UNITED
      STATESSECURITIES
      AND EXCHANGE COMMISSIONWASHINGTON,
      D.C. 20549FORM
      10-Q




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




For the
quarterly period ended June 30, 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
                (IRS
      Employer Identification No.)Incorporation
      or Organization)805
      Las Cimas Parkway, Suite 400
                78746Austin,
      TX
                (Zip
      Code)(Address
      of Principal Executive Offices)(512)
      732-1000Registrant’s
      telephone number, including area
code




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 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 oNon-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 Exchange Act) Yes o No x




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.


There
      were 52,190,493 shares of American Campus Communities, Inc.’s common stock
      with a par value of $0.01 per share outstanding as of the close of
      business on August 3, 2009.









FORM
10-Q


FOR
THE QUARTER ENDED JUNE 30, 2009




TABLE
OF CONTENTS


PAGE
              NO.PART
      I.Item
      1.
            Consolidated
      Financial StatementsConsolidated
      Balance Sheets as of June 30, 2009 (unaudited) and December 31,
      2008
            
            1Consolidated
      Statements of Operations for the three and six months ended June 30, 2009
      and 2008 (all unaudited)
            
            2Consolidated
      Statement of Changes in Equity for the six months ended June 30, 2009
      (unaudited)
            
            3Consolidated
      Statements of Cash Flows for the six months ended June 30, 2009 and 2008
      (all unaudited)
            
            4Notes
      to Consolidated Financial Statements
            
            5Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            25Item
      3.
            Quantitative
      and Qualitative Disclosure about Market Risk
            
            43Item
      4.
            Controls
      and Procedures
            
            44PART
      II.Item
      4.
            Submissions
      of Matters to a Vote of Security Holders
            
            44Item
      6.
            Exhibits
            
            44SIGNATURES
            
            45







AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES




CONSOLIDATED
BALANCE SHEETS


(in
thousands, except share and per share data)


June
      30, 2009
                      
                      
                      December
      31, 2008(Unaudited)AssetsInvestments
      in real estate:Wholly-owned
      properties, net
                      
                      $
                      2,029,470
                      
                      
                      $
                      1,986,833On-campus
      participating properties, net
                      
                      
                      67,301
                      
                      
                      
                      69,302Investments
      in real estate, net
                      
                      
                      2,096,771
                      
                      
                      
                      2,056,135Cash
      and cash equivalents
                      
                      
                      57,183
                      
                      
                      
                      25,600Restricted
      cash
                      
                      
                      31,559
                      
                      
                      
                      32,558Student
      contracts receivable, net
                      
                      
                      4,891
                      
                      
                      
                      5,185Other
      assets
                      
                      
                      58,751
                      
                      
                      
                      64,431Total
      assets
                      
                      $
                      2,249,155
                      
                      
                      $
                      2,183,909Liabilities
      and equityLiabilities:Secured
      debt
                      
                      $
                      1,089,735
                      
                      
                      $
                      1,162,221Secured
      term loan
                      
                      
                      100,000
                      
                      
                      
                      100,000Unsecured
      revolving credit facility
                      
                      
                      —
                      
                      
                      
                      14,700Accounts
      payable and accrued expenses
                      
                      
                      29,165
                      
                      
                      
                      35,440Other
      liabilities
                      
                      
                      47,307
                      
                      
                      
                      56,052Total
      liabilities
                      
                      
                      1,266,207
                      
                      
                      
                      1,368,413Redeemable
      noncontrolling interests
                      
                      
                      30,215
                      
                      
                      
                      26,286Equity:American
      Campus Communities, Inc. stockholders’ equity:Common
      stock, $.01 par value, 800,000,000 shares authorized, 52,190,493 and
      42,354,283 shares issued and outstanding at June 30, 2009 and December 31,
      2008, respectively
                      
                      
                      521
                      
                      
                      
                      423Additional
      paid in capital
                      
                      
                      1,098,071
                      
                      
                      
                      901,641Accumulated
      earnings and dividends
                      
                      
                      (145,900
                      )
                      
                      
                      (111,828
                      )Accumulated
      comprehensive loss
                      
                      
                      (3,737
                      )
                      
                      
                      (5,117
                      )Total
      American Campus Communities, Inc. stockholders’ equity
                      
                      
                      948,955
                      
                      
                      
                      785,119Noncontrolling
      interests
                      
                      
                      3,778
                      
                      
                      
                      4,091Total
      equity
                      
                      
                      952,733
                      
                      
                      
                      789,210Total
      liabilities and equity
                      
                      $
                      2,249,155
                      
                      
                      $
                      2,183,909




See
accompanying notes to consolidated financial statements.


1




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES




CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited,
in thousands, except share and per share data)


Three
      Months Ended June 30,
                
                
                Six
      Months Ended June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Revenues:Wholly-owned
      properties
                
                $
                66,152
                
                
                $
                37,294
                
                
                $
                133,484
                
                
                $
                68,975On-campus
      participating properties
                
                
                3,922
                
                
                
                3,948
                
                
                
                10,796
                
                
                
                10,692Third
      party development services
                
                
                886
                
                
                
                723
                
                
                
                1,938
                
                
                
                2,379Third
      party management services
                
                
                2,105
                
                
                
                1,222
                
                
                
                4,347
                
                
                
                2,144Resident
      services
                
                
                205
                
                
                
                361
                
                
                
                445
                
                
                
                799Total
      revenues
                
                
                73,270
                
                
                
                43,548
                
                
                
                151,010
                
                
                
                84,989Operating
      expenses:Wholly-owned
      properties
                
                
                32,891
                
                
                
                16,738
                
                
                
                64,377
                
                
                
                30,623On-campus
      participating properties
                
                
                2,783
                
                
                
                2,499
                
                
                
                4,813
                
                
                
                4,794Third
      party development and management services
                
                
                2,810
                
                
                
                2,328
                
                
                
                5,787
                
                
                
                4,436General
      and administrative
                
                
                2,829
                
                
                
                3,237
                
                
                
                5,577
                
                
                
                5,371Depreciation
      and amortization
                
                
                20,400
                
                
                
                11,114
                
                
                
                40,502
                
                
                
                19,143Ground/facility
      leases
                
                
                452
                
                
                
                368
                
                
                
                1,004
                
                
                
                727Total
      operating expenses
                
                
                62,165
                
                
                
                36,284
                
                
                
                122,060
                
                
                
                65,094Operating
      income
                
                
                11,105
                
                
                
                7,264
                
                
                
                28,950
                
                
                
                19,895Nonoperating
      income and (expenses):Interest
      income
                
                
                40
                
                
                
                642
                
                
                
                80
                
                
                
                804Interest
      expense
                
                
                (15,446
                )
                
                
                (8,733
                )
                
                
                (31,332
                )
                
                
                (15,712
                )Amortization
      of deferred financing costs
                
                
                (780
                )
                
                
                (448
                )
                
                
                (1,581
                )
                
                
                (759
                )Loss
      from unconsolidated joint ventures
                
                
                (483
                )
                
                
                (129
                )
                
                
                (1,037
                )
                
                
                (255
                )Other
      nonoperating income
                
                
                402
                
                
                
                —
                
                
                
                402
                
                
                
                —Total
      nonoperating expenses
                
                
                (16,267
                )
                
                
                (8,668
                )
                
                
                (33,468
                )
                
                
                (15,922
                )(Loss)
      income before income taxes, redeemable noncontrolling interests and
      discontinued operations
                
                
                (5,162
                )
                
                
                (1,404
                )
                
                
                (4,518
                )
                
                
                3,973Income
      tax provision
                
                
                (135
                )
                
                
                (73
                )
                
                
                (270
                )
                
                
                (133
                )Redeemable
      noncontrolling interests share of loss (income)
                
                
                81
                
                
                
                (13
                )
                
                
                27
                
                
                
                (319
                )(Loss)
      income from continuing operations
                
                
                (5,216
                )
                
                
                (1,490
                )
                
                
                (4,761
                )
                
                
                3,521Income
      from discontinued operations
                
                
                —
                
                
                
                92
                
                
                
                —
                
                
                
                92Net
      (loss) income
                
                
                (5,216
                )
                
                
                (1,398
                )
                
                
                (4,761
                )
                
                
                3,613Net
      income attributable to noncontrolling interests
                
                
                (94
                )
                
                
                (52
                )
                
                
                (272
                )
                
                
                (154
                )Net
      (loss) income attributable to common shareholders
                
                $
                (5,310
                )
                
                $
                (1,450
                )
                
                $
                (5,033
                )
                
                $
                3,459(Loss)
      income per share attributable to common shareholders –
    basic:(Loss)
      income from continuing operations per share
                
                $
                (0.11
                )
                
                $
                (0.05
                )
                
                $
                (0.12
                )
                
                $
                0.10Net
      (loss) income per share
                
                $
                (0.11
                )
                
                $
                (0.04
                )
                
                $
                (0.12
                )
                
                $
                0.10(Loss)
      income per share attributable to common shareholders –
      diluted:(Loss)
      income from continuing operations per share
                
                $
                (0.11
                )
                
                $
                (0.04
                )
                
                $
                (0.12
                )
                
                $
                0.10Net
      (loss) income per share
                
                $
                (0.11
                )
                
                $
                (0.04
                )
                
                $
                (0.12
                )
                
                $
                0.11Weighted-average
      common shares outstanding:Basic
                
                
                47,897,196
                
                
                
                35,692,653
                
                
                
                45,152,665
                
                
                
                31,512,271Diluted
                
                
                49,198,944
                
                
                
                37,098,977
                
                
                
                46,409,294
                
                
                
                33,272,354Distributions
      declared per common share
                
                $
                0.3375
                
                
                $
                0.3375
                
                
                $
                0.675
                
                
                $
                0.675




See
accompanying notes to consolidated financial statements.


2




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY


(unaudited,
in thousands, except share data)


Common
      Shares
                  
                  
                  Par
      Value of
                    Common
      Shares
                  
                  
                  Additional
      Paid
                    in
      Capital
                  
                  
                  Accumulated
                    Earnings
      and
                    Distributions
                  
                  
                  Accumulated
      Other
                    Comprehensive
                    Income
      (Loss)
                  
                  
                  Noncontrolling
                    Interests
                  
                  
                  TotalEquity,
      December 31, 2008
                  
                  
                  42,354,283
                  
                  
                  $
                  423
                  
                  
                  $
                  901,641
                  
                  
                  $
                  (111,828
                  )
                  
                  $
                  (5,117
                  )
                  
                  $
                  4,091
                  
                  
                  $
                  789,210Net
      proceeds from sale of common stock
                  
                  
                  9,775,000
                  
                  
                  
                  98
                  
                  
                  
                  198,252
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  198,350Amortization
      of restricted stock awards
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,256
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,256Vesting
      of restricted stock awards
                  
                  
                  50,210
                  
                  
                  
                  —
                  
                  
                  
                  (313
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (313
                  )Issuance
      of fully vested restricted stock units
                  
                  
                  9,000
                  
                  
                  
                  —
                  
                  
                  
                  55
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  55Distributions
      to common and restricted stockholders
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (29,039
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (29,039
                  )Distributions
      to joint venture partners
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (585
                  )
                  
                  
                  (585
                  )Conversion
      of common units to common stock
                  
                  
                  2,000
                  
                  
                  
                  —
                  
                  
                  
                  23
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  23Reclassification
      of noncontrolling interests
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (2,843
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (2,843
                  )Comprehensive
      loss:Change
      in fair value of interest rate swaps
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,380
                  
                  
                  
                  —
                  
                  
                  
                  1,380Net
      loss
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (5,033
                  )
                  
                  
                  —
                  
                  
                  
                  272
                  
                  
                  
                  (4,761
                  )Total
      comprehensive loss
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (3,381
                  )Equity,
      June 30, 2009
                  
                  
                  52,190,493
                  
                  
                  $
                  521
                  
                  
                  $
                  1,098,071
                  
                  
                  $
                  (145,900
                  )
                  
                  $
                  (3,737
                  )
                  
                  $
                  3,778
                  
                  
                  $
                  952,733




See
accompanying notes to consolidated financial statements.


3




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited,
in thousands)


Six
      Months Ended June 30,2009
                
                
                2008Operating
      activitiesNet
      (loss) income
                
                $
                (4,761
                )
                
                $
                3,613Adjustments
      to reconcile net (loss) income to net cash provided by operating
      activities:Redeemable
      noncontrolling interests share of (loss) income
                
                
                (27
                )
                
                
                319Depreciation
      and amortization
                
                
                40,502
                
                
                
                19,143Amortization
      of deferred financing costs and debt premiums/discounts
                
                
                1,440
                
                
                
                77Share-based
      compensation
                
                
                1,358
                
                
                
                1,057Loss
      from unconsolidated joint ventures
                
                
                1,037
                
                
                
                258Amortization
      of gain on interest rate swap termination
                
                
                —
                
                
                
                (121
                )Income
      tax provision
                
                
                270
                
                
                
                120Changes
      in operating assets and liabilities:Restricted
      cash
                
                
                999
                
                
                
                (3,381
                )Student
      contracts receivable, net
                
                
                294
                
                
                
                1,810Other
      assets
                
                
                (4,763
                )
                
                
                (5,732
                )Accounts
      payable and accrued expenses
                
                
                (6,857
                )
                
                
                (2,783
                )Other
      liabilities
                
                
                (5,105
                )
                
                
                (2,785
                )Net
      cash provided by operating activities
                
                
                24,387
                
                
                
                11,595Investing
      activitiesCash
      paid for company and property acquisitions
                
                
                —
                
                
                
                (287,245
                )Cash
      paid for land acquisitions
                
                
                (2,637
                )
                
                
                (3,017
                )Investments
      in wholly-owned properties
                
                
                (68,356
                )
                
                
                (73,007
                )Investments
      in unconsolidated joint ventures
                
                
                —
                
                
                
                (8,208
                )Investments
      in on-campus participating properties
                
                
                (181
                )
                
                
                (196
                )Purchase
      of corporate furniture, fixtures and equipment
                
                
                (1,181
                )
                
                
                (1,141
                )Distributions
      received from unconsolidated joint ventures
                
                
                —
                
                
                
                15Net
      cash used in investing activities
                
                
                (72,355
                )
                
                
                (372,799
                )Financing
      activitiesProceeds
      from sale of common stock
                
                
                207,719
                
                
                
                264,500Offering
      costs
                
                
                (9,369
                )
                
                
                (12,264
                )Proceeds
      from sale of preferred stock
                
                
                —
                
                
                
                131Proceeds
      from contribution of properties to joint venture
                
                
                —
                
                
                
                74,368Proceeds
      from secured term loan
                
                
                —
                
                
                
                100,000Revolving
      credit facility, net
                
                
                (14,700
                )
                
                
                (9,600
                )Proceeds
      from construction loans
                
                
                5,334
                
                
                
                55,051Pay-off
      of mortgage loans
                
                
                (72,829
                )
                
                
                (24,225
                )Principal
      payments on debt
                
                
                (4,850
                )
                
                
                (3,318
                )Change
      in construction accounts payable
                
                
                (1,284
                )
                
                
                (3,279
                )Debt
      issuance and assumption costs
                
                
                (15
                )
                
                
                (5,754
                )Distributions
      to common and restricted stockholders
                
                
                (29,001
                )
                
                
                (21,851
                )Distributions
      to noncontrolling partners
                
                
                (1,454
                )
                
                
                (1,158
                )Net
      cash provided by financing activities
                
                
                79,551
                
                
                
                412,601Net
      change in cash and cash equivalents
                
                
                31,583
                
                
                
                51,397Cash
      and cash equivalents at beginning of period
                
                
                25,600
                
                
                
                12,073Cash
      and cash equivalents at end of period
                
                $
                57,183
                
                
                $
                63,470Supplemental
      disclosure of non-cash investing and financing activitiesIssuance
      of Common Units in connection with land acquisition
                
                $
                (2,005
                )
                
                $
                —Issuance
      of common stock in connection with company acquisition
                
                $
                —
                
                
                $
                (154,739
                )Issuance
      of Common Units in connection with company acquisition
                
                $
                —
                
                
                $
                (199
                )Loans
      assumed in connection with company and property
    acquisitions
                
                $
                —
                
                
                $
                (615,175
                )Change
      in fair value of derivative instruments, net
                
                $
                1,380
                
                
                $
                182Supplemental
      disclosure of cash flow informationInterest
      paid
                
                $
                31,783
                
                
                $
                13,295




See
accompanying notes to consolidated financial statements.


4




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.




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.




As of
June 30, 2009, the Company’s property portfolio contained 86 student housing
properties with approximately 52,800 beds and approximately 17,200 apartment
units, including 40 properties containing approximately 23,500 beds and
approximately 7,500 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 3 herein. The Company’s property portfolio
consisted of 80 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 June 30, 2009,
the Company also owned a noncontrolling interest in two joint ventures that
owned an aggregate of 21 student housing properties with approximately 12,100
beds in approximately 3,600 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
June 30, 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 23,400 beds in
approximately 8,800 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 June 30, 2009, the Company’s
total owned, joint venture and third-party managed portfolio included 138
properties with approximately 88,300 beds in approximately 29,600
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 significant 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, including
changes resulting from the adoption of SFAS No. 160, “Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No.
51” (“SFAS No. 160”).




New
Accounting Pronouncements




In
December 2007, the FASB issued SFAS No. 160 which establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary (previously
referred to as minority interests). SFAS No. 160 also requires that a retained
noncontrolling interest upon the deconsolidation of a subsidiary be initially
measured at its fair value. The Company adopted SFAS No. 160 effective January
1, 2009, which required retroactive adoption of the presentation and disclosure
requirements for existing minority interests. See Note 6 herein for a more
detailed discussion of SFAS No. 160 and its effects on the Company’s
consolidated financial statements.


5




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




In April
2009, the FASB issued FASB Staff Position (“FSP”) FAS 107-1, “Interim
Disclosures about Fair Value of Financial Instruments.” FSP FAS 107-1
extends the disclosure requirements of SFAS No. 107, “Disclosures
about Fair Value of Financial Instruments” to interim financial
statements of publicly traded entities as defined in Accounting Principles Board
(“APB”) Opinion No. 28, “Interim
Financial Reporting”. SFAS No. 107 requires disclosure of the fair value
of all financial instruments (recognized or unrecognized), when practicable to
do so. These fair values disclosures must be presented together with the related
carrying amount of the financial instruments in a manner that clearly
distinguishes between assets and liabilities and indicates how the carrying
amounts relate to the amounts reported on the balance sheet. FSP FAS 107-1 is
effective for interim reporting periods ending after June 15, 2009. The Company
adopted FSP FAS 107-1 during the quarter ended June 30, 2009 and the adoption
did not have a material impact on the Company’s consolidated financial
statements but did increase our disclosures.




In May
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 165, “Subsequent
Events” (“SFAS No. 165”). SFAS No. 165 sets forth the period after the
balance sheet date during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition or disclosure in
the financial statements, the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements, and disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. SFAS No. 165 requires
the disclosure of the date through which an entity has evaluated subsequent
events and the basis for that date. This disclosure should alert all users of
financials statements that an entity has not evaluated subsequent events after
that date in the set of financial statements being presented. SFAS No. 165 is
effective for interim or annual periods ending after June 15, 2009. The Company
adopted SFAS No. 165 during the quarter ended June 30, 2009 and it did not have
a material impact on the Company’s consolidated financial statements. Subsequent
events for the quarter ended June 30, 2009 have been evaluated through August 7,
2009, the date on which the Company’s financial statements were
issued.




In June
2009, the FASB issued SFAS No. 167, “Amendments
to FASB Interpretation No. 46(R)”, to improve financial reporting by
enterprises involved with variable interest entities by addressing (1) the
effects on certain provisions of FASB Interpretation No. 46 (revised December
2003), Consolidation
of Variable Interest Entities, as a result of the elimination of the
qualifying special-purpose entity concept in SFAS No. 166, Accounting
for Transfers of Financial Assets, and (2) constituent concerns about the
application of certain key provisions of Interpretation 46(R), including those
in which the accounting and disclosures under the Interpretation do not always
provide timely and useful information about an enterprise’s involvement in a
variable interest entity. This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2009, with earlier adoption
prohibited. The Company is currently evaluating what impact, if any, the
adoption of SFAS No. 167 will have on its consolidated financial
statements.




In June
2009, the FASB issued SFAS No. 168, “The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles.” This standard replaces SFAS No. 162, “The
Hierarchy of Generally Accepted Accounting Principles”, and establishes
only two levels of U.S. GAAP, authoritative and nonauthoritative. The FASB
Accounting Standards Codification (the “Codification”) will become the source of
authoritative, nongovernmental GAAP, except for rules and interpretive releases
of the SEC, which are sources of authoritative GAAP for SEC registrants. All
other nongrandfathered, non-SEC accounting literature not included in the
Codification will become nonauthoritative. This standard is effective for
financial statements issued for fiscal years and interim periods ending after
September 15, 2009. The Company does not expect the adoption of SFAS No. 168 to
have a material impact on its consolidated financial statements, however, its
references to accounting literature within the notes to consolidated financial
statements will be revised to conform to the Codification beginning with the
quarter ended September 30, 2009.




In June
2008, the FASB issued FSP 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities.” FSP 03-6-1 affects entities which accrue
non-returnable cash dividends on share-based payment awards during the awards’
service period. The FASB concluded unvested share-based payment awards which are
entitled to non-forfeitable cash dividends, whether paid or unpaid, are
participating securities and are participants of undistributed earnings. Because
the awards are considered participating securities, the issuer is required to
apply the two-class method of computing basic and diluted earnings per share
which involves separate computations for common shares and participating
securities. As the company does accrue and pay non-forfeitable cash dividends on
unvested share-based payment awards, these types of awards are considered
participating securities and are included in our earnings per share
calculation.


6




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Interim
Financial Statements




The
accompanying interim financial statements are unaudited, but have been prepared
in accordance with GAAP for interim financial information and in conjunction
with the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all disclosures required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting
solely of normal recurring matters) necessary for a fair presentation of the
financial statements for these interim periods have been included. Because of
the seasonal nature of the Company’s operations, the results of operations and
cash flows for any interim period are not necessarily indicative of results for
other interim periods or for the full year. These financial statements should be
read in conjunction with the financial statements and the notes thereto included
in the Company’s Annual Report on Form 10-K for the year ended December, 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
      yearsLeasehold
      interest - on-campusparticipating
      properties
              25-34
      years (shorter of useful life or respective lease term)Furniture,
      fixtures and equipment
              3-7
      years




The cost
of buildings and improvements includes the purchase price of the property,
including legal fees and acquisition costs. 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 $1.2 million and $2.0 million was
capitalized during the three months ended June 30, 2009 and 2008, respectively,
and $2.2 million and $3.7 million was capitalized during the six months ended
June 30, 2009 and 2008, respectively. Amortization of deferred financing costs
totaling approximately $0.1 million and $0.2 million was capitalized during the
three and six months ended June 30, 2008, 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 cash flows (undiscounted and before
interest charges) 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 June 30, 2009.




The
Company allocates the purchase price of acquired properties to net tangible and
identified intangible assets based on relative fair values in accordance with
SFAS No. 141(R).
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.


7




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




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.




Owned
On-Campus Properties




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 is
currently under construction with a scheduled completion date of August 2009.
Both leases include the option to extend the lease term for two additional terms
of ten years each. Under the terms of the leases, the lessor has title to the
land and any improvements placed thereon. Pursuant to EITF No. 97-10: The
Effect of Lessee Involvement in Asset Construction, 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 no qualify for
sale-leaseback accounting based on guidance provided in SFAS No. 98, Accounting
for Leases, 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 enters into ground and facility leases with university systems and
colleges to finance, construct, and manage 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.
Pursuant to EITF No. 97-10: The
Effect of Lessee Involvement in Asset Construction, 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.


8




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Intangible
Assets




In
connection with property acquisitions completed during 2008, the Company
capitalized approximately $19.0 million, related to management’s estimate of the
fair value of the in-place leases assumed. These intangible assets are amortized
on a straight-line basis over the average remaining term of the underlying
leases. Amortization expense was approximately $4.1 million and $1.3 million for
the three months ended June 30, 2009 and 2008, respectively, and approximately
$8.2 million and $1.4 million for the six months ended June 30, 2009 and 2008,
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 $0.1 million and $0.2 million for the
three and six months ended June 30, 2009, respectively. The amortization of
intangible assets is included in depreciation and amortization expense in the
accompanying consolidated statements of operations. See Note 3 herein for a
detailed discussion of the property acquisitions completed during
2008.




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 $0.8 million and $0.4
million for the three months ended June 30, 2009 and 2008, respectively, and
approximately $1.6 million and $0.8 million for the six months ended June 30,
2009 and 2008, respectively. Accumulated amortization at June 30, 2009 and
December 31, 2008 approximated $10.2 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 determines consolidation based on standards set forth in FASB
Interpretation No. 46R,Consolidation of Variable Interest Entities (“FIN 46(R)”) and Emerging
Issues Task Force (EITF) No. 04-5, Determining
Whether a General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners Have Certain
Rights.For joint ventures that are variable interest entities as defined
under FIN 46(R) where the Company is not the primary beneficiary, it does not
consolidate the joint venture for financial reporting purposes. Based on the
guidance set forth in EITF 04-5, the Company consolidates certain joint venture
investments because it exercises significant control over major operating
decisions, such as approval of budgets, property management, investment activity
and changes in financing. For joint ventures under EITF 04-5, where the Company
does not exercise significant control over major operating and management
decisions, but where it exercises significant influence, the Company uses the
equity method of accounting and does not consolidate the joint venture for
financial reporting purposes.




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 June 30, 2009 and December 31, 2008,
net unamortized debt premiums were $4.6 million and $5.7 million, respectively,
and net unamortized debt discounts were $9.4 million and $10.4 million,
respectively. Debt premiums and discounts are included in secured debt on the
accompanying consolidated balance sheets.




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.


9




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




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 June 30, 2009, the Company has deferred approximately $7.0
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.




Derivative
Instruments and Hedging Activities




As
required by SFAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities,” (“SFAS No. 133”), 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 under SFAS No. 133. The interest
differential to be paid or received is accrued as interest expense. The
Company’s counter-parties are major financial institutions. See Note 10 herein
for an expanded discussion on derivative instruments and hedging
activities.




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.




Earnings
per Share




Basic
earnings per share is computed using net income attributable to American Campus
Communities, Inc. and Subsidiaries and the weighted average number of shares of
the Company’s common stock outstanding during the period, including restricted
stock units (“RSUs”) issued to outside directors. RSUs are included in both
basic and diluted weighted average common shares outstanding because they were
fully vested on the date of grant and all conditions required in order for the
recipients to earn the RSUs have been satisfied. Diluted earnings per share
reflects weighted average common shares issuable from the vesting or conversion
of restricted stock awards (“RSAs”) granted to employees, common units of
limited partnership interest in the Operating Partnership (“Common Units”) and
preferred units of limited partnership interest in the Operating Partnership
(“Series A Preferred Units”). See Note 6 for a discussion of Common Units and
Series A Preferred Units and Note 9 for a discussion of RSUs and
RSAs.


