American Campus Communities (NYSE: ACC), the only public real estate investment trust, or REIT, focused on student housing, isn't due to report its third-quarter results for a few weeks. However, the company decided to issue an interim update on its business, as investors had been very concerned about the company's ability to lease up its properties for the fall semester as the delta surge of the COVID-19 pandemic worsened.
Well, to put it mildly, the news is good. Here's a rundown of what American Campus Communities just reported and what it could mean for investors.
How did fall 2021 leasing go?
American Campus Communities typically starts the academic year with more than 95% of its rooms occupied, but it had anticipated somewhat slower leasing activity for the fall 2021 semester. At the time of the company's second-quarter earnings release, American Campus Communities expected to have 92% to 94% of its portfolio leased at the start of the fall semester. For context, this is up from a leasing rate of just 90.3% at the start of the fall 2020 semester.
Well, the company handily surpassed the high end of that range. As of Sept. 30, 95.8% of American Campus Communities' 2021 same-store portfolio was leased, and at average rental rate growth of 3.3% (expectations called for 2.5% to 3%).
What's more, RealPage reports that national student housing occupancy has returned to pre-pandemic levels, according to American Campus Communities CEO Bill Bayless.
One big question is, what changed between the company's second-quarter earnings and the start of the fall 2021 semester? After all, the delta surge accelerated between those two points in time, so if anything, one might have expected leasing trends to be worse than expected.
A possible explanation is that students were waiting to see whether their classes would be in person before committing to leases, which could be why the company apparently saw such a last-minute surge. After all, the portfolio was just 91.7% preleased heading into the last week of July. As Bayless said, "Nearly all universities across the country have resumed in-person academic and social activities."
American Campus Communities is raising its guidance
All this means American Campus Communities is expecting this surprisingly robust leasing activity to translate into better-than-expected bottom line profits this year. The company increased its funds from operations (FFO) guidance range, as well as its expectations for net income, for the full year as follows: