VIE is based on whether the entity has the power to direct matters which most significantly impact the activities of the VIE and has the obligation to absorb losses, or the right to receive benefits, of the VIE which could potentially be significant to the VIE.  The ASU requires an ongoing reconsideration of the primary beneficiary and also amends the event triggering a reassessment of whether an entity is a VIE.  ASU 2009-17 requires additional disclosures for VIE’s, including disclosures about a reporting entity’s involvement with VIE’s, how a reporting entity’s involvement with a VIE affects the reporting entity’s financial statements, and significant judgments and assumptions made by the reporting entity to determine whether it must consolidate the VIE.  ASU 2009-17 is effective for the Company beginning on January 1, 2010.  The Company is currently evaluating what impact, if any, the adoption of ASU 2009-17 will have on its consolidated financial statements.

Effective June 30, 2009, the Company adopted a policy related to subsequent events which involves accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued.  The adoption of this new accounting guidance did not have any impact on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company adopted policies related to disclosures about derivative instruments and hedging activities, which provides enhanced disclosures about (a) how and why the Company uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under the Company’s accounting policy, and (c) how derivative instruments and related hedged items affect the Company’s financial position, financial performance and cash flows. This adoption did not have a material effect on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company retrospectively adopted newly issued accounting and reporting policies related to noncontrolling interests in consolidated financial statements (previously referred to as minority interests).  See Note 9 herein for a more detailed discussion of noncontrolling interests and the effect of the new accounting guidance on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company adopted policies related to accounting for business combinations, which changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition-related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. This adoption did not have a material effect on the Company’s financial statements.

Effective January 1, 2009, the Company adopted a policy which clarifies that share-based payment awards that entitle their holders to receive nonforfeitable dividends before vesting should be considered participating securities.  As participating securities, these instruments should be included in the computation of earnings per share (“EPS”) using the two-class method. Pursuant to this adoption, the Company’s computation of EPS has been retrospectively adjusted in Note 3 for the years ended December 31, 2008 and 2007 and in Note 19 for the quarters ended March 31, 2009, December 31, 2008, September 30, 2008, June 30, 2008 and March 31, 2008.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Investments in Real Estate

Investments in real estate are recorded at historical cost.  Major improvements that extend the life of an asset are capitalized and depreciated over the remaining useful life of the asset.  The cost of ordinary repairs and maintenance are charged to expense when incurred.  Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets as follows:

Buildings and improvements
  
7-40 years
Leasehold interest - on-campus participating properties
  
25-34 years (shorter of useful life or respective lease term)
Furniture, fixtures and equipment
  
3-7 years
 
F-8
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Project costs directly associated with the development and construction of an owned real estate project, which include interest, property taxes, and amortization of deferred finance costs, are capitalized as construction in progress.  Upon completion of the project, costs are transferred into the applicable asset category and depreciation commences.  Interest totaling approximately $2.9 million, $5.5 million and $5.4 million was capitalized during the years ended December 31, 2009, 2008 and 2007, respectively.  Amortization of deferred financing costs totaling approximately $0.2 million and $0.4 million was capitalized during the years ended December 31, 2008 and 2007, respectively.

Management assesses whether there has been an impairment in the value of the Company’s investments in real estate whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Impairment is recognized when estimated expected future undiscounted cash flows are less than the carrying value of the property.  The estimation of expected future net cash flows is inherently uncertain and relies on assumptions regarding current and future economics and market conditions.  If such conditions change, then an adjustment to the carrying value of the Company’s long-lived assets could occur in the future period in which the conditions change.  To the extent that a property is impaired, the excess of the carrying amount of the property over its estimated fair value is charged to earnings.  The Company believes that there were no impairments of the carrying values of its investments in real estate as of December 31, 2009.

The Company allocates the purchase price of acquired properties to net tangible and identified intangible assets based on relative fair values.  Fair value estimates are based on information obtained from a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data.  Information obtained about each property as a result of due diligence, marketing and leasing activities is also considered.  The value of in-place leases is based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued “as-if” vacant.  As lease terms are typically one year or less, rates on in-place leases generally approximate market rental rates.  Factors considered in the valuation of in-place leases include an estimate of the carrying costs during the expected lease-up period considering current market conditions, nature of the tenancy, and costs to execute similar leases.  Carrying costs include estimates of lost rentals at market rates during the expected lease-up period, as well as marketing and other operating expenses.  The value of in-place leases is amortized over the remaining initial term of the respective leases, generally less than one year.  The purchase price of property acquisitions is not expected to be allocated to tenant relationships, considering the terms of the leases and the expected levels of renewals.

Long-Lived Assets–Held for Sale

Long-lived assets to be disposed of are classified as held for sale in the period in which all of the following criteria are met:

 
a.
Management, having the authority to approve the action, commits to a plan to sell the asset.

 
b.
The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets.

 
c.
An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated.

 
d.
The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year.

 
e.
The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value.

 
f.
Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Concurrent with this classification, the asset is recorded at the lower of cost or fair value, and depreciation ceases.
 
F-9
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Owned On-Campus Properties

Under its ACE program, the Company as lessee, entered into two 65-year ground and facility leases with a university system to finance, construct, and manage two student housing facilities.  One property was completed in August 2008 and the other property was completed in August 2009.  Both leases include the option to extend the lease term for two additional terms of ten years each, and the lessor has title to the land and any improvements placed thereon.  The Company’s involvement in construction requires the lessor’s post construction ownership of the improvements to be treated as a sale with a subsequent leaseback by the Company.  However, these sale-leaseback transactions do not qualify for sale-leaseback accounting because of the Company’s continuing involvement in the constructed assets.  As a result of the Company’s continuing involvement, these leases are accounted for by the deposit method, in which the assets subject to the ground and facility leases are reflected at historical cost, less amortization, and the financing obligations are reflected at the terms of the underlying financing.

On-Campus Participating Properties

The Company entered into ground and facility leases with two university systems and colleges to finance, construct, and manage four on-campus student housing facilities.  Under the terms of the leases, the lessor has title to the land and any improvements placed thereon.  Each lease terminates upon final repayment of the construction related financing, the amortization period of which is contractually stipulated.  The Company’s involvement in construction requires the lessor’s post construction ownership of the improvements to be treated as a sale with a subsequent leaseback by the Company.  The sale-leaseback transaction has been accounted for as a financing, and as a result, any fee earned during construction is deferred and recognized over the term of the lease.  The resulting financing obligation is reflected at the terms of the underlying financing, i.e., interest is accrued at the contractual rates and principal reduces in accordance with the contractual principal repayment schedules.

The Company reflects these assets subject to ground/facility leases at historical cost, less amortization.  Costs are amortized, and deferred fee revenue in excess of the cost of providing the service are recognized, over the lease term.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.  The Company maintains cash balances in various banks.  At times the Company’s balances may exceed the amount insured by the FDIC.  As the Company only uses money-centered financial institutions, the Company does not believe it is exposed to any significant credit risk related to its cash and cash equivalents.

Restricted Cash

Restricted cash consists of funds held in trust and invested in low risk investments, generally consisting of government backed securities, as permitted by the indentures of trusts, which were established in connection with three bond issues.  Additionally, restricted cash includes escrow accounts held by lenders and resident security deposits, as required by law in certain states.  Certain funds held by a trustee in a required escrow account are being invested under a forward delivery agreement in government backed securities that have a remaining maturity when purchased of six months.  Restricted cash also consists of escrow deposits made in connection with potential property acquisitions and development opportunities.  These escrow deposits are invested in an interest-bearing account at a federally-insured bank.  Realized and unrealized gains and losses are not material for the periods presented.

Intangible Assets

In connection with property acquisitions completed during 2008 and 2007, the Company capitalized approximately $19.0 million and $1.2 million, respectively, related to management’s estimate of the fair value of the in-place leases assumed.  These intangible assets were amortized on a straight-line basis over the average remaining term of the underlying leases.  Amortization expense was approximately $9.7 million, $9.1 million and $1.2 million for the years ended December 31, 2009, 2008 and 2007, respectively.  The Company also capitalized $1.5 million related to management’s estimate of the fair value of third-party management contracts acquired from GMH in June 2008.  These intangible assets are amortized on a straight-line basis over a period of three years.  Amortization expense related to these acquired management contracts was approximately $0.5 million and $0.3 million for the years ended December 31, 2009 and 2008, respectively.  The amortization of intangible assets is included in depreciation and amortization expense in the accompanying consolidated statements of operations.  See Note 5 herein for a detailed discussion of the property acquisitions completed during 2008 and 2007.
 
F-10
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Deferred Financing Costs

The Company defers financing costs and amortizes the costs over the terms of the related debt using the effective interest method.  Upon repayment of or in conjunction with a material change in the terms of the underlying debt agreement, any unamortized costs are charged to earnings. Amortization expense, net of amounts capitalized, was approximately $3.5 million, $2.5 million and $1.3 million for the years ended December 31, 2009, 2008 and 2007, respectively.  Accumulated amortization at December 31, 2009 and 2008 approximated $9.0 million and $8.9 million, respectively.  Deferred financing costs, net of amortization, are included in other assets on the accompanying consolidated balance sheets.

Joint Ventures

The Company holds interests in both consolidated and unconsolidated joint ventures.  The Company consolidates joint ventures when it exhibits financial or operational control, which is determined using accounting standards related to the consolidation of joint ventures and VIE’s.  For joint ventures that are defined as VIE’s, the primary beneficiary consolidates the entity.  In instances where the Company is not the primary beneficiary, it does not consolidate the joint venture for financial reporting purposes. For joint ventures that are not defined as variable interest entities, management first considers whether the Company is the general partner or a limited partner (or the equivalent in such investments which are not structured as partnerships).  The Company consolidates joint ventures where it is the general partner (or the equivalent) and the limited partners (or the equivalent) in such investments do not have rights which would preclude control and, therefore, consolidation for financial reporting purposes.  For joint ventures where the Company is the general partner (or the equivalent), but does not control the joint venture as the other partners (or the equivalent) hold substantive participating rights, the Company uses the equity method of accounting.  For joint ventures where the Company is a limited partner (or the equivalent), management considers factors such as ownership interest, voting control, authority to make decisions, and contractual and substantive participating rights of the partners (or the equivalent) to determine if the presumption that the general partner controls the entity is overcome.  In instances where these factors indicate the Company controls the joint venture, the Company consolidates the joint venture; otherwise it uses the equity method of accounting.
 
Debt Premiums and Discounts

Debt premiums and discounts represent fair value adjustments to account for the difference between the stated rates and market rates of debt assumed in connection with the Company’s property acquisitions.  The debt premiums and discounts are amortized to interest expense over the term of the related loans using the effective-interest method.  As of December 31, 2009 and 2008, net unamortized debt premiums were approximately $3.8 million and $5.7 million, respectively, and net unamortized debt discounts were approximately $8.5 million and $10.4 million, respectively.  Debt premiums and discounts are included in secured mortgage debt on the accompanying consolidated balance sheets.

Rental Revenues and Related Receivables

Students are required to execute lease contracts with payment schedules that vary from single to monthly payments. Receivables are recorded when billed, revenues and related lease incentives are recognized on a straight-line basis over the term of the contracts, and balances are considered past due when payment is not received on the contractual due date. Generally, the Company requires each executed contract to be accompanied by a refundable security deposit and a signed parental guaranty. Security deposits are refundable, net of any outstanding charges, upon expiration of the underlying contract.

Allowances for receivables are established when management determines that collection of such receivables are doubtful. When management has determined receivables to be uncollectible, they are removed as an asset with a corresponding reduction in the allowance for doubtful accounts.

The allowance for doubtful accounts is summarized as follows:

   
Balance, Beginning
of Period
    
Charged to
Expense
    
Write-Offs
    
Balance, End
of Period
  
                         
Year ended December 31, 2007
   $ 2,158     $ 1,919     $ (1,077 )   $ 3,000  
Year ended December 31, 2008
   $ 3,000     $ 2,955     $ (2,106 )   $ 3,849  
Year ended December 31, 2009
   $ 3,849     $ 4,327     $ (2,066 )   $ 6,110  
 
F-11
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Third-Party Development Services Revenue and Costs

Development revenues are generally recognized based on a proportionate performance method based on contract deliverables, while construction revenues are recognized using the percentage of completion method, as determined by construction costs incurred relative to total estimated construction costs.  Costs associated with such projects are deferred and recognized in relation to the revenues earned on executed contracts.  For projects where the Company’s fee is based on a fixed price, any cost overruns incurred during construction, as compared to the original budget, will reduce the net fee generated on those projects.  Incentive fees are generally recognized when the project is complete and performance has been agreed upon by all parties, or when performance has been verified by an independent third-party.  The Company also evaluates the collectibility of fee income and expense reimbursements generated through the provision of development and construction management services based upon the individual facts and circumstances, including the contractual right to receive such amounts in accordance with the terms of the various projects, and reserves any amounts that are deemed to be uncollectible.