10




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




The
following is a summary of the elements used in calculating basic and diluted
earnings per share:


Three
      Months Ended June 30,
                  
                  
                  Six
      Months Ended June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Basic
      earnings per share calculation:(Loss)
      income from continuing operations attributable to common
      shareholders
                  
                  $
                  (5,310
                  )
                  
                  $
                  (1,542
                  )
                  
                  $
                  (5,033
                  )
                  
                  $
                  3,367Amount
      allocated to participating securities
                  
                  
                  (157
                  )
                  
                  
                  (96
                  )
                  
                  
                  (339
                  )
                  
                  
                  (207
                  )(Loss)
      income from continuing operations attributable to common shareholders, net
      of amount allocated to participating securities
                  
                  
                  (5,467
                  )
                  
                  
                  (1,638
                  )
                  
                  
                  (5,372
                  )
                  
                  
                  3,160Income
      from discontinued operations attributable to common
      shareholders
                  
                  
                  —
                  
                  
                  
                  92
                  
                  
                  
                  —
                  
                  
                  
                  92Net
      (loss) income attributable to common shareholders, as adjusted –
      basic
                  
                  $
                  (5,467
                  )
                  
                  $
                  (1,546
                  )
                  
                  $
                  (5,372
                  )
                  
                  $
                  3,252(Loss)
      income from continuing operations attributable to common shareholders, as
      adjusted – per share
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.05
                  )
                  
                  $
                  (0.12
                  )
                  
                  $
                  0.10Income
      from discontinued operations attributable to common shareholders – per
      share
                  
                  
                  —
                  
                  
                  
                  0.01
                  
                  
                  
                  —
                  
                  
                  
                  —Net
      (loss) income attributable to common shareholders, as adjusted – per
      share
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.12
                  )
                  
                  $
                  0.10Basic
      weighted average common shares outstanding
                  
                  
                  47,897,196
                  
                  
                  
                  35,692,653
                  
                  
                  
                  45,152,665
                  
                  
                  
                  31,512,271Diluted
      earnings per share calculation:(Loss)
      income from continuing operations attributable to common shareholders, net
      of amount allocated to participating securities
                  
                  $
                  (5,467
                  )
                  
                  $
                  (1,638
                  )
                  
                  $
                  (5,372
                  )
                  
                  $
                  3,160Income
      from continuing operations attributable to Series A Preferred
      Units
                  
                  
                  46
                  
                  
                  
                  46
                  
                  
                  
                  92
                  
                  
                  
                  92(Loss)
      income from continuing operations allocated to Common
Units
                  
                  
                  (127
                  )
                  
                  
                  (35
                  )
                  
                  
                  (119
                  )
                  
                  
                  225(Loss)
      income from continuing operations attributable to common shareholders, as
      adjusted
                  
                  
                  (5,548
                  )
                  
                  
                  (1,627
                  )
                  
                  
                  (5,399
                  )
                  
                  
                  3,477Income
      from discontinued operations attributable to common
      shareholders
                  
                  
                  —
                  
                  
                  
                  92
                  
                  
                  
                  —
                  
                  
                  
                  92Income
      from discontinued operations allocated to Common Units
                  
                  
                  —
                  
                  
                  
                  2
                  
                  
                  
                  —
                  
                  
                  
                  2Income
      from discontinued operations attributable to common shareholders, as
      adjusted
                  
                  
                  —
                  
                  
                  
                  94
                  
                  
                  
                  —
                  
                  
                  
                  94Net
      (loss) income attributable to common shareholders, as
    adjusted
                  
                  $
                  (5,548
                  )
                  
                  $
                  (1,533
                  )
                  
                  $
                  (5,399
                  )
                  
                  $
                  3,571(Loss)
      income from continuing operations attributable to common shareholders, as
      adjusted – per share
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.12
                  )
                  
                  $
                  0.10Income
      from discontinued operations attributable to common shareholders, as
      adjusted – per share
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  0.01Net
      (loss) income attributable to common shareholders, as adjusted – per
      share
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.12
                  )
                  
                  $
                  0.11Basic
      weighted average common shares outstanding
                  
                  
                  47,897,196
                  
                  
                  
                  35,692,653
                  
                  
                  
                  45,152,665
                  
                  
                  
                  31,512,271Common
      Units
                  
                  
                  1,186,785
                  
                  
                  
                  1,291,361
                  
                  
                  
                  1,141,666
                  
                  
                  
                  1,369,997Series
      A Preferred Units
                  
                  
                  114,963
                  
                  
                  
                  114,963
                  
                  
                  
                  114,963
                  
                  
                  
                  114,963RSAs (1)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  275,123Diluted
      weighted average common shares outstanding
                  
                  
                  49,198,944
                  
                  
                  
                  37,098,977
                  
                  
                  
                  46,409,294
                  
                  
                  
                  33,272,354




(1)
                467,529
      and 284,588 weighted average RSAs are excluded from diluted weighted
      average common shares outstanding for the three months ended June 30, 2009
      and 2008, respectively, and 455,310 weighted average RSAs are excluded
      from diluted weighted average common shares outstanding for the six months
      ended June 30, 2009, because they would be anti-dilutive due to the
      Company’s loss position for these
periods.


11




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




3.          Property
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.




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 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 Units, each valued at $28.43 per share
or unit.




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.




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 three and
six months ended June 30, 2008, presents consolidated financial information for
the Company as if the property acquisitions discussed above, the $100 million
secured term loan borrowing, and the April 2008 equity offering and subsequent
paydown of the revolving credit facility 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:


Three
      Months Ended
                    June
      30, 2008
                  
                  
                  Six
      Months Ended
                    June
      30, 2008Total
      revenues
                  
                  $
                  67,610
                  
                  
                  $
                  140,845Net
      loss
                  
                  $
                  (4,826
                  )
                  
                  $
                  (1,663
                  )Net
      loss per share – basic
                  
                  $
                  (0.12
                  )
                  
                  $
                  (0.04
                  )Net
      loss per share – diluted
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.04
                  )


12




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




4.          Investments
in Wholly-Owned Properties




Wholly-owned
properties consisted of the following:


June
      30, 2009
                  
                  
                  December
      31, 2008Land (1)
                  
                  $
                  247,295
                  
                  
                  $
                  242,653Buildings
      and improvements
                  
                  
                  1,715,913
                  
                  
                  
                  1,706,184Furniture,
      fixtures and equipment
                  
                  
                  100,126
                  
                  
                  
                  87,633Construction
      in progress
                  
                  
                  108,874
                  
                  
                  
                  63,7152,172,208
                  
                  
                  
                  2,100,185Less
      accumulated depreciation
                  
                  
                  (142,738
                  )
                  
                  
                  (113,352
                  )Wholly-owned
      properties, net
                  
                  $
                  2,029,470
                  
                  
                  $
                  1,986,833




(1)
                  The
      land balance above includes undeveloped land parcels valued at $22.8
      million and $18.2 million as of June 30, 2009 and December 31, 2008,
      respectively.




5.          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.




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.


13




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




On-campus
participating properties are as follows:


LeaseCommencement
                            
                            Required
      Debt Repayment(1)
                            
                            Historical
      CostLessor/University
                            
                            
                            
                            June
      30, 2009
                            
                            
                            December
      31, 2008Texas
      A&M University System /
                              Prairie View A&M
      University (2)
                            
                            2/1/96
                            
                            9/1/23
                            
                            $
                            38,836
                            
                            
                            $
                            38,732Texas
      A&M University System /
                              Texas
      A&M International
                            
                            2/1/96
                            
                            9/1/23
                            
                            
                            6,169
                            
                            
                            
                            6,163Texas
      A&M University System /
                              Prairie View A&M
      University(3)
                            
                            10/1/99
                            
                            8/31/25
      / 8/31/28
                            
                            
                            24,215
                            
                            
                            
                            24,191University
      of Houston System /
                              University of
      Houston(4)
                            
                            9/27/00
                            
                            8/31/35
                            
                            
                            34,946
                            
                            
                            
                            34,899104,166
                            
                            
                            
                            103,985Less
      accumulated amortization
                            
                            
                            
                            
                            
                            
                            (36,865
                            )
                            
                            
                            (34,683
                            )On-campus
      participating properties, net
                            
                            
                            
                            
                            
                            $
                            67,301
                            
                            
                            $
                            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 2005.6.
                      Noncontrolling
      Interests




Noncontrolling
interests per SFAS No. 160: In December 2007, the FASB issued SFAS No.
160, effective for fiscal years beginning on or after December 15, 2008. The
Company has adopted SFAS No. 160 effective January 1, 2009. Per SFAS No. 160,
the portions of equity (net assets) in subsidiaries that are held by owners
other than the parent are referred to as noncontrolling interests (formerly
minority interests). Under SFAS No. 160, such noncontrolling interests are
reported on the consolidated balance sheets within equity, separately from the
Company’s equity. Additionally, revenues, expenses and net income or loss from
less-than-wholly-owned subsidiaries are reported on the consolidated statements
of operations at the consolidated amounts, including both the amounts
attributable to the Company and to noncontrolling
interests.




The
Company has determined that the minority equity interests of unaffiliated joint
venture partners in four joint ventures meet the definition of noncontrolling
interests per SFAS No. 160. These joint ventures own and operate the Company’s
Callaway House, University Village at Sweet Home, University Centre and Villas
at Chestnut Ridge owned-off campus properties. The Company has therefore
reclassified the portion of net assets attributable to these joint venture
partners to equity (referred to as “noncontrolling interests”) on the
accompanying consolidated balance sheets. Accordingly, these 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.”




Redeemable
noncontrolling interests per FASB Emerging Issues Task Force Topic No. D-98,
“Classification and Measurement of Redeemable Securities” (“EITF D-98”):In addition to SFAS No. 160, the Company consults the guidance in EITF
D-98. Under EITF D-98, 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. Additionally, with respect
to noncontrolling interests for which the Company has a choice to settle the
contract by delivery of its own shares, the Company considered the guidance in
EITF 00-19 “Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock” to evaluate 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.


14




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




The
Company has determined that Common Units and Series A Preferred Units in the
Operating Partnership meet the requirements under EITF D-98 to be classified
outside of permanent equity in the mezzanine section on the consolidated balance
sheets (referred to as “redeemable noncontrolling interests”). 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 made this determination based on terms in applicable
agreements, specifically in relation to redemption provisions. 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 six months ended June 30, 2009 and 2008, 2,000 and 329,532 Common Units,
respectively, were converted into shares of the Company’s common stock. As of
June 30, 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.


7.
              Investment
      in Unconsolidated Joint
Ventures




As of
June 30, 2009, the Company’s investments in unconsolidated joint ventures
accounted for utilizing the equity method consisted of three joint ventures. The
Company’s TRS entities provide property management services to the joint
ventures and also provide development management services for one of the joint
ventures owning a property currently under development. As discussed in Note 2
herein, investments in joint ventures are evaluated based on FIN 46(R) to
determine whether or not the investment qualifies as a variable interest entity
(“VIE”). If the investment is determined to fall under the scope of FIN 46(R),
management then determines whether the Company is the primary beneficiary of the
VIE by performing a combination of qualitative and quantitative measures, as
appropriate, including evaluating factors such as the voting rights and
decision-making abilities of each variable interest holder. If the investment is
determined not to fall under the scope for FIN 46(R), the Company evaluates the
investment in accordance with other guidance such as EITF 04-5.




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. 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 $342.3 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.




Management
has determined that the Fidelity Joint Ventures meet the criteria to be
classified as VIEs, although the Company is not the primary beneficiary. The
Company’s $8.8 million and $9.4 million investment in these two joint ventures
at June 30, 2009 and December 31, 2008, respectively, is included in other
assets in the accompanying consolidated balance sheets, and the Company’s $0.3
million and $0.6 million share in the loss from these two joint ventures for the
three and six months ended June 30, 2009, respectively, is included in loss from
unconsolidated joint ventures in the accompanying consolidated statements of
operations. For the three and six months ended June 30, 2009, the Company earned
$0.6 million and $1.2 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.


15




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




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.
Management has determined that the Company’s investment in this joint venture
does not fall under the scope of FIN 46(R) and therefore accounts for its
investment using the equity method in accordance with other guidance, including
EITF 04-5. The Company’s $0.5 million and $1.0 million investment in this joint
venture at June 30, 2009 and December 31, 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 $0.2 million and $0.1 million for
the three months ended June 30, 2009 and 2008, respectively, and $0.5 million
and $0.2 million for the six months ended June 30, 2009 and 2008, 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 $0.3 million and $0.2 million for
the three months ended June 30, 2009 and 2008, respectively, and $0.6 million
and $0.4 million for the six months ended June 30, 2009 and 2008,
respectively.


8.
              Debt




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


June
      30, 2009
                
                
                December
      31, 2008Debt
      secured by wholly-owned properties:Mortgage
      loans payable
                
                $
                878,260
                
                
                $
                955,847Construction
      loans payable
                
                
                130,198
                
                
                
                124,8191,008,458
                
                
                
                1,080,666Debt
      secured by on-campus participating properties:Mortgage
      loan payable
                
                
                32,854
                
                
                
                32,991Bonds
      payable
                
                
                53,275
                
                
                
                53,27586,129
                
                
                
                86,266Secured
      term loan
                
                
                100,000
                
                
                
                100,000Revolving
      credit facility
                
                
                —
                
                
                
                14,700Unamortized
      debt premiums
                
                
                4,603
                
                
                
                5,682Unamortized
      debt discounts
                
                
                (9,455
                )
                
                
                (10,393
                )Total
      debt
                
                $
                1,189,735
                
                
                $
                1,276,921




Pay-off
of Mortgage Debt




During
the six months ended June 30, 2009, the Company borrowed from the revolving
credit facility and used equity offering proceeds (see Note 1) to pay off $72.8
million of fixed-rate mortgage debt, secured by 10 of its wholly-owned
properties. As of June 30, 2009, the Company had an additional $8.0 million of
outstanding fixed-rate mortgage debt scheduled to mature in November 2009, which
the Company expects to pay-off on or before the maturity date.




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 3), 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 3), 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.




Revolving
Credit Facility




In May
2008, the Operating Partnership amended its $115 million revolving credit
facility to increase the size of the facility to $160 million, which may be
expanded by up to an additional $65 million upon the satisfaction of certain
conditions. The maturity date of the facility is August 17, 2009 and can be
extended 12 months through August 2010. The Company expects to renew the
facility before the August 17, 2009 maturity date, which among other things will
extend the maturity date through August 2012. The Company guarantees the
Operating Partnership’s obligations under the facility.


16




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Availability
under the revolving credit facility is limited to an “aggregate borrowing base
amount” equal to the lesser of (i) 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-, three-, or six-month LIBOR plus, in each case, a spread
based upon the Company’s total leverage. Additionally, the Company is required
to pay an unused commitment fee ranging from 0.15% to 0.20% per annum, depending
on the aggregate unused balance. In May 2009, the Company paid off the entire
balance on the revolving credit facility using proceeds from its equity offering
(see Note 1). As of June 30, 2009, the total availability under the facility
(subject to the satisfaction of certain financial covenants) totaled
approximately $153.5 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 the Company to maintain certain minimum ratios of “EBITDA” (earnings
before interest, taxes, depreciation and amortization) to fixed charges. 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
June 30, 2009, the Company was in compliance with all such
covenants.




