P3 college housing down 8% in September, developer says

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American Campus Communities, one of the largest developers of student housing, reported an 8% drop in occupancy in September as the COVID-19 pandemic continued to hinder college attendance.

The decline was twice as high among first-year students, according to a statement to investors from ACC Chief Executive Bill Bayless.

“This group of students, who are leaving home for the first time to begin their college careers, have exhibited a higher degree of reluctance to relocate to campus while online instruction is prevalent,” Bayless said. “In response, many universities temporarily relaxed housing requirements and expectations for first-year students, resulting in a fall term occupancy decline over the prior year of approximately 16% at our on-campus residence hall properties that primarily serve first-year students.”

Callaway House in Austin is one American Campus Community property.

On-campus or nearby student housing is commonly built as a public-private partnership with a college or university using revenue bonds through a conduit issuer. The college or university can assign students to the housing and often leases space in the buildings for services such as meals and parking.

First-year students represent just 10% of the beds in Austin-based ACC’s inventory, Bayless said.

Beds at properties mostly housing first-year students with leases beginning in August were 79.5% leased as of Friday, down from 95.7% as of Sept. 30, 2019. Properties housing sophomores and older with leases beginning in August were 92.8% leased as of Friday, down from 97.7% last year.

In addition, American Campus Communities owns properties with about 7,000 beds primarily for sophomores and upperclassmen with leases beginning in September. They saw some erosion of leasing rates, dropping to 82.4% as of Friday from 97% at the end of September last year.

“Moving forward, we are focused on continued execution of our COVID-19 operational plan that has already allowed us to welcome back over 80,000 student residents at ACC owned communities and on completing the lease-up of our communities with leases commencing in September,” said Jennifer Beese, American Campus Communities chief operating officer, in a statement.

“We also believe the start of this academic year represents a less final completion of the annual lease-up, as some students may continue to make the decision to return to campus and rejoin their peers regardless of university curriculum delivery methodology," she said. "This could provide the opportunity to execute additional leases and improve occupancy during the fall term as we hope to progress toward a return to normalcy throughout the 2020-2021 academic year.”

The company is monitoring 1,000 leases for which students paid August rent but requested their beds be rented to new tenants. That’s about twice the typical amount, the company said.

American Campus Communities has so far agreed to about $1.5 million in refunds for the fall semester for on-campus properties, far lower than $17 million in total over the spring and summer terms.

The company owned 166 student housing properties with nearly 112,000 beds as of June 30. Including properties it manages but does not own, it manages 201 properties covering about 138,000 beds.

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Public-private partnership Coronavirus Higher education bonds