Pre-development expenditures such as architectural fees, permits and deposits associated with the pursuit of third-party and owned development projects are expensed as incurred, until such time that management believes it is probable that the contract will be executed and/or construction will commence.  Because the Company frequently incurs these pre-development expenditures before a financing commitment and/or required permits and authorizations have been obtained, the Company bears the risk of loss of these pre-development expenditures if financing cannot ultimately be arranged on acceptable terms or the Company is unable to successfully obtain the required permits and authorizations.  As such, management evaluates the status of third-party and owned projects that have not yet commenced construction on a periodic basis and expenses any deferred costs related to projects whose current status indicates the commencement of construction is unlikely and/or the costs may not provide future value to the Company in the form of revenues.  Such write-offs are included in third-party development and management services expenses (in the case of third-party development projects) or general and administrative expenses (in the case of owned development projects) on the accompanying consolidated statements of operations.  As of December 31, 2009, the Company has deferred approximately $7.5 million in pre-development costs related to third-party and owned development projects that have not yet commenced construction.   Such costs are included in other assets on the accompanying consolidated balance sheets.

Third-Party Management Services Revenue

Management fees are recognized when earned in accordance with each management contract.  Incentive management fees are recognized when the incentive criteria have been met.

Advertising Costs

Advertising costs are expensed during the period incurred.  The Company uses no direct response advertising.  Advertising expense approximated $9.5 million, $5.2 million and $2.6 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Derivative Instruments and Hedging Activities

The Company records all derivative financial instruments on the balance sheet at fair value.  Changes in fair value are recognized either in earnings or as other comprehensive income, depending on whether the derivative has been designated as a fair value or cash flow hedge and whether it qualifies as part of a hedging relationship, the nature of the exposure being hedged, and how effective the derivative is at offsetting movements in underlying exposure.  The Company discontinues hedge accounting when: (i) it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur; or (iv) management determines that designating the derivative as a hedging instrument is no longer appropriate.  In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company will carry the derivative at its fair value on the balance sheet, recognizing changes in the fair value in current-period earnings.  The Company uses interest rate swaps to effectively convert a portion of its floating rate debt to fixed rate, thus reducing the impact of rising interest rates on interest payments.  These instruments are designated as cash flow hedges and the interest differential to be paid or received is accrued as interest expense. The Company’s counter-parties are major financial institutions.  See Note 14 herein for an expanded discussion on derivative instruments and hedging activities.
 
F-12
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Common Stock Issuances and Costs

Specific incremental costs directly attributable to the Company’s equity offerings were deferred and charged against the gross proceeds of the offering.  As such, underwriting commissions and other common stock issuance costs are reflected as a reduction of additional paid in capital.

On May 11, 2009, the Company completed an equity offering, consisting of the sale of 9,775,000 shares of the Company’s common stock at a price of $21.25 per share, including 1,275,000 shares issued as a result of the exercise of the underwriters’ overallotment option in full at closing.  The offering generated gross proceeds of $207.7 million.  The aggregate proceeds to the Company, net of the underwriting discount and expenses of the offering, were approximately $198.3 million.

On April 23, 2008, the Company completed an equity offering, consisting of the sale of 9,200,000 shares of the Company’s common stock at a price of $28.75 per share, including the exercise of 1,200,000 shares issued as a result of the exercise of the underwriters’ overallotment option in full at closing.  The offering generated gross proceeds of $264.5 million.  The aggregate proceeds to the Company, net of the underwriting discount, structuring fee and expenses of the offering, was approximately $252.1 million.

On October 10, 2007, the Company completed an equity offering, consisting of the sale of 3,500,000 shares of the Company’s common stock at a price of $28.29 per share, resulting in gross proceeds of approximately $99.0 million.  The company received approximately $98.7 million in net proceeds after deducting estimated expenses of approximately $0.3 million.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) and other comprehensive income (loss), consisting of unrealized gains (losses) on derivative instruments.  Comprehensive income (loss) is presented in the accompanying consolidated statements of changes in equity, and accumulated other comprehensive loss is displayed as a separate component of stockholders’ equity.

Stock-Based Compensation

The Company has recognized compensation expense related to certain stock-based awards (see Note 12) over the underlying vesting periods, which amounted to approximately $3.0 million, $2.1 million and $1.3 million for the years ended December 31, 2009, 2008 and 2007, respectively.
 
The Company’s Outperformance Bonus Plan vested on August 17, 2007 and the Compensation Committee of the Board of Directors elected to pay a portion of the awards to selected recipients in the form of profits interest units (“PIUs”), which are discussed in more detail in Note 12.  Approximately $3.7 million of the compensation charge recorded during the year ended December 31, 2007 reflects the settlement of the Outperformance Bonus Plan through the issuance of PIUs.

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).  To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted taxable income to its stockholders.  As a REIT, the Company will generally not be subject to corporate level federal income tax on taxable income it currently distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for the subsequent four taxable years.  Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local income and excise taxes on its income and property, and to federal income and excise taxes on its undistributed income.

The Company owns two TRS entities that manage the Company’s non-REIT activities and each is subject to federal, state and local income taxes.

F-13
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Other Nonoperating Income

Other nonoperating income of $0.4 million and $0.5 million was recognized for the years ended December 31, 2009 and 2008, respectively, related to tax incentive amounts received in cash during the periods related to a property we acquired in February 2007 located in Ypsilanti, Michigan.  Upon acquisition of this property, any future potential benefit of such tax incentive was assumed from the seller.
 
F-14
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
3.
Earnings per Share

Basic earnings per share is computed using net loss attributable to common shareholders and the weighted average number of shares of the Company’s common stock outstanding during the period.  Diluted earnings per share reflects common shares issuable from the assumed conversion of common and preferred Operating Partnership units and common share awards granted.  Only those items having a dilutive impact on basic earnings per share are included in diluted earnings per share.  On January 1, 2009, the Company adopted newly issued guidance relating to share-based payment transactions and participating securities and, as a result, the Company’s unvested share-based payment awards are considered participating securities and are included in the basic and diluted earnings per share calculations.  The Company’s computation of earnings per share has been retrospectively adjusted for the years ended December 31, 2008 and 2007 to conform to this new guidance.

A reconciliation of the numerators and denominators for basic and diluted earnings per share computations is not required as the Company reported a loss from continuing operations for all periods presented, and therefore the effect of the inclusion of all potentially dilutive securities would be anti-dilutive when computing diluted earnings per share.  Thus, the computation for both basic and diluted earnings per share is the same.  The following potentially dilutive securities were outstanding for the years ended December 31, 2009, 2008 and 2007 but were not included in the computation of diluted earnings per share because the effects of their inclusion would be anti-dilutive.

   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
  Common Operating Partnership units (Note 12)
     1,170,469       1,253,650       1,797,964  
  Preferred Operating Partnership units (Note 12)
     114,963       114,963       114,963  
  Restricted Stock Awards (Note 9)
     459,855       278,961       167,696  
  Total potentially dilutive securities
     1,745,287       1,647,574       2,080,623  

The following is a summary of the elements used in calculating basic earnings per share:
 
   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Basic earnings per share calculation:
                  
  Loss from continuing operations
   $ (2,392 )   $ (12,474 )   $ (1,431 )
  Income from continuing operations attributable to
     noncontrolling interests
     (630 )     (248 )     (255 )
  Loss from continuing operations attributable to common
     shareholders
      (3,022 )      (12,722 )     (1,686 )
  Amount allocated to participating securities
     (652 )     (398 )     (232 )
  Loss from continuing operations attributable to common
     shareholders, net of amount allocated to participating
     securities
       (3,674 )       (13,120 )     (1,918 )
                         
  Loss from discontinued operations
     (10,068 )     (345 )     -  
  Loss from discontinued operations attributable to
     noncontrolling interests
      250        12       -  
  Loss from discontinued operations attributable to
     common shareholders
     (9,818 )     (333 )     -  
  Net loss attributable to common shareholders, as
     adjusted – basic
   $ (13,492 )   $ (13,453 )   $ (1,918 )
 
                        
  Loss from continuing operations attributable to common
     shareholders, as adjusted – per share
   $ (0.08 )   $ (0.35 )   $ (0.08 )
  Loss from discontinued operations attributable to
     common shareholders – per share
   $ (0.20 )   $ (0.01 )   $ -  
  Net loss attributable to common shareholders, as
     adjusted – per share
   $ (0.28 )   $ (0.36 )   $ (0.08 )
                         
  Basic weighted average common shares outstanding
     48,706,480       36,947,656       24,186,213  
 
F-15
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
4.  
Income Taxes

As mentioned in Note 2, the Company qualifies as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).  As a REIT, the Company is not subject to federal income tax as long as it distributes at least 90% of its taxable income to its shareholders each year.  Therefore, no provision for federal income taxes for the REIT has been included in the accompanying consolidated financial statements.  If the Company fails to qualify as a REIT, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income and to federal income and excise taxes on its undistributed income.

The Company’s TRSs are subject to federal, state, and local income taxes.  As such, deferred income taxes result from temporary differences between the carrying amounts of assets and liabilities of the TRSs for financial reporting purposes and the amounts used for income tax purposes.  Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse.  Significant components of the deferred tax assets and liabilities of the TRSs are as follows:

   
December 31,
  
   
2009
    
2008
  
Deferred tax assets:
            
  Fixed and intangible assets
   $ 7,760     $ 7,674  
  Net operating loss carryforwards
     3,246       3,961  
  Prepaid and deferred rent
     2,313       2,212  
  Bad debt reserves
     240       365  
  Accrued expenses and other
     1,049       92  
  Stock compensation
     933       340  
Total deferred tax assets
     15,541       14,644  
Valuation allowance for deferred tax assets
     (15,053 )     (14,103 )
Deferred tax assets, net of valuation allowance
     488       541  
                 
Deferred tax liability:
                
  Deferred financing costs
     488       541  
                 
Net deferred tax liabilities
   $ -     $ -  

Significant components of the Company’s income tax provision are as follows:

   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Current:
  
 
    
 
        
  State
   $ (540 )   $ (388 )   $ (240 )
Deferred:
                        
  Federal
     -       -       (493 )
  State
     -       -       (23 )
Total provision — continuing operations
   $ (540 )   $ (388 )   $ (756 )
 
TRS earnings subject to tax consisted of an approximate $2.7 million loss, $2.0 million loss and $4.0 million loss for the years ended December 31, 2009, 2008 and 2007, respectively.  The reconciliation of income tax attributable to continuing operations for the TRSs computed at the U.S. statutory rate to income tax provision is as follows:
 
F-16
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Tax benefit at U.S. statutory rates on TRS income subject to tax
   $ 908     $ 673     $ 1,361  
State income tax, net of federal income tax benefit
     33       (8 )     (144 )
Effect of permanent differences and other
     217       (23 )     (8 )
Increase in valuation allowance
     (1,158 )     (665 )     (1,743 )
TRS income tax provision
   $ -     $ (23 )   $ (534 )
                         
At December 31, 2009, the TRSs had net operating loss carryforwards (“NOLs”) of approximately $9.1 million for income tax purposes that begin to expire in 2025.  These NOLs may be used to offset future taxable income generated by each of the respective TRSs.  Due to the various limitations to which the use of NOLs are subject, the Company has applied a valuation allowance to the NOLs given the likelihood that the NOLs will expire unused.  The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states’ jurisdictions as required and, as of December 31, 2009, the 2006, 2007 and 2008 calendar tax years are subject to examination by the tax authorities.
 
Beginning on January 1, 2007, the Company adopted accounting guidance related to uncertainty in income taxes, which clarifies the accounting and disclosure for uncertainty in tax positions and seeks to reduce the diversity of practice associated with certain aspects of the recognition and measurement related to accounting for income taxes.  The Company had no unrecognized tax benefits for the years ended December 31, 2009, 2008, or 2007, and as of December 31, 2009, the Company does not expect to record any unrecognized tax benefits.  Because no unrecognized tax benefits have been recorded, no related interest or penalties have been calculated and this guidance had no impact on the Company’s consolidated financial statements. 
 
5.  Property Acquisitions

2008 Acquisitions

On June 11, 2008, the Company completed the acquisition of GMH’s student housing business pursuant to an Agreement and Plan of Merger dated as of February 11, 2008 (the “Merger Agreement”).  Concurrent with the closing of the GMH acquisition, the Company formed a joint venture with a wholly-owned subsidiary of Fidelity Real Estate Growth Fund III, LP (“Fidelity”) and contributed 15 GMH student housing properties to the venture with an estimated value of $325.9 million.  The Company also assumed GMH’s equity interest in an existing joint venture with Fidelity that owns six properties.  At the time of closing, the GMH student housing portfolio consisted of 42 wholly-owned properties containing 24,939 beds located in various markets throughout the country.  Two of the acquired wholly-owned properties totaling 1,468 beds were sold during the third quarter of 2008 and one property totaling 700 beds was sold on December 31, 2009 (see Note 6).