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 June 30, 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 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 3.79% as of June 30, 2009 (1.7925% + 2.0% spread). In the event that the
swaps at any time have a negative fair value below a certain threshold level,
the Company could be required to post cash into a collateral account pledged to
the interest rate swap providers. See Note 10 herein for a more detailed
discussion of the Company’s derivative instruments and hedging
activities.


9.
            Incentive
      Award Plan




The
Company has adopted the 2004 Incentive Award Plan (the “Plan”). The Plan
provides for the grant to selected employees and directors of the Company and
the Company’s affiliates of stock options, RSUs, RSAs, Common Units, profits
interest units (“PIUs”), and other stock-based incentive awards. 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 June 30, 2009,
349,534 shares were available for issuance under the Plan.




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 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.


17




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




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 compensation charge
of approximately $0.3 million was recorded during the three months ended June
30, 2009 related to these awards. A summary of the Company’s RSUs under the Plan
as of June 30, 2009 and changes during the six months ended June 30, 2009, is
presented below:


Number
      of
                  RSUsOutstanding
      at December 31, 2008
                
                
                11,556Granted
                
                
                11,870Settled
      in common shares
                
                
                (8,594
                )Settled
      in cash
                
                
                (9,456
                )Outstanding
      at June 30, 2009
                
                
                5,376




Restricted
Stock Awards




The
Company awards RSAs to its executive officers and certain employees that vest in
equal annual installments over a three to five year period. Unvested awards are
forfeited upon the termination of an individual’s employment with the Company.
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 as of
June 30, 2009 and changes during the six months ended June 30, 2009, is
presented below:


Number
      of
                RSAsNonvested
      balance at December 31, 2008
              
              
              282,408Granted
              
              
              256,650Vested
              
              
              (50,210
              )Forfeited
              
              
              (21,887
              )Nonvested
      balance at June 30, 2009
              
              
              466,961




In
accordance with SFAS No. 123(R), the Company recognizes the value of these
awards as an expense over the vesting periods, which amounted to approximately
$0.7 million and $0.5 million for the three months ended June 30, 2009 and 2008,
respectively, and $1.3 million and $0.9 million for the six months ended June
30, 2009 and 2008, respectively.




Common
Units




PIUs were
issued to certain executive and senior officers upon consummation of the IPO. In
connection with the Company’s equity offering in July 2005, all 121,000 PIUs
were converted to Common Units, as contemplated in the Operating Partnership’s
operating agreement.




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 PIUs, with the remainder of the
awards paid in cash. As a result of the October 2007 equity offering, 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.


10.
            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.


18




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




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.




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 six months ended
June 30, 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 June 30, 2009:


Date
      Entered
              
              
              Effective
      Date
              
              
              Maturity
                Date
              
              
              Pay
      Fixed Rate
              
              
              Receive
      Floating
                Rate
      Index
              
              
              Notional
                Amount
              
              
              Fair
      ValueFeb.
      12, 2007
              
              
              Feb.
      15, 2007
              
              
              Feb.
      15, 2014
              
              
              6.689%
              
              
              LIBOR
      – 1 mo. plus 1.35%
              
              
              $
              33,156
              
              
              $
              (3,614
              )Feb.
      23, 2009
              
              
              March
      20, 2009
              
              
              Feb.
      20, 2012
              
              
              1.785%
              
              
              LIBOR
      – 1 month
              
              
              
              50,000
              
              
              
              (51
              )Feb.
      23, 2009
              
              
              March
      20, 2009
              
              
              Feb.
      20, 2012
              
              
              1.800%
              
              
              LIBOR
      – 1 month
              
              
              
              50,000
              
              
              
              (72
              )




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 June
30, 2009 and December 31, 2008:




Fair
Values of Derivative Instruments


Derivative
      LiabilitiesAs
      of June 30, 2009
              
              As
      of December 31, 2008Balance
      Sheet
                Location
              
              Fair
      Value
              
              Balance
      Sheet
                Location
              
              Fair
      ValueInterest
      rate swap contracts
              
              
              Other
      liabilities
              
              $
              3,737
              
              
              Other
      Liabilities
              
              $
              5,117Total
      derivatives designated as hedging instruments under SFAS No.
      133
              
              
              
              
              $
              3,737
              
              
              
              
              $
              5,117




The table
below presents the effect of the Company’s derivative financial instruments on
other comprehensive income (“OCI”) and the consolidated statements of operations
for the six months ended June 30, 2009 and 2008:


Amount
      of Income Recognized
                      in
      OCI on Derivative
                      (Effective
      Portion)
                    
                    
                    
                    Amount
      of Gain Reclassified from
                      Accumulated
      OCI Into Income
                      (Effective
      Portion)Location
      of Gain
                      Reclassified
      from
                      Accumulated
                      OCI
      Into IncomeDerivatives
      in SFAS No. 133
                      Cash
      Flow Hedging
                      RelationshipsSix
      Months ended June 30,
                    
                    
                    Six
      Months ended June 30,2009
                    
                    2008
                    
                    
                    2009
                    
                    2008Interest
      rate swap contracts
                    
                    $
                    1,380
                    
                    $
                    182
                    
                    
                    Interest
      expense
                    
                    $
                    —
                    
                    $
                    121Total
                    
                    $
                    1,380
                    
                    $
                    182
                    
                    
                    
                    
                    $
                    —
                    
                    $
                    121




The
Company reported comprehensive income of $3.6 million for the six months ended
June 30, 2008, which includes net income attributable to American Campus
Communities, Inc. and Subsidiaries of $3.4 million as well as an unrealized gain
of $0.2 million (reflected in the table above).


19




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




11.
Fair Value Disclosures




On
January 1, 2008, the Company adopted SFAS No. 157, “Fair
Value Measurements” (“SFAS No. 157”), which defines fair value,
establishes a framework for measuring fair value and also expands disclosures
about fair value measurements. SFAS No. 157 applies to reported balances that
are required or permitted to be measured at fair value under existing accounting
pronouncements; accordingly, the standard does not require any new fair value
measurements of reported balances. The following table presents information
about the Company’s liabilities measured at fair value on a recurring basis as
of June 30, 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. 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)
                          
                          
                          SignificantUnobservableInputs
      (Level 3)
                          
                          
                          Balance
      at
                            June
      30, 2009Derivative
      financialinstruments
                          
                          $
                          —
                          
                          
                          $
                          3,737
                          
                          
                          $
                          —
                          
                          
                          $
                          3,737




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 June 30, 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.




To comply
with the provisions of SFAS No. 157, 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 June 30, 2009, the Company has
assessed the significance of the impact of the credit valuation adjustments on
the overall valuation of its derivative positions and has determined that the
credit valuation adjustments are not significant to the overall valuation of the
Company’s derivative financial instruments. As a result, the Company has
determined its derivative valuations in their entirety are classified in Level 2
of the fair value hierarchy.


20




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Other
Fair Value Disclosures




Cash
and Cash Equivalents, Restricted Cash, Student Contracts Receivable, Other
Assets, Account Payable and Accrued Expenses and Other Liabilities: As of
June 30, 2009 and December 31, 2008, the Company estimated the carrying amount
approximates fair value, due to the short maturity of these
instruments.




Derivative
Instruments: As of June 30, 2009 and December 31, 2008, 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.




Construction
Loans: the fair value of the Company’s construction loans approximates
carrying value 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 June 30, 2009 and December 31,
2008:


June
      30, 2009
                                        
                                        
                                        December
      31, 2008Fair
      Value
                                        
                                        
                                        Carrying
      Amount
                                        
                                        
                                        Fair
      Value
                                        
                                        
                                        Carrying
      AmountMortgage
      loans
                                        
                                        $
                                        944.0
                                        
                                        
                                        $
                                        906.3
                                        
                                        
                                        $
                                        1,000.1
                                        
                                        
                                        $
                                        984.1Bonds
      payable
                                        
                                        
                                        52.8
                                        
                                        
                                        
                                        53.3
                                        
                                        
                                        
                                        52.8
                                        
                                        
                                        
                                        53.3




12.
Commitments and Contingencies




Commitments




Development-related
guarantees: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.




On one
completed project, the Company has guaranteed losses up to $3.0 million in
excess of the development fee if the loss is due to any failure of the Company
to maintain, or cause its professionals to maintain, required insurance for a
period of five years after completion of the project (August 2009).




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 June 30, 2009, management did not anticipate any material deviations
from schedule or budget related to third-party development projects currently in
progress.


21




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Guaranty
of Joint Venture Mortgage Debt:As mentioned in Note 7, the Fidelity
Joint Ventures are funded in part with secured third party debt in the amount of
$342.3 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.




The
Company has estimated the fair value of guarantees entered into or modified
after December 31, 2002, the effective date of FASB Interpretation No. 45, Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, to be immaterial. The Company’s
estimated maximum exposure amount under the above guarantees is approximately
$358.0 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. An acquisition or disposition
of real property becomes probable at the time that the due diligence period
expires and the definitive contract has not been terminated. 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, and is obligated to
sell under a real property sales 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.




13.
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, noncontrolling
interests and allocation of corporate overhead. Intercompany fees are reflected
at the contractually stipulated amounts.


22




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


Three
      Months Ended June 30,
                
                
                Six
      Months Ended June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Wholly-Owned
      PropertiesRental
      revenues
                
                $
                66,357
                
                
                $
                37,655
                
                
                $
                133,929
                
                
                $
                69,774Interest
      and other income
                
                
                10
                
                
                
                8
                
                
                
                22
                
                
                
                73Total
      revenues from external customers
                
                
                66,367
                
                
                
                37,663
                
                
                
                133,951
                
                
                
                69,847Operating
      expenses before depreciation, amortization, ground/facility lease, and
      allocation of corporate overhead
                
                
                33,131
                
                
                
                16,533
                
                
                
                64,885
                
                
                
                30,207Ground/facility
      leases
                
                
                252
                
                
                
                —
                
                
                
                512
                
                
                
                —Interest
      expense
                
                
                13,926
                
                
                
                7,880
                
                
                
                28,228
                
                
                
                13,948Other
      nonoperating income
                
                
                402
                
                
                
                —
                
                
                
                402
                
                
                
                —Operating
      income before depreciation, amortization, noncontrolling interests and
      allocation of corporate overhead
                
                $
                19,460
                
                
                $
                13,250
                
                
                $
                40,728
                
                
                $
                25,692Depreciation
      and amortization
                
                $
                18,949
                
                
                $
                9,894
                
                
                $
                37,631
                
                
                $
                16,695Capital
      expenditures
                
                $
                32,543
                
                
                $
                31,670
                
                
                $
                68,356
                
                
                $
                69,990Total
      segment assets at June 30,
                
                $
                2,100,190
                
                
                $
                1,915,732
                
                
                $
                2,100,190
                
                
                $
                1,915,732On-Campus
      Participating PropertiesRental
      revenues
                
                $
                3,922
                
                
                $
                3,948
                
                
                $
                10,796
                
                
                $
                10,692Interest
      and other income
                
                
                9
                
                
                
                53
                
                
                
                33
                
                
                
                132Total
      revenues from external customers
                
                
                3,931
                
                
                
                4,001
                
                
                
                10,829
                
                
                
                10,824Operating
      expenses before depreciation, amortization, ground/facility lease, and
      allocation of corporate overhead
                
                
                2,644
                
                
                
                2,337
                
                
                
                4,541
                
                
                
                4,442Ground/facility
      lease
                
                
                200
                
                
                
                368
                
                
                
                492
                
                
                
                727Interest
      expense
                
                
                1,556
                
                
                
                1,531
                
                
                
                3,115
                
                
                
                3,093Operating
      (loss) income before depreciation, amortization, noncontrolling interests
      and allocation of corporate overhead
                
                $
                (469
                )
                
                $
                (235
                )
                
                $
                2,681
                
                
                $
                2,562Depreciation
      and amortization
                
                $
                1,092
                
                
                $
                1,074
                
                
                $
                2,182
                
                
                $
                2,143Capital
      expenditures
                
                $
                143
                
                
                $
                144
                
                
                $
                181
                
                
                $
                196Total
      segment assets at June 30,
                
                $
                79,981
                
                
                $
                84,472
                
                
                $
                79,981
                
                
                $
                84,472Development
      ServicesDevelopment
      and construction management fees from external customers
                
                $
                886
                
                
                $
                723
                
                
                $
                1,938
                
                
                $
                2,379Operating
      expenses
                
                
                2,108
                
                
                
                2,297
                
                
                
                4,375
                
                
                
                4,445Operating
      loss before depreciation, amortization, noncontrolling interests and
      allocation of corporate overhead
                
                $
                (1,222
                )
                
                $
                (1,574
                )
                
                $
                (2,437
                )
                
                $
                (2,066
                )Total
      segment assets at June 30,
                
                $
                6,281
                
                
                $
                8,898
                
                
                $
                6,281
                
                
                $
                8,898Property
      Management ServicesProperty
      management fees from external customers
                
                $
                2,105
                
                
                $
                1,222
                
                
                $
                4,347
                
                
                $
                2,144Intersegment
      revenues
                
                
                2,551
                
                
                
                1,360
                
                
                
                5,247
                
                
                
                2,585Total
      revenues
                
                
                4,656
                
                
                
                2,582
                
                
                
                9,594
                
                
                
                4,729Operating
      expenses
                
                
                1,936
                
                
                
                1,106
                
                
                
                3,767
                
                
                
                2,021Operating
      income before depreciation, amortization, noncontrolling interests and
      allocation of corporate overhead
                
                $
                2,720
                
                
                $
                1,476
                
                
                $
                5,827
                
                
                $
                2,708Total
      segment assets at June 30,
                
                $
                5,565
                
                
                $
                2,193
                
                
                $
                5,565
                
                
                $
                2,193ReconciliationsTotal
      segment revenues
                
                $
                75,840
                
                
                $
                44,969
                
                
                $
                156,312
                
                
                $
                87,779Unallocated
      interest income earned on corporate cash
                
                
                21
                
                
                
                581
                
                
                
                25
                
                
                
                599Elimination
      of intersegment revenues
                
                
                (2,551
                )
                
                
                (1,360
                )
                
                
                (5,247
                )
                
                
                (2,585
                )Total
      consolidated revenues, including interest income
                
                $
                73,310
                
                
                $
                44,190
                
                
                $
                151,090
                
                
                $
                85,793Segment
      operating income before depreciation, amortization, noncontrolling
      interests and allocation of corporate overhead
                
                $
                20,489
                
                
                $
                12,917
                
                
                $
                46,799
                
                
                $
                28,896Depreciation
      and amortization
                
                
                (21,180
                )
                
                
                (11,562
                )
                
                
                (42,083
                )
                
                
                (19,902
                )Net
      unallocated expenses relating to corporate overhead
                
                
                (3,988
                )
                
                
                (2,630
                )
                
                
                (8,197
                )
                
                
                (4,766
                )Loss
      from unconsolidated joint ventures
                
                
                (483
                )
                
                
                (129
                )
                
                
                (1,037
                )
                
                
                (255
                )Income
      tax provision
                
                
                (135
                )
                
                
                (73
                )
                
                
                (270
                )
                
                
                (133
                )Noncontrolling
      interests share of loss (income)
                
                
                (13
                )
                
                
                (65
                )
                
                
                (245
                )
                
                
                (473
                )(Loss)
      income from continuing operations attributable to common
      shareholders
                
                $
                (5,310
                )
                
                $
                (1,542
                )
                
                $
                (5,033
                )
                
                $
                3,367Total
      segment assets
                
                $
                2,192,017
                
                
                $
                2,011,295
                
                
                $
                2,192,017
                
                
                $
                2,011,295Unallocated
      corporate assets
                
                
                57,138
                
                
                
                227,750
                
                
                
                57,138
                
                
                
                227,750Total
      assets
                
                $
                2,249,155
                
                
                $
                2,239,045
                
                
                $
                2,249,155
                
                
                $
                2,239,045


23




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




14.
Subsequent Events




Villas
at Chestnut Ridge Construction Loan:On August 4, 2009, the Company
retired the $30.2 million balance on the Villas at Chestnut Ridge construction
loan.