The total consideration paid for the GMH student housing portfolio (exclusive of 15 properties contributed to the Fidelity joint venture) was approximately $1,018.7 million, inclusive of transaction costs.  Under the terms of the Merger Agreement, each GMH common share and each unit in GMH Communities, LP (the “GMH Operating Partnership”) issued and outstanding as of the date of closing, received cash consideration of $3.36 and 0.07642 of a share of the Company’s common stock, or at the election of the GMH Operating Partnership unitholder, 0.07642 of a unit in the Operating Partnership.  The value of the Company’s common stock and Common Operating Partnership units issued was based on the closing price of the Company’s common stock on February 11, 2008.  The Company issued 5.4 million shares of common stock and 7,004 Common Operating Partnership units, each valued at $28.43 per share or unit.
 
F-17
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
The following summarizes our allocation of total consideration to the assets and liabilities acquired from GMH, excluding the 15 properties contributed to the joint venture with Fidelity:

Land
   $ 130,164  
Buildings
     799,667  
Furniture, fixtures and equipment
     32,160  
In-place leases and other intangible assets
     20,283  
Investments in unconsolidated joint ventures
     10,610  
Debt discounts, net of debt premiums
     9,464  
Undeveloped land parcels
     5,000  
Deferred financing costs
     4,126  
Working capital assets, net of liabilities
     7,270  
   Total consideration
   $ 1,018,744  

In February 2008, the Company acquired a 144-unit, 528-bed property (Pirate’s Place) located near the campus of East Carolina University in Greenville, North Carolina, for a purchase price of $10.6 million, which excludes $0.8 million of transaction costs, initial integration expenses and capital expenditures.  As part of the transaction, the Company assumed approximately $7.0 million in fixed-rate mortgage debt with an annual interest rate of 7.15% and remaining term to maturity of 14.9 years.
 
In February 2008, the Company also acquired a 68-unit, 161-bed property (Sunnyside Commons) located near the campus of West Virginia University in Morgantown, West Virginia, for a purchase price of $7.5 million, which excludes $0.6 million of transaction costs, initial integration expenses and capital expenditures.  The Company did not assume any debt as part of this transaction.

2007 Acquisitions

In January 2007, the Company acquired a 248-unit, 752-bed property (Village on Sixth) located near the campus of Marshall University in Huntington, West Virginia, for a purchase price of $25.6 million, which excludes $1.7 million of transaction costs, initial integration expenses and capital expenditures necessary to bring this property up to the Company’s operating standards.  As part of the transaction, the Company assumed two fixed-rate mortgage loans, which includes one for $16.2 million with an annual interest rate of 5.5% and remaining term to maturity of 7.5 years and a second loan for $1.4 million with an annual interest rate of 6.6% and remaining term to maturity of 9.9 years.

In February 2007, the Company acquired a three property portfolio (the “Edwards Portfolio”) for a purchase price of $102.0 million, which excludes $3.7 million of transaction costs, initial integration expenses and capital expenditures necessary to bring these properties up to the Company’s operating standards.  As part of the transaction, the Company assumed $70.7 million in fixed-rate mortgage debt with a weighted average annual interest rate of 5.7% and an average remaining term to maturity of 8.5 years.  In August 2007, construction was completed on an additional phase at one of these properties.  As contemplated in the original transaction, concurrent with the completion of construction in August 2007, the Company purchased this additional phase consisting of 24 units and 84 beds, for approximately $4.6 million.

The Edwards Portfolio consists of one property in Lexington, Kentucky located near the campus of the University of Kentucky, one property in Toledo, Ohio located near the campus of the University of Toledo and one property in Ypsilanti, Michigan located near the campus of Eastern Michigan University.  Including the purchase of the additional phase discussed above, these three properties contain 763 units and 1,970 beds.

The acquired properties’ results of operations have been included in the accompanying consolidated statements of operations since their respective acquisition closing dates.  The following pro forma information for the years ended December 31, 2008 and 2007, present consolidated financial information for the Company as if the property acquisitions discussed above, the $100 million senior secured term loan borrowing, and the April 2008 and October 2007 equity offerings had occurred at the beginning of the earliest period presented.  The unaudited pro forma information is provided for informational purposes only and is not indicative of results that would have occurred or which may occur in the future:
 
   
Year Ended December 31,
  
   
2008
    
2007
  
Total revenues
   $ 289,435     $ 275,359  
Net loss attributable to common shareholders
   $ (10,576 )   $ (3,679 )
Net loss per share attributable to common shareholders, as adjusted – basic and diluted
   $ (0.26 )   $ (0.09 )
 
F-18
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
6.  Property Dispositions and Discontinued Operations

On December 31, 2009, the Company sold Riverside Estates for a purchase price of $18.2 million, including the assumption of the existing $16.2 million mortgage loan, resulting in net proceeds of approximately $1.3 million.  The resulting loss on disposition of approximately $9.4 million is included in discontinued operations in the accompanying consolidated statement of operations for the year ended December 31, 2009.

As part of the acquisition of GMH on June 11, 2008, the Company acquired two properties (The Courtyards and The Verge) that were under contract to be sold as of such date.  The Courtyards was sold in July 2008 for approximately $17.4 million, including the assumption of the existing $16.9 million mortgage loan, resulting in net cash proceeds of approximately $0.4 million.  The Verge was sold in August 2008 for approximately $36.4 million, including the assumption of the existing $31.4 million mortgage loan, resulting in net proceeds of approximately $3.6 million.  There was no gain or loss recorded on these dispositions for book purposes.

The related net loss for the afore-mentioned properties is reflected in the accompanying consolidated statements of operations as discontinued operations for the periods presented.  Below is a summary of the results of operations for the properties sold through their respective disposition dates:

   
Year Ended December 31,
  
   
2009
    
2008
  
Total revenues
   $ 3,408     $ 2,729  
Total operating expenses
     3,141       2,160  
   Operating income
     267       569  
Total nonoperating expenses
     (977 )     (914 )
   Net loss
   $ (710 )   $ (345 )

7.  Investments in Wholly-Owned Properties

Wholly-owned properties consisted of the following:

   
December 31,
    
   
2009
    
2008
    
Land (1)
   $ 250,044     $ 242,653    
Buildings and improvements
     1,825,915       1,706,184    
Furniture, fixtures and equipment
     112,831       87,633    
Construction in progress
     -       63,715    
 
     2,188,790       2,100,185    
Less accumulated depreciation
     (173,820 )     (113,352 )   
Wholly-owned properties, net
   $ 2,014,970     $ 1,986,833    

(1)
The land balance above includes undeveloped land parcels with book values of $27.6 million and $18.2 million as of December 31, 2009 and December 31, 2008, respectively.

8.  On-Campus Participating Properties

The Company is a party to ground/facility lease agreements (“Leases”) with certain state university systems and colleges (each, a “Lessor”) for the purpose of developing, constructing, and operating student housing facilities on university campuses. Under the terms of the Leases, title to the constructed facilities is held by the applicable Lessor and such Lessor receives a de minimus base rent paid at inception and 50% of defined net cash flows on an annual basis through the term of the lease.  The Leases terminate upon the earlier to occur of the final repayment of the related debt, the amortization period of which is contractually stipulated, or the end of the lease term.
 
F-19
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Pursuant to the Leases, in the event the leasehold estates do not achieve Financial Break Even (defined as revenues less operating expenses, excluding management fees, less debt service), the applicable Lessor would be required to make a rental payment, also known as the Contingent Payment, sufficient to achieve Financial Break Even.  The Contingent Payment provision remains in effect until such time as any financing placed on the facilities would receive an investment grade rating without the Contingent Payment provision.  In the event that the Lessor is required to make a Contingent Payment, future net cash flow distributions would be first applied to repay such Contingent Payments and then to unpaid management fees prior to normal distributions.  Beginning in November 1999 and December 2002, as a result of the debt financing on the facilities achieving investment grade ratings without the Contingent Payment provision, the Texas A&M University System is no longer required to make Contingent Payments under either the Prairie View A&M University Village or University College Leases.  The Contingent Payment obligation continues to be in effect for the Texas A&M International University and University of Houston leases.
 
In the event the Company seeks to sell its leasehold interest, the Leases provide the applicable Lessor the right of first refusal of a bona fide purchase offer and an option to purchase the lessee’s rights under the applicable Lease.

In conjunction with the execution of each Lease, the Company has entered into separate five-year agreements to manage the related facilities for 5% of defined gross receipts. The five-year terms of the management agreements are not contingent upon the continuation of the Leases. Upon expiration of the initial five year terms, the agreements continue on a month-to-month basis.

On-campus participating properties are as follows:

           
Historical Cost – December 31,
  
Lessor/University
  
Lease
Commencement
  
Required Debt
Repayment (1)
  
2009
    
2008
  
Texas A&M University System /
Prairie View A&M University (2)
  
2/1/96
  
9/1/23
   $ 38,918     $ 38,732  
Texas A&M University System /
Texas A&M International
  
2/1/96
  
9/1/23
     6,216       6,163  
Texas A&M University System /
Prairie View A&M University (3)
  
10/1/99
  
   8/31/25  /  8/31/28
     24,398       24,191  
University of Houston System /
University of Houston (4)
  
9/27/00
  
8/31/35
     35,192       34,899  
 
      
 
     104,724       103,985  
Less accumulated amortization
             (39,034 )     (34,683 )
On-campus participating properties, net
           $ 65,690     $ 69,302  

(1)  
Represents the effective lease termination date.  The Leases terminate upon the earlier to occur of the final repayment of the related debt or the end of the contractual lease term.
 
(2)  
Consists of three phases placed in service between 1996 and 1998.
 
(3)  
Consists of two phases placed in service in 2000 and 2003.
 
(4)  
Consists of two phases placed in service in 2001 and 2005.
 
9.   Noncontrolling Interests

Third-party joint venture partners:  Effective January 1, 2009, the Company adopted accounting guidance governing the portions of equity (net assets) in subsidiaries that are held by owners other than the parent, referred to as noncontrolling interests (formerly minority interests).  The Company consolidates four joint ventures that own and operate the Callaway House, University Village at Sweet Home, University Centre and Villas at Chestnut Ridge owned-off campus properties.  The portion of net assets attributable to the third-party partners in these joint ventures is classified as “noncontrolling interests” within equity on the accompanying consolidated balance sheets.  Accordingly, the third-party partners’ share of the income or loss of the joint ventures is reported on the consolidated statements of operations as “noncontrolling interests share of net income / loss.”
 
F-20
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Operating Partnership units:  Certain partners in the Operating Partnership hold their ownership through common and preferred units of limited partnership interest, hereinafter referred to as “Common Units” or “Series A Preferred Units.”  Common Units and Series A Preferred Units are exchangeable into an equal number of shares of the Company’s common stock, or, at the Company’s election, cash.  A Common Unit and a share of the Company’s common stock have essentially the same economic characteristics, as they effectively participate equally in the net income and distributions of the Operating Partnership.  Series A Preferred Units have a cumulative preferential per annum cash distribution rate of 5.99%, payable quarterly concurrently with the payment of dividends on the Company’s common stock.

The Company follows accounting guidance stipulating that securities that are redeemable for cash or other assets at a fixed or determinable price on a fixed or determinable date, at the option of the holder, or upon the occurrence of an event that is not solely within the control of the issuer, must be classified outside of permanent equity in the mezzanine section of the consolidated balance sheets.  In accordance with such guidance, management evaluates whether the Company controls the actions or events necessary to issue the maximum number of shares that could be required to be delivered under share settlement of the contract.  Based on this assessment, which includes evaluating terms in the applicable agreements related to redemption provisions, the Company has determined that Common Units and Series A Preferred Units in the Operating Partnership should be classified as “redeemable noncontrolling interests” in the mezzanine section of the consolidated balance sheets.  The value of redeemable noncontrolling interests on the consolidated balance sheets is reported at the greater of fair value or historical cost at the end of each reporting period.  Accordingly, income or loss allocated to these redeemable noncontrolling interests on the Company’s consolidated statements of operations includes the Series A Preferred Unit distributions as well as the pro rata share of the Operating Partnership’s net income or loss allocated to Common Units.

During the years ended December 31, 2009 and 2008, 15,400 and 391,582 Common Units, respectively, were converted into shares of the Company’s common stock.  As of December 31, 2009 and December 31, 2008, approximately 2% and 3%, respectively, of the equity interests of the Operating Partnership was held by owners of Common Units and Series A Preferred Units.
 
10.   Investment in Unconsolidated Joint Ventures

Investments in unconsolidated joint ventures are accounted for utilizing the equity method.  As discussed in Note 2 herein, the equity method is used when the Company has the ability to exercise significant influence over operating and financial policies of the joint venture but does not have control of the joint venture.  Under the equity method, these investments are initially recognized in the balance sheet at cost and are subsequently adjusted to reflect the Company’s proportionate share of net earnings or losses of the joint venture, distributions received, contributions, and certain other adjustments, as appropriate.   When circumstances indicate there may have been a loss in value of an equity method investment, the Company evaluates the investment for impairment by estimating the Company’s ability to recover its investment from future expected discounted cash flows.  If the Company determines the loss in value is other than temporary, the Company recognizes an impairment charge to reflect the investment at fair value. The Company believes that there were no impairments of the carrying values of its equity method investments as of December 31, 2009.

Fidelity Joint Ventures:  Concurrent with the closing of the GMH acquisition, a wholly-owned subsidiary of the Company formed a joint venture with a subsidiary of Fidelity and transferred 15 GMH student housing properties to the venture with an estimated value of $325.9 million.  One property owned by this joint venture was sold in November 2009, resulting in the joint venture owning 14 properties as of December 31, 2009.  The Company also assumed GMH’s equity interest in an existing joint venture with Fidelity that owns six properties.  The Company serves as property manager for all of the joint venture properties and owns a 10% equity interest in these joint ventures (hereinafter referred to collectively as the “Fidelity Joint Ventures”).

The Fidelity Joint Ventures are funded in part with secured third party debt in the amount of $330.4 million.  The Operating Partnership serves as non-recourse, carve-out guarantor of this debt, which means the Operating Partnership is liable to the lender for any loss, damage, cost, expense, liability, claim or other obligation incurred by the lender arising out of or in connection with certain non-recourse exceptions in connection with the debt.  Pursuant to the respective limited liability company agreements, the Fidelity Joint Ventures agreed to indemnify, defend and hold harmless the Operating Partnership with respect to such obligations, except to the extent such obligations were caused by the willful misconduct, gross negligence, fraud or bad faith of the Operating Partnership or its employees, agents or affiliates.  Therefore, the Operating Partnership’s exposure under the guarantees for obligations not caused by the willful misconduct, gross negligence, fraud or bad faith of the Operating Partnership or its employees, agents or affiliates is not expected to exceed the Company’s 10% proportionate interest in the related mortgage debt.
 
F-21
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The Company’s $8.0 million and $9.4 million investment in these two joint ventures at December 31, 2009 and 2008, respectively, is included in other assets in the accompanying consolidated balance sheets, and the Company’s $1.6 million and $1.1 million share in the loss from these two joint ventures for the years December 31, 2009 and 2008, respectively, is included in loss from unconsolidated joint ventures in the accompanying consolidated statements of operations.  For the years ended December 31, 2009 and 2008, the Company earned $2.3 million and $1.3 million, respectively, in property management fees from these joint ventures.  Due to the respective limited liability company agreements not providing for maximum capital commitments from the members, the Company’s maximum exposure to loss stemming from its investment in the Fidelity Joint Ventures could be unlimited.

Hampton Roads Joint Venture:  The Company also holds a noncontrolling equity interest in a joint venture that owns a military housing privatization project with the United States Navy to design, develop, construct, renovate, and manage unaccompanied soldier housing located on naval bases in Norfolk and Newport News, Virginia.  The project is financed through taxable revenue bonds.  The Company’s $0.5 million and $1.0 million investment in this joint venture at December 31, 2009 and 2008, respectively, is included in other assets in the accompanying consolidated balance sheets, and the Company’s share in the loss from this joint venture of $0.5 million, $0.5 million and $0.1 million for the years ended December 31, 2009, 2008 and 2007, respectively, is included in loss from unconsolidated joint ventures in the accompanying consolidated statements of operations.  The Company earned combined development and management fees from this joint venture of $1.2 million, $0.8 million and $2.4 million for the years ended December 31, 2009, 2008 and 2007, respectively.

11.  Debt

A summary of the Company’s outstanding consolidated indebtedness, including unamortized debt premiums and discounts, is as follows:

   
December 31,
  
   
2009
    
2008
  
Debt secured by wholly-owned properties:
            
  Mortgage loans payable
   $ 850,046     $ 955,847  
  Construction loans payable
     100,000       124,819  
      950,046       1,080,666  
Debt secured by on-campus participating properties:
                
  Mortgage loan payable
     32,718       32,991  
  Bonds payable
     51,390       53,275  
      84,108       86,266  
Senior secured term loan
     100,000       100,000  
Secured revolving credit facility
     -       14,700  
Secured agency facility
     94,000       -  
Unamortized debt premiums
     3,765       5,682  
Unamortized debt discounts
     (8,464 )     (10,393 )
Total debt
   $ 1,223,455     $ 1,276,921  
 
F-22

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
During the twelve months ended December 31, 2009, the following transactions occurred:

   
Year Ended
December 31, 2009
  
Balance, beginning of period
   $ 1,276,921  
Additions:
        
   Draws on secured revolving credit facility
     115,405  
   Draws on secured agency facility
     94,000  
   Draws under advancing construction loans
     5,334  
Deductions:
        
   Pay down of secured revolving credit facility
     (130,105 )
   Pay off of maturing mortgage and construction loans
     (110,949 )
   Pay off of mortgage loan in connection with property disposition
     (16,140 )
   Scheduled repayments of principal
     (10,963 )
   Amortization of debt premiums and discounts
     (48 )
    $ 1,223,455  
 
Loans Assumed or Entered Into in Conjunction with Property Acquisitions

In connection with the June 11, 2008 acquisition of GMH’s student housing business (see Note 5), the Company assumed approximately $608.2 million of fixed-rate mortgage debt.  At the time of assumption, the debt had a weighted average annual interest rate of 5.43% and an average term to maturity of 6.2 years.  Upon assumption of this debt, the Company recorded debt discounts and debt premiums of approximately $11.8 million and $2.3 million, respectively, to reflect the estimated fair value of the debt assumed.  These mortgage loans are secured by liens on the related properties.

In connection with the February 2008 acquisition of Pirate’s Place (see Note 5), a wholly-owned property, the Company assumed approximately $7.0 million of fixed-rate mortgage debt with an annual interest rate of 7.15% and January 2023 maturity date.  Upon assumption of this debt, the Company recorded a debt premium of approximately $0.3 million, to reflect the estimated fair value of the debt assumed.  This mortgage loan is secured by a lien on the related property.

In connection with the January 2007 acquisition of Village on Sixth (see Note 5), a wholly-owned property, the Company assumed approximately $17.6 million of fixed-rate mortgage debt, which is comprised of one $16.2 million mortgage loan with an annual interest rate of 5.5% and May 2014 maturity date, and a second mortgage loan for $1.4 million with an annual interest rate of 6.6% and October 2016 maturity date.  Upon assumption of this debt, the Company recorded a debt discount of approximately $0.3 million on the $16.2 million mortgage loan and a debt premium of approximately $0.1 million on the $1.4 million mortgage loan, in each case to reflect the estimated fair value of the debt assumed.  These mortgage loans are secured by liens on the related properties.
 
In connection with the February 2007 acquisition of the Edwards Portfolio (see Note 5), the Company assumed approximately $70.7 million in fixed-rate mortgage debt.  At the time of assumption, the debt had a weighted average annual interest rate of 5.7% and an average remaining term to maturity of 8.3 years.  Upon assumption of these three loans, the Company recorded debt premiums of approximately $0.1 million to reflect the estimated fair value of the debt assumed.  These three mortgage loans are secured by liens on the related properties.

Secured Revolving Credit Facility

In August 2009, the Operating Partnership renewed its revolving credit facility and increased the size of the facility from $160 million to $225 million.  The facility may be expanded by up to an additional $75 million upon the satisfaction of certain conditions.  The maturity date of the facility is August 14, 2012 and can be extended 12 months through August 2013.  The facility is currently secured by seven of the Company’s wholly-owned properties.
 
Availability under the revolving credit facility is limited to an “aggregate borrowing base amount” equal to the lesser of (i) 50% to 65% of the value of certain properties, calculated as set forth in the credit facility, and (ii) the adjusted net operating income from these properties divided by a formula amount.  The facility bears interest at a variable rate, at the Company’s option, based upon a base rate or one-, two-, or three-month LIBOR, with a LIBOR floor of 2.0%, plus, in each case, a spread based upon the Company’s total leverage.  Additionally, the Company is required to pay an unused commitment fee of 0.35% per annum.  In September 2009, the Company paid off the entire balance on the revolving credit facility using proceeds from the secured agency facility discussed below.  As of December 31, 2009, availability under the facility totaled $155.0 million.
 
F-23
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The terms of the facility include certain restrictions and covenants, which limit, among other items, the incurrence of additional indebtedness, liens, and the disposition of assets. The facility contains customary affirmative and negative covenants and also contains financial covenants that, among other things, require the Company to maintain certain minimum ratios of “EBITDA” (earnings before interest, taxes, depreciation and amortization) to fixed charges and total indebtedness.  The Company may not pay distributions that exceed a specified percentage of funds from operations, as adjusted, for any four consecutive quarters.  The financial covenants also include consolidated net worth and leverage ratio tests.  As of December 31, 2009, the Company was in compliance with all such covenants.
 
Secured Agency Facility

In September 2009, the Company closed a $125 million secured revolving credit facility with a Freddie Mac lender.  The facility has a five-year term and is currently secured by 11 properties referred to as the “Collateral Pool.”  The facility bears interest at one- or three-month LIBOR plus a spread that varies based on the debt service ratio of the Collateral Pool.  Additionally, the Company is required to pay an unused commitment fee of 1.0% per annum.  As of December 31, 2009, the balance outstanding on the secured agency facility totaled $94.0 million, bearing interest at a weighted average rate of 2.2%.  The secured agency facility includes certain financial covenants which are the same as are required for the secured revolving credit facility, described above.

Senior Secured Term Loan

On May 23, 2008, the Operating Partnership obtained a $100 million senior secured term loan.  The secured term loan has an initial term of 36 months and can be extended through May 2012 through the exercise of a 12-month extension period.  The secured term loan bears interest at a variable rate, at the Company’s option, based upon a base rate or one-, two-, three-, or six-month LIBOR plus, in each case, a spread based upon the Company’s total leverage.  On June 11, 2008, the Operating Partnership borrowed in full from the secured term loan and used the proceeds to fund a portion of the total cash consideration for the GMH acquisition.  As of December 31, 2009, the balance outstanding on the secured term loan was $100 million.  The Company guarantees the Operating Partnership’s obligations under the secured term loan.  The secured term loan includes the same restrictions and covenants as the secured revolving credit facility, described above.

On February 23, 2009, the Company entered into two $50.0 million interest rate swap agreements effective March 20, 2009 through February 20, 2012, which are both used to hedge the Company’s exposure to fluctuations in interest payments on its LIBOR-based senior secured term loan.  Under the terms of the two interest rate swap agreements, the Company pays an average fixed rate of 1.7925% and receives a one-month LIBOR floating rate.  As a result of these two interest rate swaps, the Company effectively fixed the interest rate on its senior secured term loan to 3.55% as of December 31, 2009 (1.7925% + 1.75% spread).  In the event that the swaps at any time have a negative fair value below a certain threshold level, the Company is required to post cash into a collateral account pledged to the interest rate swap providers.  As of December 31, 2009, the Company had deposited approximately $0.7 million into a collateral account related to one of the interest rate swaps.  See Note 14 herein for a more detailed discussion of the Company’s derivative instruments and hedging activities.

Construction Loans and Mortgage Notes Payable

Construction loans and mortgage notes payable at December 31, 2009, excluding debt premiums and discounts, consisted of 62 loans secured by wholly-owned properties and on-campus participating properties consisting of:

 
Property
  
Principal
Outstanding (1)
          
Interest Rate at
December 31, 2009
    
 
Maturity Date
      
Amortization
Cullen Oaks – Phase I (2)
   $ 16,275             6.69 %  (3)  
February 2014
      
30 years
  
Cullen Oaks – Phase II (2)
     16,443             6.69 %  (3)
February 2014
      
30 years
  
University Village at Boulder Creek
     15,248             5.71 %    
November 2012
      
30 years
  
River Club Apartments
     17,430             8.18 %    
August 2010
      
30 years
  
The Village at Alafaya Club
     19,237             8.16 %    
August 2010 (4)
  
30 years
  
University Club Tallahassee
     12,867             7.99 %    
October 2010
      
30 years
  
The Grove at University Club Tallahassee
     4,068             5.75 %    
March 2013
      
30 years
  
College Club Tallahassee
     8,327             6.74 %    
December 2011
      
30 years
  
The Estates
     36,218             5.20 %    
June 2015
      
30 years
  
The Village at Blacksburg
     19,926             7.50 %    
January 2011
      
30 years
  
The Woods at Greenland
     5,819             5.69 %    
October 2012
      
30 years
  
Raiders Crossing
     6,248             6.18 %    
December 2012
      
30 years
  
 
F-24
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Property
  
Principal
Outstanding(1)
          
Interest Rate at
December 31, 2009
    
Maturity Date
      
Amoritzation
Entrada Real
     9,143             5.61 %    
November 2012
      
30 years
  
The Outpost San Marcos
     13,013             5.74 %    
October 2013
      
30 years
  
The Outpost San Antonio
     22,945             4.99 %    
October 2014
      
30 years
  
City Parc at Fry Street
     10,957             5.96 %    
September 2014
      
30 years
  
Raiders Pass  - Phase I
     14,838             5.91 %    
October 2012
      
30 years
  
Raiders Pass – Phase II
     3,649             5.66 %    
October 2012
      
30 years
  
The Callaway House
     18,340             7.10 %    
April 2011
      
30 years
  
Aggie Station
     10,988             5.96 %    
October 2012
      
30 years
  
Village on Sixth – Phase I
     15,444             5.48 %    
May 2014
      
30 years
  
Village on Sixth – Annex
     1,376             6.63 %    
October 2016
      
30 years
  
Newtown Crossing
     31,138             5.65 %    
June 2015
      
30 years
  
Olde Town University Square
     20,159             5.65 %    
June 2015
      
30 years
  
Peninsular Place
     16,563             5.65 %    
June 2015
      
30 years
  
Vista del Sol
     100,000    (5)         1.45 %    
December 2010
       n/a  
Pirate’s Place
     6,495               7.15 %    
January 2023
      