Distributions:
On August 5, 2009, the Company declared a second quarter 2009 distribution per
share of $0.3375 which will be paid on August 28, 2009 to all common
stockholders of record as of August 17, 2009. At the same time, the Operating
Partnership will be 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 6).


24




Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations




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, which do not
relate solely to historical matters, 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 while forward-looking statements reflect our good
faith beliefs when we make them, they are not guarantees of future performance
and are 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.




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; and 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.




The risks
included here are not exhaustive, and additional factors could adversely affect
our business and financial performance, including factors and risks included in
other sections of this report. Moreover, we operate in a very competitive and
rapidly changing environment. New risk factors emerge from time to time and it
is not possible for management to predict all such risk factors, nor can it
assess the impact of all such risk factors on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. Given these
risks and uncertainties, investors should not place undue reliance on
forward-looking statements as a prediction of actual results.




Our
Company and Our Business




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.




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.




As of
June 30, 2009, our property portfolio contained 86 student housing properties
with approximately 52,800 beds and approximately 17,200 apartment units,
including 40 properties containing approximately 23,500 beds and approximately
7,500 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 80 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 June 30, 2009,
we also owned a noncontrolling interest in two joint ventures that owned an
aggregate of 21 student housing properties with approximately 12,100 beds in
approximately 3,600 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.


25




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 June 30, 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 23,400 beds in approximately 8,800 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 June 30, 2009, our total owned, joint venture and third-party managed
portfolio was comprised of 138 properties with approximately 88,300 beds in
approximately 29,600 units.




Third-Party
Development Services




Our
third-party development and construction management services as of June 30, 2009
consisted of four projects under contract and currently in progress with fees
ranging from $0.2 million to $7.6 million. As of June 30, 2009, fees of
approximately $3.0 million remained to be earned by us with respect to these
projects, which have scheduled completion dates of July 2009 through August
2010.




While we
believe that our third party development/construction management and property
management services allow us to develop strong and key relationships with
colleges and universities, revenue from 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, acquire
or develop, and successfully operate, student housing properties.




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. The total consideration paid for GMH was approximately
$1,018.7 million, inclusive of transaction costs, which included: (i) the
issuance of approximately 5.4 million shares of our common stock and 7,004
Common Units, each valued at $28.43 per share or unit; (ii) cash consideration
paid of approximately $239.6 million which represented the payment of $3.36 per
share for each GMH common share and each unit in the GMH Operating Partnership;
and (iii) the assumption of $608.2 million of fixed-rate mortgage debt, which
included a net debt discount of $9.4 million.




American
Campus Equity (“ACETM”)
Development Activities




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. During the first half of 2009, we were
selected by four universities to begin the planning process for the development,
ownership and operation of an ACE project. These 2009 awards, along with the ASU
Component III and Boise State University awards, provide us the opportunity to
exclusively negotiate with the subject universities with commencement subject to
final determination of feasibility, execution and closing of definitive
agreements, and various university and municipal approval
processes.




Barrett
Honors College:As of June 30, 2009, our Barrett Honors College ACE
property was under construction with total development costs estimated to be
approximately $132.0 million. The project is scheduled to complete construction
and open for occupancy in August 2009 and will serve students attending Arizona
State University. As of June 30, 2009, the project was approximately 93%
complete, and we estimate that remaining development costs will be approximately
$18.7 million. As of June 30, 2009, we have funded 100% of the project’s
development costs and will fund the remaining development costs
internally.


26




Property
Operations




As of
June 30, 2009, our property portfolio consisted of the following:


PROPERTY
                
                YR
      ACQUIRED /
                  DEVELOPED(1)
                
                LOCATION
                
                PRIMARY
      UNIVERSITY SERVED
                
                UNITS
                
                BEDSWholly-Owned
      properties:1.
                Villas
      on Apache
                
                1999
                
                Tempe,
      AZ
                
                Arizona
      State University Main Campus
                
                111
                
                2882.
                River
      Club Apartments
                
                1999
                
                Athens,
      GA
                
                The
      University of Georgia – Athens
                
                266
                
                7923.
                River
      Walk Townhomes
                
                1999
                
                Athens,
      GA
                
                The
      University of Georgia – Athens
                
                100
                
                3364.
                The
      Village at Blacksburg
                
                2000
                
                Blacksburg,
      VA
                
                Virginia
      Polytechnic Inst. & State University
                
                288
                
                1,0565.
                The
      Callaway House
                
                2001
                
                College
      Station, TX
                
                Texas
      A&M University
                
                173
                
                5386.
                The
      Village at Alafaya Club
                
                2000
                
                Orlando,
      FL
                
                The
      University of Central Florida
                
                228
                
                8397.
                The
      Village at Science Drive
                
                2001
                
                Orlando,
      FL
                
                The
      University of Central Florida
                
                192
                
                7328.
                University
      Village at Boulder Creek
                
                2002
                
                Boulder,
      CO
                
                The
      University of Colorado at Boulder
                
                82
                
                3099.
                University
      Village at Fresno
                
                2004
                
                Fresno,
      CA
                
                California
      State University – Fresno
                
                105
                
                40610.
                University Village
      at TU(2)
                
                2004
                
                Philadelphia,
      PA
                
                Temple
      University
                
                220
                
                74911.
                University
      Club Tallahassee
                
                2005
                
                Tallahassee,
      FL
                
                Florida
      State University
                
                152
                
                60812.
                The
      Grove at University Club
                
                2005
                
                Tallahassee,
      FL
                
                Florida
      State University
                
                64
                
                12813.
                College
      Club Tallahassee
                
                2005
                
                Tallahassee,
      FL
                
                Florida
      A&M University
                
                96
                
                38414.
                The
      Greens at College Club
                
                2005
                
                Tallahassee,
      FL
                
                Florida
      A&M University
                
                40
                
                16015.
                University
      Club Gainesville
                
                2005
                
                Gainesville,
      FL
                
                University
      of Florida
                
                94
                
                37616.
                City
      Parc at Fry Street
                
                2005
                
                Denton,
      TX
                
                University
      of North Texas
                
                136
                
                41817.
                The
      Estates
                
                2005
                
                Gainesville,
      FL
                
                University
      of Florida
                
                396
                
                1,04418.
                University
      Village at Sweet Home
                
                2005
                
                Amherst,
      NY
                
                State
      University of New York – Buffalo
                
                269
                
                82819.
                Entrada
      Real
                
                2006
                
                Tucson,
      AZ
                
                University
      of Arizona
                
                98
                
                36320.
                Royal
      Oaks
                
                2006
                
                Tallahassee,
      FL
                
                Florida
      State University
                
                82
                
                22421.
                Royal
      Pavilion
                
                2006
                
                Tallahassee,
      FL
                
                Florida
      State University
                
                60
                
                20422.
                Royal
      Village Tallahassee
                
                2006
                
                Tallahassee,
      FL
                
                Florida
      State University
                
                75
                
                28823.
                Royal
      Village Gainesville
                
                2006
                
                Gainesville,
      FL
                
                University
      of Florida
                
                118
                
                44824.
                Northgate
      Lakes
                
                2006
                
                Orlando,
      FL
                
                The
      University of Central Florida
                
                194
                
                71025.
                Royal
      Lexington
                
                2006
                
                Lexington,
      KY
                
                University
      of Kentucky
                
                94
                
                36426.
                The
      Woods at Greenland
                
                2006
                
                Murfreesboro,
      TN
                
                Middle
      Tennessee State University
                
                78
                
                27627.
                Raider’s
      Crossing
                
                2006
                
                Murfreesboro,
      TN
                
                Middle
      Tennessee State University
                
                96
                
                27628.
                Raider’s
      Pass
                
                2006
                
                Lubbock,
      TX
                
                Texas
      Tech University
                
                264
                
                82829.
                Aggie
      Station
                
                2006
                
                College
      Station, TX
                
                Texas
      A&M University
                
                156
                
                45030.
                The
      Outpost San Marcos
                
                2006
                
                San
      Marcos, TX
                
                Texas
      State University – San Marcos
                
                162
                
                48631.
                The
      Outpost San Antonio
                
                2006
                
                San
      Antonio, TX
                
                University
      of Texas – San Antonio
                
                276
                
                82832.
                Callaway
      Villas
                
                2006
                
                College
      Station, TX
                
                Texas
      A&M University
                
                236
                
                70433.
                Village
      on Sixth
                
                2007
                
                Huntington,
      WV
                
                Marshall
      University
                
                248
                
                75234.
                Newtown
      Crossing
                
                2007
                
                Lexington,
      KY
                
                University
      of Kentucky
                
                356
                
                94235.
                Olde
      Towne University Square
                
                2007
                
                Toledo,
      OH
                
                University
      of Toledo
                
                224
                
                55036.
                Peninsular
      Place
                
                2007
                
                Ypsilanti,
      MI
                
                Eastern
      Michigan University
                
                183
                
                47837.
                University
      Centre
                
                2007
                
                Newark,
      NJ
                
                Rutgers
      University, NJIT, Essex CCC
                
                234
                
                83838.
                Sunnyside
      Commons
                
                2008
                
                Morgantown,
      WV
                
                West
      Virginia University
                
                68
                
                16139.
                Pirate’s
      Place
                
                2008
                
                Greenville,
      NC
                
                East
      Carolina University
                
                144
                
                52840.
                University
      Highlands
                
                2008
                
                Reno,
      NV
                
                University
      of Nevada at Reno
                
                216
                
                73241.
                Jacob
      Heights I
                
                2008
                
                Mankato,
      MN
                
                Minnesota
      State University
                
                42
                
                162


27




PROPERTY
                
                YR
      ACQUIRED /
                  DEVELOPED(1)
                