30 years
  
Jacob Heights I
     3,850               5.54 %    
February 2016
      
Interest only
  
Jacob Heights III
     2,948               6.19 %    
August 2016
      
Interest only
  
The Summit
     23,825               5.60 %    
March 2017
      
Interest only
  
GrandMarc – Seven Corners
     18,020               5.19 %    
June 2014
      
30 years
  
University Village – Sacramento
     14,740               5.32 %    
February 2016
      
Interest only
  
Aztec Corner
     28,600               5.97 %    
August 2016
      
30 years
  
University Crossings
     33,201               5.42 %    
November 2013
      
30 years
  
University Crossings - Annex
     8,108               5.90 %    
November 2013
      
30 years
  
Campus Corner
     22,266               5.84 %    
November 2016
      
Interest only
  
Tower at 3rd
     14,491               4.96 %    
September 2015
      
Interest only
  
University Mills
     8,806               4.92 %    
August 2014
      
30 years
  
University Manor
     14,233               4.92 %    
August 2014
      
30 years
  
Brookstone Village
     4,141               5.38 %    
February 2016
      
Interest only
  
Campus Walk – Wilmington
     6,700               5.00 %    
September 2015
      
Interest only
  
Cambridge at Southern
     18,388               5.78 %    
December 2016
      
Interest only
  
Campus Club – Statesboro
     18,811               4.24 %    
March 2010
      
Interest only
  
University Pines
     11,036               6.95 %    
June 2013
      
30 years
  
Lakeside
     14,100               5.84 %    
November 2016
      
Interest only
  
The Edge
     29,914               5.22 %    
January 2011
      
Interest only
  
Southview
     18,918               4.56 %    
June 2015
      
Interest only
  
Stonegate
     14,264               4.56 %    
June 2015
      
Interest only
  
The Commons
     5,569               5.60 %    
April 2024
      
30 years
  
University Gables
     13,925               6.95 %    
June 2013
      
30 years
  
The Enclave I
     9,762               4.92 %    
August 2014
      
30 years
  
Hawks Landing
     15,600               5.84 %    
November 2016
      
Interest only
  
Willowtree Apartments
     13,441               7.09 %    
October 2011
      
30 years
  
Willowtree Towers
     6,576               7.09 %    
October 2011
      
30 years
  
Abbott Place
     17,850               5.84 %    
November 2016
      
Interest only
  
University Centre – Kalamazoo
     19,875               5.60 %    
March 2017
      
Interest only
  
University Meadows
     9,633               4.92 %    
October 2015
      
Interest only
  
Campus Way
     15,375               5.84 %    
November 2016
      
Interest only
  
Campus Walk – Oxford
     8,133               4.70 %    
March 2012
      
Interest only
  
Campus Trails
     7,486               5.84 %    
November 2016
      
Interest only
  
University Pointe
     21,300               5.28 %    
October 2015
      
Interest only
  
University Trails
     15,725               4.24 %    
March 2010
      
Interest only
  
Total
   $  982,764    
Wtd Avg Rate
       5.36 %                

(1)  
For federal income tax purposes, the aggregate cost of the loans is equal to the carrying amount.
 
(2)  
Both loans bear interest at a rate of LIBOR plus 1.35%.
 
(3)  
The floating rate on both loans was swapped to a fixed rate of 6.69%.  This interest rate swap terminates in February 2014, at which time the interest rate will revert back to a variable rate.  The TRS has guaranteed payment of the indebtedness of the Phase I loan and the indebtedness of the Phase II loan, up to a limit of $4.0 million of loan principal plus interest and litigation fees potentially incurred by the lender.  This guaranty will remain in effect until the balance on the loan is paid in full.
 
F-25
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(4)  
Represents the Anticipated Repayment Date, as defined in the loan agreement.  If the loan is not repaid on the Anticipated Repayment Date, then certain monthly payments including excess cash flow, as defined, become due through the maturity date of August 2030.
 
(5)  
For each borrowing on the construction loan, the Company has the option of choosing Prime rate or one-, two-, or three-month LIBOR plus 1.20%.  The loan can be extended through December 2011 through the exercise of a 12-month extension period.
 
Bonds Payable

Bonds payable consist of three issues secured by student housing ground/facility leases, with interest and principal paid semi-annually and annually, respectively, through maturity. Covenants include, among other items, budgeted and actual debt service coverage ratios. The bonds are nonrecourse to the Company. Payment of regularly scheduled principal payments is guaranteed by MBIA Insurance Corporation. Bonds payable at December 31, 2009 consisted of the following:

             
Principal
    
Weighted
        
Required
  
 
Series
  
Mortgaged Facilities
Subject to Leases
  
Original
    
December 31,
2009
    
Average
Rate
    
Maturity Date
  
Monthly
Debt Service
  
1999
  
 University Village-
   PVAMU/TAMIU
   $ 39,270     $ 30,345       7.70 %  
September 2023
   $ 302  
2001
  
University College–PVAMU
     20,995       17,320       7.45 %  
August 2025
     158  
2003
  
University College–PVAMU
     4,325       3,725       5.97 %  
August 2028
     28  
   
Total/weighted average rate
   $ 64,590     $ 51,390       7.49 %       $ 488  

Schedule of Debt Maturities

Scheduled debt maturities (reflecting automatic extensions where applicable) for each of the five years subsequent to December 31, 2009 and thereafter, are as follows:

   
Scheduled
Principal
    
Due at
Maturity
    
Total
  
2010
   $ 10,975     $ 183,577     $ 194,552  
2011
     10,409       194,875       205,284  
2012
     10,398       70,242       80,640  
2013
     9,302       77,509       86,811  
2014
     7,217       216,283       223,500  
Thereafter
     49,804       387,563       437,367  
    $ 98,105     $ 1,130,049     $ 1,228,154  

The $183.6 million of debt scheduled to mature in 2010 is comprised of a $100.0 million construction loan which can be extended through December 2011 through the exercise of a 12-month extension, and $83.6 million of fixed-rate mortgage debt that we expect to pay-off on or before their respective maturity dates.

Payment of principal and interest were current at December 31, 2009.  Mortgage notes and bonds payable are subject to prepayment penalties.

12.  Incentive Award Plan

The Company has adopted the 2004 Incentive Award Plan (the “Plan”).  The Plan provides for the grant of various stock-based incentive awards to selected employees and directors of the Company and the Company’s affiliates.  The Company has reserved a total of 1,210,000 shares of the Company’s common stock for issuance pursuant to the Plan, subject to certain adjustments for changes in the Company’s capital structure, as defined in the Plan.  As of December 31, 2009, 354,560 shares were available for issuance under the Plan.

F-26

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
Restricted Stock Units

Upon initial appointment to the Board of Directors and reelection to the Board of Directors at each Annual Meeting of Stockholders, each outside member of the Board of Directors is granted restricted stock units (“RSUs”).  For all 2006 and 2007 RSU grants, no shares of stock were issued at the time of the RSU awards, and the Company was not required to set aside a fund for the payment of any such award; however, the stock was deemed to be awarded on the date of grant.  Upon the Settlement Date, which is three years from the date of grant, the Company will deliver to the recipients a number of shares of common stock or cash, as determined by the Compensation Committee of the Board of Directors, equal to the number of RSUs held by the recipients.  In addition, recipients of RSUs are entitled to dividend equivalents equal to the cash distributions paid by the Company on one share of common stock for each RSU issued, payable currently or on the Settlement Date, as determined by the Compensation Committee of the Board of Directors.

Upon reelection to the Board of Directors in May 2009, the Chairman of the Board of Directors was granted RSUs valued at $51,500 and the remaining outside members were each granted RSUs valued at $41,500.  The number of RSUs was determined based on the fair market value of the Company’s stock on the date of grant, as defined in the Plan.  All awards vested and settled immediately on the date of grant, and the Company delivered shares of common stock and cash, as determined by the Compensation Committee of the Board of Directors.

A summary of the Company’s RSUs under the Plan for the three years ended December 31, 2009 and changes during the two years ended December 31, 2009, are presented below:
   
Number of
RSUs
    
Weighted-Average
Grant Date Fair Value
Per RSU
  
Outstanding at December 31, 2007
     18,786     $ 24.50  
Granted
     7,831       30.34  
Settled in common shares
     (11,897 )     25.82  
Settled in cash
     (3,164 )     25.43  
Outstanding at December 31, 2008
     11,556       26.83  
Granted
     11,870       21.82  
Settled in common shares
     (8,594 )     22.89  
Settled in cash
     (9,456 )     22.46  
Outstanding at December 31, 2009
     5,376     $ 29.77  

The RSUs are fully vested on the date of grant.  Accordingly, the Company recognized expense of approximately $0.3 million for the year ended December 31, 2009 and $0.2 million for each of the years ended December 31, 2008 and 2007, respectively, reflecting the fair value of the RSUs issued on the date of grant.  The weighted-average grant-date fair value for each RSU granted during the year ended December 31, 2007 was $29.77.

Restricted Stock Awards

The Company awards restricted stock awards (“RSAs”) to its executive officers and certain employees that vest in equal annual installments over a five year period.  Unvested awards are forfeited upon the termination of an individual’s employment with the Company under specified circumstances.  Recipients of RSAs receive dividends, as declared by the Company’s Board of Directors, on unvested shares, provided that the recipient continues to be employed by the Company.  A summary of the Company’s RSAs under the Plan for the three years ended December 31, 2009 and changes during the two years ended December 31, 2009, are presented below:

   
Number of
RSAs
    
Weighted-Average
Grant Date Fair Value
Per RSA
  
Nonvested balance at December 31, 2007
     178,921     $ 27.64  
Granted
     151,492       27.62  
Vested
     (32,353 )     26.54  
Forfeited
     (15,652 )     26.97  
Nonvested balance at December 31, 2008
     282,408       27.79  
Granted
     256,650       21.13  
Vested
     (50,210 )     27.46  
Forfeited
     (26,913 )     26.28  
Nonvested balance at December 31, 2009
     461,935     $ 24.21  
 
F-27
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The weighted-average grant date fair value for each RSA granted and forfeited during the year ended December 31, 2007 was $30.21 and $25.68, respectively.  The Company recognizes the value of these awards as an expense over the vesting periods, which amounted to approximately $2.7 million, $1.9 million and $1.1 million for the years ended December 31, 2009, 2008 and 2007, respectively.

The total fair value of RSAs vested during the year ended December 31, 2009, was approximately $0.9 million.  Additionally, as of December 31, 2009, the Company had approximately $8.6 million of total unrecognized compensation cost related to these RSAs, which is expected to be recognized over a remaining weighted-average period of 3.5 years.

Common Units

The Outperformance Bonus Plan was adopted upon consummation of the Company’s IPO in August 2004, and consisted of awards to key employees equal to the value of 367,682 shares of the Company’s common stock.  Such awards vested on the third anniversary of the IPO (August 2007), upon the Company’s achievement of specified performance measures.  Upon vesting, the Compensation Committee of the Board of Directors exercised its permitted discretion and granted 132,400 of the awards to selected recipients in the form of profits interest units (“PIUs”) of the Operating Partnership, with the remainder of the awards paid in cash in the amount of $6.7 million.  During the year ended December 31, 2007, the Company recorded a compensation charge of approximately $10.4 million to reflect the value of such awards.  As a result of the October 2007 equity offering discussed in Note 2, a book-up event occurred for tax purposes, resulting in the 132,400 PIUs being converted to Common Units.

Each common unit is deemed equivalent to one share of the Company’s common stock.  Common units receive the same quarterly per unit distribution as the per share distributions on the Company’s common stock.

13.  Preferred Stock

As part of the Company’s acquisition of GMH’s student housing business, the Company acquired the GMH REIT, an entity that elected to be taxed as a REIT under the Code.  In order to ensure that the entity met certain organizational requirements, on the Merger date the entity issued 131 shares of 15% Series A Cumulative Non-voting Preferred Stock.  Holders of Series A Preferred Stock were entitled to receive, when and as authorized by the Company’s Board of Directors, cumulative preferential cash dividends at the rate of 15% per annum of the total of $1,000 per share plus all accumulated and unpaid dividends thereon.  On December 31, 2008, as contemplated as part of the merger transactions, the Company converted the GMH REIT into a Delaware limited liability company, at which time the preferred shares were redeemed at a redemption price of $1,200 per share, including a redemption premium of $200 per share.

14.  Derivatives Instruments and Hedging Activities

The Company is exposed to certain risk arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities.  The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments.  Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.  To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 
 
F-28
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income (Loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.  During the year ended December 31, 2009, such derivatives were used to hedge the variable cash flows associated with the Company’s $100 million senior secured term loan and the Cullen Oaks Phase I and Phase II loans.

The following table summarizes the Company’s outstanding interest rate swap contracts as of December 31, 2009:

 
Date Entered
 
Effective Date
Maturity
Date
 
Pay Fixed Rate
Receive Floating
 Rate Index
Notional
Amount
 
Fair Value
Feb. 12, 2007
Feb. 15, 2007
Feb. 15, 2014
6.689%
LIBOR – 1 mo. plus 1.35%
$          33,156
$       (3,504)
Feb. 23, 2009
March 20, 2009
Feb. 20, 2012
1.785%
LIBOR – 1 month
            50,000
            (419)
Feb. 23, 2009
March 20, 2009
Feb. 20, 2012
1.800%
LIBOR – 1 month
            50,000
            (433)

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2009 and December 31, 2008:

 
Derivative Liabilities as of
  
 
December 31, 2009
    
December 31, 2008
  
 
Balance Sheet
Location
  
Fair Value
    
Balance Sheet
Location
    
Fair Value
  
 
Interest rate swap contracts
 
Other liabilities
   $ 4,356    
 
Other Liabilities
     $ 5,117  
Total derivatives designated as hedging instruments
     $ 4,356           $ 5,117  

The tables below present the effects of the Company’s derivative financial instruments on other comprehensive income (“OCI”) and the consolidated statements of operations for the years ended December 31, 2009, 2008 and 2007:
 
     
Amount of Income (Loss) Recognized in OCI on Derivative
(Effective Portion)
  
     
Year Ended December 31,
  
Cash Flow Hedging
Relationships		    
2009
    
2008
    
2007
  
 
Interest rate swap contracts
     $ 761     $ (3,031 )   $ (2,075 )
 
Total
     $ 761     $ (3,031 )   $ (2,075 )

Location of Gain
Reclassified from
Accumulated OCI Into
Income		    
Amount of Gain Reclassified from Accumulated OCI Into
Income (Effective Portion)
  
    Year Ended December 31,  
       
   
2009
    
2008
    
2007
  
 
Interest  expense
     $ -     $ 211     $ 211  
 
Total
     $ -     $ 211     $ 211  

15.   Fair Value Disclosures

The following table presents information about the Company’s liabilities measured at fair value on a recurring basis as of December 31, 2009, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.  In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities the Company has the ability to access.  Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices observable for the asset or liability, such as interest rates and yield curves observable at commonly quoted intervals.  Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
 
F-29
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
In instances in which the inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input significant to the fair value measurement in its entirety.  The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Disclosures concerning assets and liabilities measured at fair value are as follows:

   
Liabilities Measured at Fair Value on a Recurring Basis
 
  
   
Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
    
 
Significant Other
Observable Inputs
(Level 2)
    
 
Significant
Unobservable
Inputs (Level 3)
    
 
 
Balance at
December 31, 2009
  
                         
Derivative financial instruments
   $ -     $ 4,356     $ -     $ 4,356  

The Company uses derivative financial instruments, specifically interest rate swaps, for nontrading purposes.  The Company uses interest rate swaps to manage interest rate risk arising from previously unhedged interest payments associated with variable rate debt.  Through December 31, 2009, derivative financial instruments were designated and qualified as cash flow hedges.  Derivative contracts with positive net fair values inclusive of net accrued interest receipts or payments, are recorded in other assets.  Derivative contracts with negative net fair values, inclusive of net accrued interest payments or receipts, are recorded in other liabilities.  The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative.  This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.  The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

The Company incorporates credit valuation adjustments to appropriately reflect its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds and guarantees.

Although the Company has determined the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustment associated with its derivative utilizes Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparty.  However, as of December 31, 2009, the Company has assessed the significance of the impact of the credit valuation adjustment on the overall valuation of its derivative position and has determined that the credit valuation adjustment is not significant to the overall valuation of the Company’s derivative.  As a result, the Company has determined its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

Other Fair Value Disclosures

Cash and Cash Equivalents, Restricted Cash, Student Contracts Receivable, Other Assets, Account Payable and Accrued Expenses and Other Liabilities:  The Company estimates that the carrying amount approximates fair value, due to the short maturity of these instruments.

Derivative Instruments: These instruments are reported on the balance sheet at fair value, which is based on calculations provided by independent, third-party financial institutions and represent the discounted future cash flows expected, based on the projected future interest rate curves over the life of the instrument.
 
F-30
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Senior Secured Term Loan, Secured Credit Facilities and Construction Loans: the fair value of the Company’s secured term loan, secured credit facilities and construction loans approximate carrying values due to the variable interest rate feature of these instruments.

Mortgage Loans: the fair value of mortgage loans is based on the present value of the cash flows at current rates through maturity.

Bonds Payable: the fair value of bonds payable is based on market quotes for bonds outstanding.

The table below contains the estimated fair value and related carrying amounts for the Company’s mortgage loans and bonds payable as of December 31, 2009 and December 31, 2008:

   
December 31, 2009
    
December 31, 2008
  
   
Fair Value
    
Carrying Amount
    
Fair Value
    
Carrying Amount
  
Mortgage loans
   $ 912,332     $ 878,065     $ 1,000,105     $ 984,127  
Bonds payable
     49,865       51,390       52,814       53,275  

16.  Lease Commitments

The Company entered into a 65-year ground/facility lease agreement on October 30, 2007 for the purpose of constructing Barrett Honors College, a student housing facility on the campus of Arizona State University in Tempe, Arizona.  The agreement will terminate on the 65th anniversary date of the opening date (August 2074) and has two ten year extensions available.  During the first ten years, under the terms of the ground lease, the lessor will receive annual minimum rents of approximately $0.3 million.  For the remaining years of the lease, the lessor will receive variable rent payments based upon the operating performance of the property.  Straight-lined rental amounts were capitalized during the construction period and expensed upon the commencement of operations in August 2009.  Rent expense under this agreement was approximately $14,000 for the year ended December 31, 2009.

The Company entered into a 65-year ground/facility lease agreement on December 22, 2006 for the purpose of constructing Vista del Sol, a student housing facility on the campus of Arizona State University in Tempe, Arizona.  The agreement will terminate on the 65th anniversary date of the opening date (August 2073) and has two ten year extensions available.  During the first five years, under the terms of the ground lease, the lessor will receive annual minimum rents of approximately $0.7 million and variable rent payments based upon the operating performance of the property.  For the remaining years of the lease, the lessor will receive variable rent payments based upon the operating performance of the property.  Straight-lined rental amounts were capitalized during the construction period and expensed upon the commencement of operations in August 2008.  Rent expense under this agreement was approximately $1.0 million and $0.4 million for the years ended December 31, 2009 and 2008, respectively.

The Company entered into a 95-year ground lease agreement on August 3, 2005 for the purpose of constructing University Centre, a student housing facility near the campuses of Rutgers University and the New Jersey Institute of Technology in Newark, New Jersey.  The agreement terminates in July 2102 with no extensions or renewals available.  Under the terms of the ground lease, the lessor receives escalating annual rents ranging from $0.1 million to $0.4 million and contingent rental payments based upon the operating performance of the property.  Straight-lined rental amounts were capitalized during the construction period and expensed upon the commencement of operations in August 2007.  Rent expense under the ground lease agreement was approximately $0.3 million for each of the years ended December 31, 2009 and 2008 and $0.1 million for the year ended December 31, 2007.

The Company entered into a ground lease agreement on October 2, 2003 for the purpose of constructing a student housing facility near the campus of Temple University in Philadelphia, Pennsylvania.  The agreement terminates June 30, 2079 and has four six year extensions available.  Under the terms of the ground lease, the lessor receives annual minimum rents of $0.1 million and contingent rental payments which are based upon the operating performance of the property.  The contingent rental payment was approximately $0.1 million for each of the years ended December 31, 2009, 2008 and 2007.

The Company is a party to a sublease for corporate office space beginning August 15, 2002, and expiring December 31, 2010. The Company is also party to a lease for corporate office space beginning June 19, 2008, and expiring July 31, 2013. The terms of the sublease and lease provide for a period of free rent and scheduled rental rate increases and common area maintenance charges upon expiration of the free rent period.
 
F-31
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The Company also has various operating and capital leases for furniture, office and technology equipment, which expire through 2014.  Rental expense under the operating lease agreements approximated $2.2 million, $1.4 million and $0.8 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Wholly-owned properties, net at December 31, 2009 included approximately $3.5 million related to capital leases of furniture, net of approximately $1.8 million of accumulated amortization.  Other assets at December 31, 2009 included approximately $150,000 related to corporate assets under capital leases, net of approximately $130,000 of accumulated amortization.
Future minimum commitments over the life of all leases subsequent to December 31, 2009, are as follows:

   
Operating
    
Capital
  
2010
   $ 1,902     $ 1,053  
2011
     1,530       826  
2012
     1,531       439  
2013
     771       148  
2014
     661       99  
Thereafter
     38,844       -  
Total minimum lease payments
     45,239       2,565  
Amount representing interest
     -       (251 )
Balance of minimum lease payments
   $ 45,239     $ 2,314  

The capital lease obligations are reflected in other liabilities in the accompanying consolidated balance sheets and amortization of assets recorded under capital leases is included in depreciation expense.

17.  Commitments and Contingencies

Commitments

Development-related guarantees: For its third-party development projects, the Company commonly provides alternate housing and project cost guarantees, subject to force majeure.  These guarantees are typically limited, on an aggregate basis, to the amount of the projects’ related development fees or a contractually agreed-upon maximum exposure amount.  Alternate housing guarantees typically expire five days after construction is complete and generally require the Company to provide substitute living quarters and transportation for students to and from the university if the project is not complete by an agreed-upon completion date.  Under project cost guarantees, the Company is responsible for the construction cost of a project in excess of an approved budget.   The budget consists primarily of costs included in the general contractors’ guaranteed maximum price contract (“GMP”).  In most cases, the GMP obligates the general contractor, subject to force majeure and approved change orders, to provide completion date guarantees and to cover cost overruns and liquidated damages.  In addition, the GMP is typically secured with payment and performance bonds.  Project cost guarantees expire upon completion of certain developer obligations, which are normally satisfied within one year after completion of the project.

In the normal course of business, the Company enters into various development-related purchase commitments with parties that provide development-related goods and services.  In the event that the Company was to terminate development services prior to the completion of projects under construction, the Company could potentially be committed to satisfy outstanding purchase orders with such parties.  At December 31, 2009, management did not anticipate any material deviations from schedule or budget related to third-party development projects currently in progress. 

Guaranty of Joint Venture Mortgage Debt: As mentioned in Note 10, the Fidelity Joint Ventures are funded in part with secured third party debt in the amount of $330.4 million.  The Operating Partnership serves as non-recourse, carve-out guarantor of this debt, which means the Operating Partnership is liable to the lender for any loss, damage, cost, expense, liability, claim or other obligation incurred by the lender arising out of or in connection with certain non-recourse exceptions in connection with the debt.  Pursuant to the respective limited liability company agreements, the Fidelity Joint Ventures agreed to indemnify, defend and hold harmless the Operating Partnership with respect to such obligations, except to the extent such obligations were caused by the willful misconduct, gross negligence, fraud or bad faith of the Operating Partnership or its employees, agents or affiliates.  Therefore, the Operating Partnership’s exposure under the guarantees for obligations not caused by the willful misconduct, gross negligence, fraud or bad faith of the Operating Partnership or its employees, agents or affiliates is not expected to exceed the Company’s 10% proportionate interest in the related mortgage debt.
 
F-32
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The Company has estimated the fair value of guarantees entered into to be immaterial.  The Company’s estimated maximum exposure amount under the above guarantees is approximately $340.0 million.

Contingencies

Litigation:  In the normal course of business, the Company is subject to claims, lawsuits, and legal proceedings.  While it is not possible to ascertain the ultimate outcome of such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

Letters of Intent:  In the ordinary course of the Company’s business, the Company enters into letters of intent indicating a willingness to negotiate for acquisitions, dispositions or joint ventures.  Such letters of intent are non-binding, and neither party to the letter of intent is obligated to pursue negotiations unless and until a definitive contract is entered into by the parties.  Even if definitive contracts are entered into, the letters of intent relating to the acquisition and disposition of real property and resulting contracts generally contemplate that such contracts will provide the acquirer with time to evaluate the property and conduct due diligence, during which periods the acquiror will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money.  There can be no assurance that definitive contracts will be entered into with respect to any matter covered by letters of intent or that the Company will consummate any transaction contemplated by any definitive contract.  Furthermore, due diligence periods for real property are frequently extended as needed.  Once the due diligence period expires, the Company is then at risk under a real property acquisition contract, but only to the extent of any earnest money deposits associated with the contract.
 
Environmental Matters:  The Company is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Company’s business, assets or results of operations. However, there can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Company’s results of operations and cash flows.

18.   Segments

The Company defines business segments by their distinct customer base and service provided.  The Company has identified four reportable segments: Wholly-Owned Properties, On-Campus Participating Properties, Development Services, and Property Management Services.  Management evaluates each segment’s performance based on operating income before depreciation, amortization, minority interests and allocation of corporate overhead.  Intercompany fees are reflected at the contractually stipulated amounts.
 