                LOCATION
                
                PRIMARY
      UNIVERSITY SERVED
                
                UNITS
                
                BEDS42.
                Jacob
      Heights III
                
                2008
                
                Mankato,
      MN
                
                Minnesota
      State University
                
                24
                
                9643.
                The
      Summit
                
                2008
                
                Mankato,
      MN
                
                Minnesota
      State University
                
                192
                
                67244.
                GrandMarc
      – Seven Corners
                
                2008
                
                Minneapolis,
      MN
                
                University
      of Minnesota
                
                186
                
                44045.
                University
      Village – Sacramento
                
                2008
                
                Sacramento,
      CA
                
                California
      State University – Sacramento
                
                250
                
                39446.
                Aztec
      Corner
                
                2008
                
                San
      Diego, CA
                
                San
      Diego State University
                
                180
                
                60647.
                University
      Crossings
                
                2008
                
                Philadelphia,
      PA
                
                University
      of Pennsylvania / Drexel
                
                260
                
                1,01648.
                Campus
      Corner
                
                2008
                
                Bloomington,
      IN
                
                Indiana
      University
                
                254
                
                79649.
                Tower at 3rd
                
                2008
                
                Champaign,
      IL
                
                University
      of Illinois
                
                147
                
                29550.
                University
      Mills
                
                2008
                
                Cedar
      Falls, IA
                
                University
      of Northern Iowa
                
                121
                
                48151.
                Pirates
      Cove
                
                2008
                
                Greenville,
      NC
                
                East
      Carolina University
                
                264
                
                1,05652.
                University
      Manor
                
                2008
                
                Greenville,
      NC
                
                East
      Carolina University
                
                168
                
                60053.
                Brookstone
      Village
                
                2008
                
                Wilmington,
      NC
                
                UNC
      – Wilmington
                
                124
                
                23854.
                Campus
      Walk – Wilmington
                
                2008
                
                Wilmington,
      NC
                
                UNC
      – Wilmington
                
                289
                
                29055.
                Riverside
      Estates
                
                2008
                
                Cayce,
      SC
                
                University
      of South Carolina
                
                205
                
                70056.
                Cambridge
      at Southern
                
                2008
                
                Statesboro,
      GA
                
                Georgia
      Southern University
                
                228
                
                56457.
                Campus
      Club – Statesboro
                
                2008
                
                Statesboro,
      GA
                
                Georgia
      Southern University
                
                276
                
                98458.
                University
      Pines
                
                2008
                
                Statesboro,
      GA
                
                Georgia
      Southern University
                
                144
                
                55259.
                Lakeside
                
                2008
                
                Athens,
      GA
                
                University
      of Georgia
                
                244
                
                77660.
                The
      Club
                
                2008
                
                Athens,
      GA
                
                University
      of Georgia
                
                120
                
                48061.
                The
      Edge (formerly Pegasus Connection)
                
                2008
                
                Orlando,
      FL
                
                Central
      Florida
                
                306
                
                93062.
                University
      Place
                
                2008
                
                Charlottesville,
      VA
                
                University
      of Virginia
                
                144
                
                52863.
                Southview
                
                2008
                
                Harrisonburg,
      VA
                
                James
      Madison University
                
                240
                
                96064.
                Stonegate
                
                2008
                
                Harrisonburg,
      VA
                
                James
      Madison University
                
                168
                
                67265.
                The
      Commons
                
                2008
                
                Harrisonburg,
      VA
                
                James
      Madison University
                
                132
                
                52866.
                University
      Gables
                
                2008
                
                Murfreesboro,
      TN
                
                Middle
      Tennessee State University
                
                168
                
                64867.
                Campus
      Ridge
                
                2008
                
                Johnson
      City, TN
                
                East
      Tennessee State University
                
                132
                
                52868.
                The
      Enclave I
                
                2008
                
                Bowling
      Green, OH
                
                Bowling
      Green State University
                
                120
                
                48069.
                Hawks
      Landing
                
                2008
                
                Oxford,
      OH
                
                Miami
      University of Ohio
                
                122
                
                48470.
                Willow
      Tree Apartments
                
                2008
                
                Ann
      Arbor, MI
                
                University
      of Michigan
                
                310
                
                56871.
                Willow
      Tree Towers
                
                2008
                
                Ann
      Arbor, MI
                
                University
      of Michigan
                
                163
                
                28372.
                Abbott
      Place
                
                2008
                
                East
      Lansing, MI
                
                Michigan
      State University
                
                222
                
                65473.
                University
      Centre – Kalamazoo
                
                2008
                
                Kalamazoo,
      MI
                
                Western
      Michigan University
                
                232
                
                70074.
                University
      Meadows
                
                2008
                
                Mt.
      Pleasant, MI
                
                Central
      Michigan University
                
                184
                
                61675.
                Campus
      Way
                
                2008
                
                Tuscaloosa,
      AL
                
                University
      of Alabama
                
                196
                
                68476.
                Campus
      Walk – Oxford
                
                2008
                
                Oxford,
      MS
                
                University
      of Mississippi
                
                108
                
                43277.
                Campus
      Trails
                
                2008
                
                Starkville,
      MS
                
                Mississippi
      State University
                
                156
                
                48078.
                University
      Pointe
                
                2008
                
                Lubbock,
      TX
                
                Texas
      Tech University
                
                204
                
                68279.
                University
      Trails
                
                2008
                
                Lubbock,
      TX
                
                Texas
      Tech University
                
                240
                
                68480.
                Vista del Sol (3)
                
                2008
                
                Tempe,
      AZ
                
                Arizona
      State University
                
                613
                
                1,86681.
                Villas
      at Chestnut Ridge
                
                2008
                
                Amherst,
      NY
                
                State
      University of New York – Buffalo
                
                196
                
                55282.
                Barrett Honors
      College (4)
                
                2009
                
                Tempe,
      AZ
                
                Arizona
      State University
                
                602
                
                1,721Total
      wholly-owned properties
                
                
                
                
                
                
                
                15,350
                
                48,299


28




PROPERTY
                  
                  YEAR
      ACQUIRED /
                    DEVELOPED (1)
                  
                  LOCATION
                  
                  PRIMARY
      UNIVERSITY SERVED
                  
                  UNITS
                  
                  BEDSOn-campus
      participating properties:83.
                  University
      Village – PVAMU
                  
                  1996
      / 97 / 98
                  
                  Prairie
      View, TX
                  
                  Prairie
      View A&M University
                  
                  612
                  
                  1,92084.
                  University
      College – PVAMU
                  
                  2000
      / 2003
                  
                  Prairie
      View, TX
                  
                  Prairie
      View A&M University
                  
                  756
                  
                  1,47085.
                  University
      Village – TAMIU
                  
                  1997
                  
                  Laredo,
      TX
                  
                  Texas
      A&M International University
                  
                  84
                  
                  25086.
                  Cullen
      Oaks – Phase I and II
                  
                  2001
      / 2006
                  
                  Houston,
      TX
                  
                  The
      University of Houston
                  
                  411
                  
                  879Total
      on-campus participating properties
                  
                  
                  
                  
                  
                  
                  
                  1,863
                  
                  4,519Total
      – all properties
                  
                  
                  
                  
                  
                  
                  
                  17,213
                  
                  52,818




(1)
                        As
      of June 30, 2009, the average age of our wholly-owned properties was
      approximately 9.2 years.(2)
                        Subject
      to a 75-year ground lease with Temple University.(3)
                        Subject
      to a 65-year ground/facility lease with Arizona State
      University.(4)
                        Currently
      under development with a scheduled completion date of August 2009. Subject
      to a 65-year ground/facility lease with Arizona State
      University.


29




Results
of Operations




Comparison
of the Three Months Ended June 30, 2009 and June 30, 2008




The
following table presents our results of operations for the three months ended
June 30, 2009 and 2008, including the amount and percentage change in these
results between the two periods:




Three
      Months Ended June 30,2009
                    
                    
                    2008
                    
                    
                    Change
      ($)
                    
                    
                    Change
      (%)Revenues:Wholly-owned
      properties
                    
                    $
                    66,152
                    
                    
                    $
                    37,294
                    
                    
                    $
                    28,858
                    
                    
                    
                    77.4
                    %On-campus
      participating properties
                    
                    
                    3,922
                    
                    
                    
                    3,948
                    
                    
                    
                    (26
                    )
                    
                    
                    (0.7
                    %)Third
      party development services
                    
                    
                    886
                    
                    
                    
                    723
                    
                    
                    
                    163
                    
                    
                    
                    22.5
                    %Third
      party management services
                    
                    
                    2,105
                    
                    
                    
                    1,222
                    
                    
                    
                    883
                    
                    
                    
                    72.3
                    %Resident
      services
                    
                    
                    205
                    
                    
                    
                    361
                    
                    
                    
                    (156
                    )
                    
                    
                    (43.2
                    %)Total
      revenues
                    
                    
                    73,270
                    
                    
                    
                    43,548
                    
                    
                    
                    29,722
                    
                    
                    
                    68.3
                    %Operating
      expenses:Wholly-owned
      properties
                    
                    
                    32,891
                    
                    
                    
                    16,738
                    
                    
                    
                    16,153
                    
                    
                    
                    96.5
                    %On-campus
      participating properties
                    
                    
                    2,783
                    
                    
                    
                    2,499
                    
                    
                    
                    284
                    
                    
                    
                    11.4
                    %Third
      party development and management services
                    
                    
                    2,810
                    
                    
                    
                    2,328
                    
                    
                    
                    482
                    
                    
                    
                    20.7
                    %General
      and administrative
                    
                    
                    2,829
                    
                    
                    
                    3,237
                    
                    
                    
                    (408
                    )
                    
                    
                    (12.6
                    %)Depreciation
      and amortization
                    
                    
                    20,400
                    
                    
                    
                    11,114
                    
                    
                    
                    9,286
                    
                    
                    
                    83.6
                    %Ground/facility
      leases
                    
                    
                    452
                    
                    
                    
                    368
                    
                    
                    
                    84
                    
                    
                    
                    22.8
                    %Total
      operating expenses
                    
                    
                    62,165
                    
                    
                    
                    36,284
                    
                    
                    
                    25,881
                    
                    
                    
                    71.3
                    %Operating
      income
                    
                    
                    11,105
                    
                    
                    
                    7,264
                    
                    
                    
                    3,841
                    
                    
                    
                    52.9
                    %Nonoperating
      income and (expenses):Interest
      income
                    
                    
                    40
                    
                    
                    
                    642
                    
                    
                    
                    (602
                    )
                    
                    
                    (93.8
                    %)Interest
      expense
                    
                    
                    (15,446
                    )
                    
                    
                    (8,733
                    )
                    
                    
                    (6,713
                    )
                    
                    
                    76.9
                    %Amortization
      of deferred financing costs
                    
                    
                    (780
                    )
                    
                    
                    (448
                    )
                    
                    
                    (332
                    )
                    
                    
                    74.1
                    %Loss
      from unconsolidated joint ventures
                    
                    
                    (483
                    )
                    
                    
                    (129
                    )
                    
                    
                    (354
                    )
                    
                    
                    274.4
                    %Other
      nonoperating income
                    
                    
                    402
                    
                    
                    
                    —
                    
                    
                    
                    402
                    
                    
                    
                    100.0
                    %Total
      nonoperating expenses
                    
                    
                    (16,267
                    )
                    
                    
                    (8,668
                    )
                    
                    
                    (7,599
                    )
                    
                    
                    87.7
                    %Loss
      from continuing operations before income taxes, redeemable noncontrolling
      interests and discontinued operations
                    
                    
                    (5,162
                    )
                    
                    
                    (1,404
                    )
                    
                    
                    (3,758
                    )
                    
                    
                    267.7
                    %Income
      tax provision
                    
                    
                    (135
                    )
                    
                    
                    (73
                    )
                    
                    
                    (62
                    )
                    
                    
                    84.9
                    %Redeemable
      noncontrolling interests share of loss (income)
                    
                    
                    81
                    
                    
                    
                    (13
                    )
                    
                    
                    94
                    
                    
                    
                    (723.1
                    %)Loss
      from continuing operations
                    
                    
                    (5,216
                    )
                    
                    
                    (1,490
                    )
                    
                    
                    (3,726
                    )
                    
                    
                    250.1
                    %Income
      from discontinued operations
                    
                    
                    —
                    
                    
                    
                    92
                    
                    
                    
                    (92
                    )
                    
                    
                    (100.0
                    %)Net
      loss
                    
                    
                    (5,216
                    )
                    
                    
                    (1,398
                    )
                    
                    
                    (3,818
                    )
                    
                    
                    273.1
                    %Net
      income attributable to noncontrolling interests
                    
                    
                    (94
                    )
                    
                    
                    (52
                    )
                    
                    
                    (42
                    )
                    
                    
                    80.8
                    %Net
      loss attributable to common shareholders
                    
                    $
                    (5,310
                    )
                    
                    $
                    (1,450
                    )
                    
                    $
                    (3,860
                    )
                    
                    
                    266.2
                    %




Wholly-Owned
Properties Operations




Revenues
from our wholly-owned properties for the three months ended June 30, 2009
compared with the same period in 2008 increased by $28.7 million primarily due
to the acquisition of GMH’s student housing business in June 2008 and the
completion of construction and opening of Vista del Sol and Villas at Chestnut
Ridge in August 2008. Operating expenses increased approximately $16.2 million
for the three months ended June 30, 2009 compared with the same period in 2008,
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. For the three months ended June 30, 2009, the remaining 40 properties
acquired from GMH contributed an additional $23.0 million of revenues and an
additional $13.7 million of operating expenses. In August 2008, we completed
construction of and opened Vista del Sol, serving students attending Arizona
State University and Villas at Chestnut Ridge, serving students attending
SUNY-Buffalo. These non-GMH new properties contributed an additional $4.8
million of revenues and an additional $1.3 million of operating expenses during
the three months ended June 30, 2009 as compared to the three months ended June
30, 2008.


30




Same
Store Property Operations (Excluding New Property Activity). We had 39
properties containing 20,689 beds which were operating during both three month
periods ended June 30, 2009 and 2008. These properties produced revenues of
$32.4 million and $31.4 million during the three months ended June 30, 2009 and
2008, respectively, an increase of $1.0 million. This increase was primarily due
to an increase in average rental rates during the three months ended June 30,
2009 as compared to the same period in 2008, as well as the improved lease up
for the 2008/2009 academic year, which resulted in average occupancy rates
increasing to 93.7% during the three months ended June 30, 2009 from 93.4%
during the three months ended June 30, 2008. Revenues in 2009 will be dependent
on our ability to maintain our current leases in effect for the 2008/2009
academic year and our ability to obtain appropriate rental rates and desired
occupancy for the 2009/2010 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 $14.6 million
for the three months ended June 30, 2008 to $15.8 million for the three months
ended June 30, 2009, an increase of $1.2 million. This increase was primarily
due to a $1.0 million 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 for the full year 2009 will increase as
compared with 2008 as a result of expected increases in marketing costs, utility
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 three month periods ended June 30, 2009 and 2008. Revenues from our
participating properties remained relatively constant at $3.9 million for both
three month periods ended June 30, 2009 and 2008.




At these
properties, operating expenses increased from $2.5 million for the three months
ended June 30, 2008 to $2.8 million for the three months ended June 30, 2009, an
increase of $0.3 million. This increase was primarily due to an increase in
utility costs. We anticipate that operating expenses for the full year 2009 will
increase slightly as compared with 2008 as a result of expected increases in
utility costs and general inflation.




Third
Party Development Services Revenue




Third
party development services revenue increased by $0.2 million from $0.7 million
during the three months ended June 30, 2008 to $0.9 million for the three months
ended June 30, 2009. The increase was primarily related to the closing and
commencement of construction of the University of California, Irvine – Phase III
project in August 2008, which contributed approximately $0.6 million in
additional third party development services revenues during the three months
ended June 30, 2009; offset by the completion of the University of Hawaii –
Manoa project in August 2008, which contributed approximately $0.4 million of
third party development services revenue during the three months ended June 30,
2008. Closing of additional third-party development services projects during
2009 will be dependent upon the Company’s university clients obtaining project
financing, which may be 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.




Third
Party Management Services Revenue




Third
party management services revenues increased by $0.9 million from $1.2 million
for the three months ended June 30, 2008 to $2.1 million for the three months
ended June 30, 2009. This increase was primarily due to an additional $0.8
million in management fees recognized during the three months ended June 30,
2009 from third party management contracts assumed as part of the GMH
acquisition, including 21 properties owned in two joint ventures with Fidelity
in which we have a 10% interest. We anticipate that third-party management
services revenues for the full year 2009 will increase as compared with 2008,
primarily as a result of the previously mentioned contracts assumed from
GMH.