F-33
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   
Year Ended December 31,
  
   
2009
    
2008
    
2007
  
Wholly-Owned Properties
                  
Rental revenues
   $ 273,053     $ 197,037     $ 117,858  
Interest and other income
     42       113       324  
Total revenues from external customers
     273,095       197,150       118,182  
Operating expenses before depreciation, amortization, ground/facility
   lease, and allocation of corporate overhead
      134,267       101,246        54,411  
Ground/facility leases
     1,021       376       -  
Interest expense
     53,990       43,741       24,226  
Other nonoperating income
     402       486       -  
Operating income before depreciation, amortization and allocation of
   corporate overhead
   $ 84,219     $ 52,273     $ 39,545  
Depreciation and amortization
   $ 70,479     $ 51,558     $ 25,648  
Capital expenditures
   $ 114,729     $ 142,796     $ 142,265  
Total segment assets at December 31,
   $ 2,093,638     $ 2,060,591     $ 978,275  
 
On-Campus Participating Properties
                        
Rental revenues
   $ 22,727     $ 22,042     $ 20,966  
Interest and other income
     42       206       359  
Total revenues from external customers
     22,769       22,248       21,325  
Operating expenses before depreciation, amortization,
   ground/facility lease, and allocation of corporate overhead
      9,650        10,073        8,701  
Ground/facility lease
     1,086       1,402       1,622  
Interest expense
     6,183       6,166       6,226  
Operating income before depreciation, amortization
   and allocation of corporate overhead
   $ 5,850     $ 4,607     $ 4,776  
Depreciation and amortization
   $ 4,350     $ 4,322     $ 4,263  
Capital expenditures
   $ 739     $ 719     $ 480  
Total segment assets at December 31,
   $ 78,718     $ 83,946     $ 85,708  
 
Development Services
                        
Development and construction management fees from
   external customers
   $ 5,015     $ 7,922     $ 5,490  
Intersegment revenues
     -       2,502       -  
Total revenues
     5,015       10,424       5,490  
Operating expenses
     8,590       9,471       5,588  
Operating (loss) income before depreciation, amortization
   and allocation of corporate overhead
   $ (3,575 )   $ 953     $ (98 )
Total segment assets at December 31,
   $ 4,338     $ 7,196     $ 7,624  
 
Property Management Services
                        
Property management fees from external customers
   $ 8,795     $ 6,578     $ 2,821  
Intersegment revenues
     10,730       7,532       4,289  
Total revenues
     19,525       14,110       7,110  
Operating expenses
     7,406       6,485       3,102  
Operating income before depreciation, amortization
   and allocation of corporate overhead
   $ 12,119     $ 7,625     $ 4,008  
Total segment assets at December 31,
   $ 4,545     $ 7,258     $ 2,220  
 
Reconciliations
                        
Total segment revenues
   $ 320,404     $ 243,932     $ 152,107  
Unallocated interest income earned on corporate cash
     36       812       794  
Elimination of intersegment revenues
     (10,730 )     (10,034 )     (4,289 )
Total consolidated revenues, including interest income
   $ 309,710     $ 234,710     $ 148,612  
Segment operating income before depreciation, amortization and
   allocation of corporate overhead
   $ 98,613     $ 65,458     $ 48,231  
Depreciation and amortization
     (79,667 )     (59,416 )     (31,784 )
Net unallocated expenses relating to corporate overhead
     (18,725 )     (16,509 )     (17,014 )
Loss from unconsolidated joint ventures
     (2,073 )     (1,619 )     (108 )
Income tax provision
     (540 )     (388 )     (756 )
Loss from continuing operations
   $ (2,392 )   $ (12,474 )   $ (1,431 )
Total segment assets
   $ 2,181,239     $ 2,158,991     $ 1,073,827  
Unallocated corporate assets
     53,742       24,918       2,469  
Total assets
   $ 2,234,981     $ 2,183,909     $ 1,076,296  

F-34

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
19.  Quarterly Financial Information (Unaudited)

The information presented below represents the consolidated financial results of the Company for the years ended December 31, 2009 and 2008.

   
2009
  
   
1PstP Quarter
    
2PndP Quarter
    
3PrdP Quarter
    
4PthP Quarter
    
Total
  
Total revenues
   $ 77,740     $ 73,270     $ 78,445     $ 83,543     $ 312,998  (1)
Net income (loss)
   $ 277     $ (5,310 )   $ (5,804 )   $ (2,003 )   $ (12,840 )
Net income (loss) per
   share- basic
   $ 0.00     $ (0.11 )   $ (0.11 )   $ (0.04 )   $ (0.28 )
Net income (loss) per
   share- diluted
   $ 0.00     $ (0.11 )   $ (0.11 )   $ (0.04 )   $ (0.28 )

   
2008
  
   
1PstP Quarter
    
2PndP Quarter
    
3PrdP Quarter
    
4PthP Quarter
    
Total
  
Total revenues
   $ 41,441     $ 43,889     $ 72,688     $ 78,290     $ 236,308  (1)
Net income (loss)
   $ 4,909     $ (1,450 )   $ (13,094 )   $ (3,420 )   $ (13,055 )
Net income (loss) per
   share- basic
   $ 0.18     $ (0.04 )   $ (0.31 )   $ (0.08 )   $ (0.36 )
Net income (loss) per
   share- diluted
   $ 0.18     $ (0.04 )   $ (0.31 )   $ (0.08 )   $ (0.36 )

(1)    Includes revenues from discontinued operations of $3.4 million and $2.7 million for the years ended December 31, 2009 and 2008, respectively.

20.  Subsequent Events

Distributions:  On January 29, 2010, the Company declared a fourth quarter 2009 distribution per share of $0.3375 which was paid on February 26, 2010 to all common stockholders of record as of February 15, 2010.  At the same time, the Operating Partnership paid an equivalent amount per unit to holders of Common Units, as well as the quarterly cumulative preferential distribution to holders of Series A Preferred Units (see Note 9).

Pay-off of mortgage debt:  On the scheduled maturity date of March 1, 2010, the Company paid off approximately $34.5 million of fixed-rate mortgage debt secured by two of our wholly-owned properties (Campus Club – Statesboro and University Trails).
 
F-35

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
21.  Schedule of Real Estate and Accumulated Depreciation
 
               
Initial Cost
    
Basis Step-Up
          
Total Costs
                    
   
Units
    
Beds
    
Land
    
Buildings and Improvements and
Furniture, Fixtures and Equipment
    
Land
    
Buildings and Improvements and
Furniture, Fixtures and Equipment
    
Costs Capitalized Subsequent to Acquisition
    
Land
    
Buildings and Improvements
and
Furniture,
Fixtures and
Equipment
    
Total (1)
    
Accumulated Depreciation
(2)
    
Encumbrances (3)
    
Year Built
  
Wholly-Owned Properties
                                                                          
Villas on
  Apache
     111       288     $ 1,465     $ 8,071     $ -     $ -     $ 3,151     $ 1,465     $ 11,222     $ 12,687     $ 4,423     $ -       1987  
                                                                                                         
The Village at
  Blacksburg
     288       1,056       3,826       22,155       -       -       3,640       3,826       25,795       29,621       7,229       19,926       1990/ 1998  
                                                                                                         
River Club
  Apartments
     266       792       3,478       19,655       -       -       1,736       3,478       21,391       24,869       6,440       17,430       1996  
                                                                                                         
River Walk
  Townhomes
     100       336       1,442       8,194       -       -       698       1,442       8,892       10,334       2,647       -       1998  
                                                                                                         
The Callaway
  House
     173       538       5,081       20,499       -       -       1,592       5,081       22,091       27,172       6,301       18,340       1999  
                                                                                                         
The Village at
  Alafaya Club
     228       839       3,788       21,851       -       -       1,562       3,788       23,414       27,201       6,386       19,237       1999  
                                                                                                         
The Village at
  Science Drive
     192       732       4,673       19,021       -       -       971       4,673       19,992       24,665       4,607       -       2000  
                                                                                                         
University
  Village at
  Boulder Creek
       82         309         939         14,887         96         1,506       831         1,035       17,224       18,259       4,068       15,248       2002  
                                                                                                         
University
  Village at
  Fresno
     105       406       900       15,070       29       483       248       929       15,801       16,730       2,938       -       2004  
                                                                                                         
University
  Village at TU
     220       749       -       38,739       -       2,380       516       -       41,635       41,635       6,842       -       2004  
                                                                                                         
University
  Village at
  Sweet Home
       269         828         2,473         34,626         -         -       278         2,473       34,904       37,377       5,146       -         2005  
                                                                                                         
University Club
  Tallahassee (4)
     152       608       4,065       17,368       -       -       2,348       4,065       19,716       23,781       4,228       12,867       2000  
                                                                                                         
The Grove at
  University
  Club (4)
     64       128       600       5,735       -       -       458       600       6,193       6,793       930       4,068       2002  
                                                                                                         
College Club
  Tallahassee (5)
     96       384       1,498       11,156       -       -       1,285       1,498       12,441       13,939       2,412       8,327       2001  
                                                                                                         
The Greens at
  College
  Club (5)
     40       160       601       4,893       -       -       536       601       5,429       6,030       980       -       2004  
 
F-36
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
               
Initial Cost
    
Basis Step-Up
          
Total Costs
                    
   
Units
    
Beds
    
Land
    
Buildings and Improvements and
Furniture, Fixtures and Equipment
    
Land
    
Buildings and Improvements and
Furniture, Fixtures and Equipment
    
Costs Capitalized Subsequent to Acquisition
    
Land
    
Buildings and Improvements
and
Furniture,
Fixtures and
Equipment
    
Total (1)
    
Accumulated Depreciation
(2)
    
Encumbrances (3)
    
Year Built
  
                                                                               
University Club
  Gainesville
     94       376     $ 1,416     $ 11,848     $ -     $ -     $ 1,219     $ 1,416     $ 13,067     $ 14,483     $ 2,005     $ -       1999  
                                                                                                         
The Estates
     396       1,044       4,254       43,164       -       -       1,742       4,254       44,906       49,160       6,402       36,218       2002  
                                                                                                         
City Parc at Fry
  Street
     136       418       1,902       17,678       -       -       717       1,902       18,395       20,297       2,870       10,957       2004  
                                                                                                         
Entrada Real
     98       363       1,475       15,859       -       -       509       1,475       16,368       17,843       1,878       9,143       2000  
                                                                                                         
Royal Oaks (6)
     82       224       1,346       8,153       -       -       483       1,346       8,636       9,982       1,031       -       1990  
                                                                                                         
Royal
  Pavilion (6)
     60       204       1,212       7,304       -       -       439       1,212       7,743       8,955       939       -       1991  
                                                                                                         
Royal Village
  Tallahassee (6)
     75       288       1,764       10,768       -       -       620       1,764       11,388       13,152       1,326       -       1992  
                                                                                                         
Royal Village
  Gainesville
     118       448       2,484       15,153       -       -       806       2,484       15,959       18,443       2,025       -       1996  
                                                                                                         
Northgate Lakes
     194       710       4,807       27,284       -       -       1,146       4,807       28,430       33,237       3,401       -       1997/ 1998  
                                                                                                         
Royal Lexington
     94       364       2,848       12,783       -       -       817       2,848       13,600       16,448       1,707       -       1994  
                                                                                                         
The Woods at
  Greenland
     78       276       1,050       7,286       -       -       505       1,050       7,791       8,841       987       5,819       2001  
                                                                                                         
Raider’s
  Crossing
     96       276       1,089       8,404       -       -       532       1,089       8,936       10,025       1,100       6,248       2002  
                                                                                                         
Raider’s Pass
     264       828       3,877       32,445       -       -       1,184       3,877       33,629       37,506       3,918       18,487       2002/ 2003  
                                                                                                         
Aggie Station
     156       450       1,634       18,821       -       -       577       1,634       19,398       21,032       2,180       10,988       2003  
                                                                                                         
The Outpost San
  Marcos
     162       486       1,987       18,973       -       -       451       1,987       19,424       21,411       2,149       13,013       2003/ 2004  
                                                                                                         
The Outpost San
  Antonio
     276       828       3,262       36,252                       444       3,262       36,696       39,958       3,997       22,945       2005  
                                                                                                         
Callaway Villas
     236       704       3,903       32,286       -       -       262       3,903       32,548       36,451       3,674       -       2006  
                                                                                                         
Village on Sixth
     248       752       2,763       22,480       -       -       2,083       2,763       24,563       27,326       2,354       16,820       2000/ 2006  
                                                                                                         
Newtown
  Crossing
     356       942       6,763       53,597       -       -       729       6,763       54,326       61,089       4,988       31,138       2005/ 2007  
                                                                                                         
Olde Town
  University
  Square
     224       550       2,277       24,614       -       -       703       2,277       25,317       27,594       2,521       20,159       2005  
 