31




Third
Party Development and Management Services
Expenses




Third
party development and management services expenses increased by $0.5 million,
from $2.3 million during the three months ended June 30, 2008, to $2.8 million
for the three months ended June 30, 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 the full year 2009
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 $0.4 million, from $3.2
million during the three months ended June 30, 2008 to $2.8 million for the
three months ended June 30, 2009. This decrease was primarily due to $0.4
million in direct merger costs incurred related to our acquisition of GMH in
June 2008. We anticipate general and administrative expenses to increase for the
full year 2009 as a result of an increase in corporate staffing levels
experienced as a result of the recent growth of our wholly-owned portfolio,
including our acquisition of GMH.




Depreciation
and Amortization




Depreciation
and amortization increased by $9.3 million, from $11.1 million during the three
months ended June 30, 2008 to $20.4 million for the three months ended June 30,
2009. This increase was primarily due to the acquisition of the GMH student
housing business in June 2008, and the completion of construction and opening of
Vista del Sol and Villas at Chestnut Ridge in August 2008. The GMH properties
contributed an additional $7.5 million to depreciation and amortization expense
for the three months ended June 30, 2009, of which $2.9 million related to the
valuation assigned to in-place leases for such properties. We expect
depreciation and amortization to increase for the full year 2009 as a result of
the addition of the GMH properties to our portfolio and a full year of
depreciation on properties acquired and placed in service during
2008.




Ground
Lease Expense




Ground
lease expense increased $0.1 million from $0.4 million during the three months
ended June 30, 2008 to $0.5 million for the three months ended June 30, 2009,
primarily due to ground/facility lease costs incurred for Vista del Sol which
completed construction and opened in August 2008. We expect ground lease expense
in 2009 to increase due to the timing of Vista del Sol being placed in service
during 2008 and the anticipated completion and opening of Barrett Honors College
in August 2009.




Interest
Income




Interest
income decreased by $0.6 million, from $0.6 million for the three months ended
June 30, 2008 to $40,000 for the three months ended June 20, 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 three months ended
June 30, 2009 as compared to the same period in 2008.




Interest
Expense




Interest
expense increased $6.7 million, from $8.7 million during the three months ended
June 30, 2008 to $15.4 million for the three months ended June 30, 2009. 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 $5.8 million of
interest expense for the three months ended June 30, 2009. We also incurred an
additional $0.6 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
for our acquisition of GMH. An additional $0.6 million of interest expense was
incurred during the three months ended June 30, 2009 related to the loans for
Vista del Sol and Villas at Chestnut Ridge, which completed construction and
were placed into service in August 2008. These increases were offset by a $0.3
million decrease to interest expense related to the pay-off of $43.0 million of
mortgage loans in May 2009. We anticipate that interest expense will increase
for the full year 2009 due to additional interest expense incurred in connection
with our acquisition of GMH’s student housing business as well as the senior
secured term loan entered into in May 2008.


32




Amortization
of Deferred Financing Costs




Amortization
of deferred financing costs increased approximately $0.3 million from $0.5
million during the three months ended June 30, 2008 to $0.8 million for the
three months ended June 30, 2009, 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. We expect
amortization of deferred financing costs in 2009 to increase due to debt assumed
in connection with our acquisition of GMH’s student housing business as well as
the senior secured term loan.




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 21
properties formed or assumed as part of our acquisition of GMH in June
2008.




Loss from
unconsolidated joint ventures increased approximately $0.4 million from $0.1
million during the three months ended June 30, 2008 to $0.5 million for the
three months ended June 30, 2009. This increase was primarily due to the loss
from the two joint ventures formed or assumed as part of our acquisition of
GMH.




Other
Nonoperating Income




Other
nonoperating income of $0.4 million for the three months ended June 30, 2009
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.




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 6 in the accompanying Notes to Consolidated
Financial Statements contained in Item 1 herein for a detailed discussion of
noncontrolling interests.


33




Comparison
of the Six Months Ended June 30, 2009 and June 30,
2008




The
following table presents our results of operations for the six months ended June
30, 2009 and 2008, including the amount and percentage change in these results
between the two periods:


Six
      Months Ended June 30,2009
                    
                    
                    2008
                    
                    
                    Change
      ($)
                    
                    
                    Change
      (%)Revenues:Wholly-owned
      properties
                    
                    $
                    133,484
                    
                    
                    $
                    68,975
                    
                    
                    $
                    64,509
                    
                    
                    
                    93.5
                    %On-campus
      participating properties
                    
                    
                    10,796
                    
                    
                    
                    10,692
                    
                    
                    
                    104
                    
                    
                    
                    1.0
                    %Third
      party development services
                    
                    
                    1,938
                    
                    
                    
                    2,379
                    
                    
                    
                    (441
                    )
                    
                    
                    (18.5
                    %)Third
      party management services
                    
                    
                    4,347
                    
                    
                    
                    2,144
                    
                    
                    
                    2,203
                    
                    
                    
                    102.8
                    %Resident
      services
                    
                    
                    445
                    
                    
                    
                    799
                    
                    
                    
                    (354
                    )
                    
                    
                    (44.3
                    %)Total
      revenues
                    
                    
                    151,010
                    
                    
                    
                    84,989
                    
                    
                    
                    66,021
                    
                    
                    
                    77.7
                    %Operating
      expenses:Wholly-owned
      properties
                    
                    
                    64,377
                    
                    
                    
                    30,623
                    
                    
                    
                    33,754
                    
                    
                    
                    110.2
                    %On-campus
      participating properties
                    
                    
                    4,813
                    
                    
                    
                    4,794
                    
                    
                    
                    19
                    
                    
                    
                    0.4
                    %Third
      party development and management services
                    
                    
                    5,787
                    
                    
                    
                    4,436
                    
                    
                    
                    1,351
                    
                    
                    
                    30.5
                    %General
      and administrative
                    
                    
                    5,577
                    
                    
                    
                    5,371
                    
                    
                    
                    206
                    
                    
                    
                    3.8
                    %Depreciation
      and amortization
                    
                    
                    40,502
                    
                    
                    
                    19,143
                    
                    
                    
                    21,359
                    
                    
                    
                    111.6
                    %Ground/facility
      leases
                    
                    
                    1,004
                    
                    
                    
                    727
                    
                    
                    
                    277
                    
                    
                    
                    38.1
                    %Total
      operating expenses
                    
                    
                    122,060
                    
                    
                    
                    65,094
                    
                    
                    
                    56,966
                    
                    
                    
                    87.5
                    %Operating
      income
                    
                    
                    28,950
                    
                    
                    
                    19,895
                    
                    
                    
                    9,055
                    
                    
                    
                    45.5
                    %Nonoperating
      income and (expenses):Interest
      income
                    
                    
                    80
                    
                    
                    
                    804
                    
                    
                    
                    (724
                    )
                    
                    
                    (90.0
                    %)Interest
      expense
                    
                    
                    (31,332
                    )
                    
                    
                    (15,712
                    )
                    
                    
                    (15,620
                    )
                    
                    
                    99.4
                    %Amortization
      of deferred financing costs
                    
                    
                    (1,581
                    )
                    
                    
                    (759
                    )
                    
                    
                    (822
                    )
                    
                    
                    108.3
                    %Loss
      from unconsolidated joint ventures
                    
                    
                    (1,037
                    )
                    
                    
                    (255
                    )
                    
                    
                    (782
                    )
                    
                    
                    306.7
                    %Other
      nonoperating income
                    
                    
                    402
                    
                    
                    
                    —
                    
                    
                    
                    402
                    
                    
                    
                    100.0
                    %Total
      nonoperating expenses
                    
                    
                    (33,468
                    )
                    
                    
                    (15,922
                    )
                    
                    
                    (17,546
                    )
                    
                    
                    110.2
                    %(Loss)
      income from continuing operations before income taxes, redeemable
      noncontrolling interests and discontinued operations
                    
                    
                    (4,518
                    )
                    
                    
                    3,973
                    
                    
                    
                    (8,491
                    )
                    
                    
                    (213.7
                    %)Income
      tax provision
                    
                    
                    (270
                    )
                    
                    
                    (133
                    )
                    
                    
                    (137
                    )
                    
                    
                    103.0
                    %Redeemable
      noncontrolling interests share of loss (income)
                    
                    
                    27
                    
                    
                    
                    (319
                    )
                    
                    
                    346
                    
                    
                    
                    (108.5
                    %)(Loss)
      income from continuing operations
                    
                    
                    (4,761
                    )
                    
                    
                    3,521
                    
                    
                    
                    (8,282
                    )
                    
                    
                    (235.2
                    %)Income
      from discontinued operations
                    
                    
                    —
                    
                    
                    
                    92
                    
                    
                    
                    (92
                    )
                    
                    
                    (100.0
                    %)Net
      (loss) income
                    
                    
                    (4,761
                    )
                    
                    
                    3,613
                    
                    
                    
                    (8,374
                    )
                    
                    
                    (231.8
                    %)Net
      income attributable to noncontrolling interests
                    
                    
                    (272
                    )
                    
                    
                    (154
                    )
                    
                    
                    (118
                    )
                    
                    
                    76.6
                    %Net
      (loss) income attributable to common shareholders
                    
                    $
                    (5,033
                    )
                    
                    $
                    3,459
                    
                    
                    $
                    (8,492
                    )
                    
                    
                    (245.5
                    %)




Wholly-Owned
Properties Operations




Revenues
from our wholly-owned properties for the six months ended June 30, 2009 compared
with the same period in 2008 increased by $64.2 million primarily due to the
acquisition of GMH’s student housing business in June 2008 and the completion of
construction and opening of Vista del Sol and Villas at Chestnut Ridge in August
2008. Operating expenses increased approximately $33.8 million for the six
months ended June 30, 2009 compared with the same period in 2008, primarily due
to the same factors which affected the increase in revenues.




New
Property Operations. For the six months ended June 30, 2009, the GMH
student housing properties contributed an additional $52.3 million of revenues
and an additional $29.2 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. These four non-GMH new properties contributed an additional
$10.1 million of revenues and an additional $2.9 million of operating expenses
during the six months ended June 30, 2009 as compared to the six months ended
June 30, 2008.




Same
Store Property Operations (Excluding New Property Activity). We had 37
properties containing 20,000 beds which were operating during both six month
periods ended June 30, 2009 and 2008. These properties produced revenues of
$64.6 million and $62.8 million during the six months ended June 30, 2009 and
2008, respectively, an increase of $1.8 million. This increase was primarily due
to an increase in average rental rates during the six months ended June 30, 2009
as compared to the same period in 2008, as well as the improved lease up for the
2008/2009 academic year, which resulted in average occupancy rates increasing to
95.2% during the six months ended June 30, 2009 from 95.0% during the six months
ended June 30, 2008.


34




At these
existing same store properties, operating expenses increased from $27.9 million
for the six months ended June 30, 2008 to $29.5 million for the six months ended
June 30, 2009, an increase of $1.6 million. This increase was primarily due to
an increase in marketing costs incurred to stimulate leasing velocity for the
2009/2010 academic year.




On-Campus
Participating Properties (“OCPP”) Operations




We had
four participating properties containing 4,519 beds which were operating during
both six month periods ended June 30, 2009 and 2008. Revenues from our
participating properties increased to $10.8 million during the six months ended
June 30, 2009 from $10.7 million for the six months ended June 30, 2008, an
increase of $0.1 million.




At these
properties, operating expenses remained relatively constant at $4.8 million for
both six month periods ended June 30, 2009 and 2008.




Third
Party Development Services Revenue




Third
party development services revenue decreased by $0.4 million from $2.3 million
during the six months ended June 30, 2008 to $1.9 million for the six months
ended June 30, 2009. The decrease was primarily related to the completion of the
University of Hawaii – Manoa and Concordia University projects in August 2008
and the closing and commencement of construction of The Highlands at Edinboro
University of Pennsylvania project in February 2008, which combined contributed
approximately $1.3 million of additional third party development services
revenue during the six months ended June 30, 2008, offset by the closing and
commencement of construction of the University of California, Irvine – Phase III
project in August 2008, which contributed approximately $1.1 million in
additional third party development services revenues during the six months ended
June 30, 2009.




Third
Party Management Services Revenue




Third
party management services revenues increased by $2.2 million from $2.1 million
for the six months ended June 30, 2008 to $4.3 million for the six months ended
June 30, 2009. This increase was primarily due to an additional $1.8 million in
management fees recognized during the six months ended June 30, 2009 from third
party management contracts assumed as part of the GMH acquisition, including 21
properties owned in two joint ventures with Fidelity in which we have a 10%
interest.




Third
Party Development and Management Services
Expenses




Third
party development and management services expenses increased by $1.4 million,
from $4.4 million during the six months ended June 30, 2008 to $5.8 million for
the six months ended June 30, 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.




General
and Administrative




General
and administrative expenses increased approximately $0.2 million, from $5.4
million during the six months ended June 30, 2008 to $5.6 million for the six
months ended June 30, 2009. This increase was primarily due to additional
staffing, benefits, rent and public company costs related to acquisition of GMH
in June 2008 and overall company growth experienced during 2008, offset by $0.4
million in direct merger costs incurred related to our acquisition of GMH in
June 2008.




Depreciation
and Amortization




Depreciation
and amortization increased by $21.4 million, from $19.1 million during the six
months ended June 30, 2008 to $40.5 million for the six months ended June 30,
2009. This increase was primarily due to the acquisition of the GMH student
housing business in June 2008, and the completion of construction and opening of
Vista del Sol and Villas at Chestnut Ridge in August 2008. The GMH properties
contributed an additional $18.0 million to depreciation and amortization expense
for the six months ended June 30, 2009, of which $6.9 million related to the
valuation assigned to in-place leases for such properties.


35




Ground
Lease Expense




Ground
lease expense increased $0.3 million from $0.7 million during the six months
ended June 30, 2008 to $1.0 million for the six months ended June 30, 2009,
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 $0.7 million, from $0.8 million for the six months ended
June 30, 2008 to $0.1 million for the six months ended June 20, 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 six months
ended June 30, 2009 as compared to the same period in 2008.