F-37
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                               
               
Initial Cost
    
Basis Step-Up
          
Total Costs
                    
   
Units
    
Beds
    
Land
    
Buildings and Improvements and
Furniture, Fixtures and Equipment
    
Land
    
Buildings and Improvements and
Furniture, Fixtures and Equipment
    
Costs Capitalized Subsequent to Acquisition
    
Land
    
Buildings and
Improvements
and
Furniture,
Fixtures and
Equipment
    
Total (1)
    
Accumulated Depreciation (2)
    
Encumbrances (3)
    
Year Built
  
                                                                               
Peninsular Place
     183       478     $ 2,306     $ 16,559     $ -     $ -     $ 369     $ 2,306     $ 16,928     $ 19,234     $ 1,803     $ 16,563       2005  
                                                                                                         
University
  Centre
     234       838       -       77,378       -       -       1,713       -       79,091       79,091       5,614       -       2007  
                                                                                                         
Sunnyside
  Commons
     68       161       6,933       768       -       -       57       6,933       825       7,758       51       -       1925-2001  
                                                                                                         
Pirate’s Place
     144       528       1,159       9,652       -       -       950       1,159       10,602       11,761       609       6,495       1996  
                                                                                                         
The
  Highlands
     216       732       4,821       24,822       -       -       988       4,821       25,810       30,631       1,322       -       2004  
                                                                                                         
Jacob
  Heights I (7)
     42       162       407       5,888       -       -       103       407       5,991       6,398       295       3,850       2004  
                                                                                                         
Jacob
  Heights III (7)
     24       96       233       3,637       -       -       61       233       3,698       3,931       175       2,948       2006  
                                                                                                         
The Summit (7)
     192       672       1,678       26,939       -       -       427       1,678       27,366       29,044       1,227       23,825       2003  
                                                                                                         
GrandMarc –
  Seven Corners
     186       440       4,491       28,807       -       -       787       4,491       29,594       34,085       1,311       18,020       2000  
                                                                                                         
University
  Village –
  Sacramento
     250       394       7,275       12,639       -       -       375       7,275       13,014       20,289       638       14,740       1979  
                                                                                                         
Aztec Corner
     180       606       17,460       32,209       -       -       308       17,460       32,517       49,977       1,471       28,600       1995  
                                                                                                         
University
  Crossings
     260       1,016       20,622       47,830       -       -       2,011       20,622       49,841       70,463       2,197       41,309       1926/ 2003  
                                                                                                         
Campus Corner
     254       796       1,591       20,928       -       -       473       1,591       21,401       22,992       1,066       22,266       1997  
                                                                                                         
Tower at 3rd
     147       295       1,145       19,128       -       -       2,000       1,145       21,128       22,273       951       14,491       1973  
                                                                                                         
University Mills
     121       481       524       12,334       -       -       485       524       12,819       13,343       671       8,806       2002  
                                                                                                         
Pirates Cove
     264       1,056       2,173       26,704       -       -       2,784       2,173       29,488       31,661       1,639       -       2000  
                                                                                                         
University
  Manor
     168       600       1,387       14,889       -       -       1,614       1,387       16,503       17,890       909       14,233       2002  
                                                                                                         
Brookstone
  Village
     124       238       1,203       7,024       -       -       793       1,203       7,817       9,020       347       4,141       1993  
                                                                                                         
Campus Walk –
  Wilmington
     289       290       2,794       11,718       -       -       530       2,794       12,248       15,042       512       6,700       1989  
                                                                                                         
Cambridge at
  Southern
     228       564       3,317       20,301       -       -       444       3,317       20,745       24,062       1,084       18,388       2006  
 
F-38
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                       
               
Initial Cost
    
Basic Step-Up
          
Total Costs
                    
   
Units
    
Beds
    
Land
    
Buildings and Improvements and
Furniture, Fixtures and Equipment
    
Land
    
Buildings and Improvements and
Furniture, Fixtures and Equipment
    
Costs Capitalized Subsequent to Acquisition
    
Land
    
Buildings and
Improvements
and
Furniture,
Fixtures and
Equipment
    
Total (1)
    
Accumulated Depreciation (2)
    
Encumbrances (3)
    
Year Built
  
                                                                               
Campus Club –
  Statesboro
     276       984     $ 3,075     $ 31,100     $ -     $ -     $ 3,067     $ 3,075     $ 34,167     $ 37,242     $ 1,847     $ 18,811       2003  
                                                                                                         
University Pines
     144       552       1,707       17,527       -       -       654       1,707       18,181       19,888       862       11,036       2001  
                                                                                                         
Lakeside
     244       776       2,347       22,999       -       -       1,811       2,347       24,810       27,157       1,299       14,100       1991  
                                                                                                         
The Club
     120       480       1,164       11,979       -       -       1,509       1,164       13,488       14,652       722       -       1989  
                                                                                                         
The Edge
 
     306       930       6,053       37,802       -       -       1,493       6,053       39,295       45,348       1,836       29,914       1999  
                                                                                                         
University Place
     144       528       2,794       15,639       -       -       433       2,794       16,072       18,866       799       -       2003  
                                                                                                         
Southview
     240       960       3,492       41,760       -       -       1,143       3,492       42,903       46,395       2,051       18,918       1998  
                                                                                                         
Stonegate
     168       672       2,929       28,164       -       -       933       2,929       29,097       32,026       1,407       14,264       2000  
                                                                                                         
The Commons
     132       528       2,173       17,786       -       -       1,125       2,173       18,911       21,084       959       5,569       1991  
                                                                                                         
University
  Gables
     168       648       1,309       13,148       -       -       1,661       1,309       14,809       16,118       882       13,925       2001  
                                                                                                         
Campus Ridge
     132       528       960       12,831       -       -       305       960       13,136       14,096       668       -       2003  
                                                                                                         
The Enclave I
     120       480       582       9,205       -       -       784       582       9,989       10,571       514       9,762       2002  
                                                                                                         
Hawks Landing
     122       484       1,445       13,735       -       -       2,596       1,445       16,331       17,776       878       15,600       1994  
                                                                                                         
Willowtree
  Apartments (8)
     310       568       6,014       15,135       -       -       369       6,014       15,504       21,518       754       13,441       1968  
                                                                                                         
Willowtree
  Towers (8)
     163       283       3,793       6,745       -       -       183       3,793       6,928       10,721       376       6,576       1974  
                                                                                                         
Abbott Place
     222       654       1,833       18,313       -       -       1,775       1,833       20,088       21,921       1,118       17,850       1999  
                                                                                                         
University
  Centre –-
  Kalamazoo
     232       700       1,804       19,395       -       -       807       1,804       20,202       22,006       1,068       19,875       2004  
                                                                                                         
University
  Meadows
     184       616       1,426       14,870       -       -       1,091       1,426       15,961       17,387       847       9,633       2001  
                                                                                                         
Campus Way
     196       684       1,581       21,845       -       -       1,545       1,581       23,390       24,971       1,176       15,375       1993  
                                                                                                         
Campus Walk –
  Oxford
     108       432       1,096       11,271       -       -       1,681       1,096       12,952       14,048       760       8,133       2001  
                                                                                                         
Campus Trails
     156       480       1,358       11,291       -       -       1,129       1,358       12,420       13,778       650       7,486       1991  
                                                                                                         
University
  Pointe
     204       682       989       27,576       -       -       610       989       28,186       29,175       1,334       21,300       2004  
 
University Trails
     240       684       1,183        25,173       -       -       812        1,183        25,985        27,168        1,263        15,725       2003  
 
F-39
 
AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
               
Initial Cost
    
Basis Step-Up
          
Total Costs
                    
   
Units
    
Beds
    
Land
    
Buildings and
Improvements
and
Furniture,
Fixtures and
Equipment
    
Land
    
Buildings and
Improvements
and
Furniture,
Fixtures and
Equipment
    
Costs
Capitalized
Subsequent
to
Acquisition
    
Land
    
Buildings and
Improvements
and
Furniture,
Fixtures and
Equipment
    
Total (1)
    
 
 
Accumulated
Depreciation
(2)
    
Encumbrances
(3)
    
Year
Built
  
                                                                               
Vista del Sol
     613       1,866     $ -     $ 136,144     $ -     $ -     $ 572     $ -     $ 136,716     $ 136,716     $ 5,859     $ 100,000       2008  
                                                                                                         
Villas at
  Chestnut Ridge
     196       552       2,756       33,510       -       -       55       2,756       33,565       36,321       1,498       -       2008  
                                                                                                         
Barrett Honors
  College
     602       1,721       -       130,953       -       -       20       -       130,973       130,973       1,471       -       2009  
                                                                                                         
Subtotal
     15,145       47,599     $ 222,322     $ 1,853,124     $ 125     $ 4,369     $ 81,253     $ 222,447     $ 1,938,746     $ 2,161,193     $ 173,820     $  950,046          
                                                                                                         
On-Campus Participating Properties
                                                                                  
University
  Village  –
  PVAMU
     612       1,920     $ -     $ 36,506     $ -     $ -     $ 2,412     $ -     $ 38,918     $ 38,918     $ 18,784     $ 26,319    
1996/
97/98
  
                                                                                                         
University
  College –
   PVAMU
     756       1,470       -       22,650       -       -       1,748       -       24,398       24,398       9,143       21,045       2000/ 2003  
                                                                                                         
University
  Village –
  TAMIU
     84       250       -       5,844       -       -       372       -       6,216       6,216       2,944       4,026       1997  
                                                                                                         
Cullen Oaks
  Phase I and II
     411       879       -       33,910       -       -       1,282       -       35,192       35,192       8,163       32,718       2001/ 2005  
                                                                                                         
Subtotal
     1,863       4,519       -       98,910       -       -       5,814       -       104,724       104,724       39,034       84,108          
Total-all
  properties
     17,008       52,118     $ 222,322     $ 1,952,034     $ 125     $ 4,369     $ 87,067     $ 224,447     $ 2,043,470     $ 2,265,917     $ 212,854     $ 1,034,154          
                                                                                                         

(1)  
Total aggregate costs for Federal income tax purposes is $2,337.1 million.
(2)  
The depreciable lives for buildings and improvements and furniture, fixtures and equipment range from three to forty years.
(3)  
Total encumbrances exclude net unamortized debt premiums of $3.8 million and net unamortized debt discounts of $8.5 million as of December 31, 2009.
(4)  
For lease administration purposes, University Club Tallahassee and The Grove at University Club are reported combined.  As a result, costs capitalized subsequent to acquisition and accumulated depreciation are allocated to the respective properties based on relative bed count.
(5)  
For lease administration purposes, College Club Tallahassee and The Greens at College Club are reported combined.   As a result, costs capitalized subsequent to acquisition and accumulated depreciation are allocated to the respective properties based on relative bed count.
(6)  
For lease administration purposes, Royal Oaks, Royal Pavilion, and Royal Village Tallahassee are reported combined.  As a result, costs capitalized subsequent to acquisition and accumulated depreciation are allocated to the respective properties based on relative bed count.
(7)  
For lease administration purposes, Jacob Heights I, Jacob Heights III and The Summit are reported combined.  As a result, costs capitalized subsequent to acquisition and accumulated depreciation are allocated to the respective properties based on relative bed count.
(8)  
For lease administration purposes, Willowtree Apartments and Willowtree Towers are reported combined.  As a result, costs capitalized subsequent to acquisition and accumulated depreciation are allocated to the respective properties based on relative bed count. 
 
F-40

AMERICAN CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The changes in the Company’s investments in real estate and related accumulated depreciation for each of the years ended December 31, 2009, 2008, and 2007 are as follows:

   
For the Year Ended December 31,
  
   
2009
    
2008
    
2007
  
   
Wholly-
 Owned (1)
    
On-Campus (2)
    
Wholly-
 Owned (1)
    
On-Campus (2)
    
Wholly-
 Owned (1)
    
On-Campus (2)
  
                                     
Investments in Real Estate:
                                    
  Balance, beginning of year
   $ 2,100,185     $ 103,985     $ 1,017,425     $ 103,266     $ 740,238     $ 102,786  
  Acquisition of land for development
     9,390       -       8,226       -       10,022       -  
  Acquisition of properties
     -       -       980,504       -       131,319       -  
  Improvements and development expenditures
     107,647       739       145,011       719       133,090       480  
  Contribution of land from minority partner
     in development joint venture
     -       -       -       -       2,756       -  
  Disposition of properties
     (28,432 )     -       (50,981 )     -       -       -  
  Balance, end of year
   $ 2,188,790     $ 104,724     $ 2,100,185     $ 103,985     $ 1,017,425     $ 103,266  
                                                 
Accumulated Depreciation:
                                                
   Balance, beginning of year
   $ (113,352 )   $ (34,683 )   $ (70,363 )   $ (30,361 )   $ (46,041 )   $ (26,098 )
   Depreciation for the year
     (61,765 )     (4,351 )     (42,989 )     (4,322 )     (24,322 )     (4,263 )
   Disposition of properties
     1,297       -       -       -       -       -  
   Balance, end of year
   $ (173,820 )   $ (39,034 )   $ (113,352 )   $ (34,683 )   $ (70,363 )   $ (30,361 )
 
(1)  
Owned off-campus properties and owned on-campus properties
 
(2)  
On-campus participating properties
 
 
 
F-41