Interest
Expense




Interest
expense increased $15.6 million, from $15.7 million during the six months ended
June 30, 2008 to $31.3 million for the six months ended June 30, 2009. This
increase was primarily due to $598.8 million of mortgage debt assumed from GMH
in June 2008. The debt assumed for properties acquired from GMH contributed an
additional $13.5 million of interest expense for the six months ended June 30,
2009. We also incurred an additional $1.3 million of interest expense related to
the senior secured term loan entered into in May 2008. An additional $1.2
million of interest expense was incurred during the six months ended June 30,
2009 related to the loans for Vista del Sol and Villas at Chestnut Ridge, which
completed construction and were placed into service in August 2008. These
increases were offset by a $0.3 million decrease to interest expense related to
the pay-off of $72.8 million of mortgage loans during the six months ended June
30, 2009.




Amortization
of Deferred Financing Costs




Amortization
of deferred financing costs increased approximately $0.8 million from $0.8
million during the six months ended June 30, 2008 to $1.6 million for the six
months ended June 30, 2009, 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.




Loss
from Unconsolidated Joint Ventures




Loss from
unconsolidated joint ventures increased approximately $0.8 million from $0.2
million during the six months ended June 30, 2008 to $1.0 million for the six
months ended June 30, 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.




Other
Nonoperating Income




Other
nonoperating income of $0.4 million for the six months ended June 30, 2009
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.




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 6 in the accompanying Notes to Consolidated
Financial Statements contained in Item 1 herein for a detailed discussion of
noncontrolling interests.




Cash
Flows




Comparison
of Six Months Ended June 30, 2009 and 2008




Operating
Activities




For the
six months ended June 30, 2009, net cash provided by operating activities was
approximately $24.4 million, as compared to $11.6 million for the six months
ended June 30, 2008, an increase of $12.8 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.


36




Investing
Activities




Investing
activities utilized $72.4 million and $372.8 million for the six months ended
June 30, 2009 and 2008, respectively. The $300.4 million decrease in cash
utilized in investing activities during the six months ended June 30, 2009
related primarily to a $287.6 million decrease in the use of cash to acquire
properties and undeveloped land. We acquired a total of 44 properties during the
six months ended June 30, 2008 and no properties during the six months ended
June 30, 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 experienced a
$20.9 million increase in cash used for capital expenditures at our wholly-owned
properties during the first six months of 2009, as we continued with renovations
at several GMH properties. These increases in cash utilized in investing
activities were offset by a $25.6 million decrease in cash used to fund the
construction of our wholly-owned development properties. During the six months
ended June 30, 2009, one wholly-owned property was under development, while
three properties were under development during the six months ended June 30,
2008. For the six months ended June 30, 2009 and 2008, our cash utilized in
investing activities was comprised of the following:


Six
      Months Ended June 30,2009
                  
                  
                  2008Property
      and land acquisitions
                  
                  $
                  (2,637
                  )
                  
                  $
                  (290,262
                  )Investments
      in unconsolidated joint ventures
                  
                  
                  —
                  
                  
                  
                  (8,208
                  )Capital
      expenditures for on-campus participating properties
                  
                  
                  (181
                  )
                  
                  
                  (196
                  )Capital
      expenditures for wholly-owned properties
                  
                  
                  (22,972
                  )
                  
                  
                  (2,069
                  )Investment
      in wholly-owned properties under development
                  
                  
                  (45,384
                  )
                  
                  
                  (70,938
                  )Purchase
      of corporate furniture, fixtures, and equipment
                  
                  
                  (1,181
                  )
                  
                  
                  (1,141
                  )Distributions
      received from unconsolidated joint venture
                  
                  
                  —
                  
                  
                  
                  15Total
                  
                  $
                  (72,355
                  )
                  
                  $
                  (372,799
                  )




Financing
Activities




Cash
provided by financing activities totaled $79.5 million for the six months ended
June 30, 2009 as compared to $412.6 million during the six months ended June 30,
2008. The $333.1 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
to a joint venture in which we received $74.4 million in proceeds and retained a
10% equity interest in the joint venture; (iv) the $49.7 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 $72.8 million in mortgage loan debt that matured during the
six months ended June 30, 2009, as compared to the pay-off of $24.2 million in
mortgage loan debt during the six months ended June 30, 2008; and (vi) a $7.2
million increase in distributions to stockholders as a result of issuances of
common stock in our April 2008 equity offering and as partial consideration for
the acquisition of GMH.




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, one of which is currently under construction
with a scheduled completion date of August 2009. Under the terms of these
ground/facility leases, the university system owns both the land and
improvements, and we will 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 will 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.


37




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 included in our consolidated financial
statements for the three and six months ended June 30, 2009 and
2008:


Three
      Months Ended June 30,
                
                
                Six
      Months Ended June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Revenues
                
                $
                3,922
                
                
                $
                3,948
                
                
                $
                10,796
                
                
                $
                10,692Direct operating
      expenses (1)
                
                
                (2,644
                )
                
                
                (2,337
                )
                
                
                (4,541
                )
                
                
                (4,442
                )Amortization
                
                
                (1,092
                )
                
                
                (1,074
                )
                
                
                (2,182
                )
                
                
                (2,143
                )Amortization
      of deferred financing costs
                
                
                (44
                )
                
                
                (47
                )
                
                
                (90
                )
                
                
                (93
                )Ground/facility
      leases (2)
                
                
                (200
                )
                
                
                (368
                )
                
                
                (492
                )
                
                
                (727
                )Net
      operating (loss) income
                
                
                (58
                )
                
                
                122
                
                
                
                3,491
                
                
                
                3,287Interest
      income
                
                
                9
                
                
                
                53
                
                
                
                33
                
                
                
                132Interest expense
      (3)
                
                
                (1,556
                )
                
                
                (1,531
                )
                
                
                (3,115
                )
                
                
                (3,093
                )Net
      (loss) income
                
                $
                (1,605
                )
                
                $
                (1,356
                )
                
                $
                409
                
                
                $
                326




(1)
                Excludes
      property management fees of $0.2 million for both three month periods
      ended June 30, 2009 and 2008, and $0.5 million for both six month periods
      ended June 30, 2009 and 2008. This expense and the corresponding fee
      revenue 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 $2.1 million for both
      three month periods ended June 30, 2009 and 2008, and $4.2 million and
      $4.1 million for the six months ended June 30, 2009 and 2008,
      respectively.




Liquidity
and Capital Resources




Cash
Balances and Liquidity




As of
June 30, 2009, excluding our on-campus participating properties, we had $79.6
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, which 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 revolving credit facility and an
additional $43.0 million of offering proceeds to pay-off fixed-rate mortgage
debt which matured in May 2009. Additionally, restricted cash as of June 30,
2009 also included $0.1 million of funds held in escrow in connection with
potential development opportunities.


38




As of
June 30, 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 June 30, 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 and a cumulative
preferential per annum cash distribution rate of 5.99% on our Series A Preferred
Units based on the number of units outstanding as of June 30, 2009, (iii)
payments of approximately $42.5 million of fixed-rate mortgage debt scheduled to
mature during the next 12 months, (iv) remaining development costs for Barrett
Honors College in 2009, estimated to be approximately $25.0 million, and (v)
funds for capital improvements at acquired properties and other potential
development projects. As of June 30, 2009, we had approximately $130.2 million
of outstanding variable rate construction debt, all of which is scheduled to
mature in 2009. In August 2009, we retired the outstanding balance on the Villas
at Chestnut Ridge construction loan and we expect to extend the maturity date
into 2011 for the remaining $100.0 million balance on the Vista del Sol
construction loan, by exercising the extension options available to us. We
expect to renew our existing revolving credit facility before the August 17,
2009 maturity date, which among other things will extend the maturity date
through August 2012. We expect to meet our short-term liquidity requirements by
(i) using the remaining proceeds from our May 2009 equity offering, (ii)
borrowing under our existing revolving credit facility and new revolving credit
facility which we expect to close during the third quarter, (iii) potentially
disposing of properties, and (iv) 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.




Revolving
Credit Facility




The
Operating Partnership has a $160 million revolving credit facility, which may be
expanded by up to an additional $65 million upon the satisfaction of certain
conditions. The maturity date of the facility is August 17, 2009 and can be
extended 12 months through August 2010. We expect to renew the facility before
the August 17, 2009 maturity date, which among other things will extend the
maturity date through August 2012. We continue to guarantee the Operating
Partnership’s obligations under the facility.




Availability
under the revolving credit facility is limited to an “aggregate borrowing base
amount” equal to the lesser of (i) 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-, three-, or six-month LIBOR plus, in each case, a spread
based upon the Company’s total leverage. Additionally, we are required to pay an
unused commitment fee ranging from 0.15% to 0.20% per annum, depending on the
aggregate unused balance. In May 2009, we paid down the entire balance on the
revolving credit facility using proceeds from our equity offering. As of June
30, 2009, the total availability under the facility (subject to the satisfaction
of certain financial covenants) totaled approximately $153.5
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. 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 June 30, 2009, we
were in compliance with all such covenants.




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 the Company’s 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.




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 at 3.79%. 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. See Note 10 in the accompanying
Notes to Consolidated Financial Statements contained in Item 1 herein for a more
detailed discussion of the Company’s derivative instruments and hedging
activities.


39




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 be required to use borrowings under the credit
facility, if necessary, to meet REIT distribution requirements and maintain our
REIT status. The Board of Directors considers market factors and our Company’s
performance in addition to REIT requirements in determining distribution
levels.




On August
5, 2009, we declared a second quarter 2009 distribution per share of $0.3375, to
be paid on August 28, 2009, to all common stockholders of record as of August
17, 2009. At the same time, the Operating Partnership intends to pay 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.




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 June 30, 2009, we have deferred
approximately $7.0 million in pre-development costs related to third-party and
owned development projects that have not yet commenced
construction.




Indebtedness




As of
June 30, 2009, we had approximately $1,194.6 million of outstanding consolidated
indebtedness (excluding net unamortized debt discounts and debt premiums of
approximately $9.5 million and $4.6 million, respectively), comprised of a
$100.0 million balance on our secured term loan, $1,008.5 million in mortgage
and construction loans secured by our wholly-owned properties, $32.8 million in
mortgage loans secured by two phases of an on-campus participating property, and
$53.3 million in bond issuances secured by three of our on-campus participating
properties. The weighted average interest rate on our consolidated indebtedness
as of June 30, 2009 was 5.28% per annum. As of June 30, 2009, approximately
10.9% of our total consolidated indebtedness was variable rate debt, comprised
of our Vista del Sol and Villas at Chestnut Ridge construction loans discussed
below.




Wholly-Owned
Properties




The
weighted average interest rate of the $1,008.5 million of wholly-owned mortgage
and construction debt was 5.27% per annum as of June 30, 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 may be reduced to LIBOR plus 1.20% once construction of
the property is complete and certain operations hurdles are met. 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 of December
27, 2009. The term of the loan can be extended through December 2011 through the
exercise of two 12-month extension periods. As of June 30, 2009, the balance
outstanding on the construction loan totaled $100.0 million, bearing interest at
a rate of 1.58% per annum.


40




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. As of June 30, 2009, the balance
outstanding on the construction loan totaled $30.2 million, bearing interest at
a weighted average rate of 2.32% per annum.




On-Campus
Participating Properties




Three of
our on-campus participating properties are 100% financed with $53.3 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.




Cullen
Oaks Phase I and Phase II loans are currently encumbered by mortgage loans with
balances as of June 30, 2009 of approximately $16.3 million and $16.5 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 7.17% at June 30, 2009.




Off
Balance Sheet Items




As
discussed in Note 7 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
$342.3 million as of June 30, 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.




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.


41




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) income
attributable to common shareholders.


Three
      Months Ended June 30,
                
                
                Six
      Months Ended June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      (loss) income attributable to common shareholders
                
                $
                (5,310
                )
                
                $
                (1,450
                )
                
                $
                (5,033
                )
                
                $
                3,459Noncontrolling
      interests
                
                
                13
                
                
                
                65
                
                
                
                245
                
                
                
                473Loss
      from unconsolidated joint ventures
                
                
                483
                
                
                
                129
                
                
                
                1,037
                
                
                
                255FFO from
      unconsolidated joint ventures (1)
                
                
                192
                
                
                
                (13
                )
                
                
                153
                
                
                
                (139
                )Real
      estate related depreciation and amortization
                
                
                20,000
                
                
                
                10,943
                
                
                
                39,732
                
                
                
                18,791Funds
      from operations (“FFO”)
                
                $
                15,378
                
                
                $
                9,674
                
                
                $
                36,134
                
                
                $
                22,839FFO
      per share – diluted
                
                $
                0.31
                
                
                $
                0.26
                
                
                $
                0.77
                
                
                $
                0.69Weighted
      average common shares outstanding – diluted
                
                
                49,666,473
                
                
                
                37,383,565
                
                
                
                46,864,604
                
                
                
                33,272,354




(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.




While our
on-campus participating properties contributed $3.9 million to our revenues for
both three month periods ended June 30, 2009 and 2008, and $10.8 million and
$10.7 million to our revenues for the six months ended June 30, 2009 and 2008,
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.




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 wholly-owned
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.


42




Funds
From Operations—Modified for Operational Performance of On-Campus Participating
Properties:


Three
      Months Ended June 30,
                
                
                Six
      Months Ended June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Funds
      from operations
                
                $
                15,378
                
                
                $
                9,674
                
                
                $
                36,134
                
                
                $
                22,839Elimination
      of operations of on-campus participating properties and unconsolidated
      joint venture:Net
      loss (income) from on-campus participating properties
                
                
                1,605
                
                
                
                1,356
                
                
                
                (409
                )
                
                
                (326
                )Amortization
      of investment in on-campus participating properties
                
                
                (1,092
                )
                
                
                (1,074
                )
                
                
                (2,182
                )
                
                
                (2,143
                )FFO from Hampton
      Roads unconsolidated joint venture (1)
                
                
                (56
                )
                
                
                83
                
                
                
                180
                
                
                
                20915,835
                
                
                
                10,039
                
                
                
                33,723
                
                
                
                20,579Modifications
      to reflect operational performance of on-campus participating
      properties:Our share of net
      cash flow (2)
                
                
                200
                
                
                
                368
                
                
                
                492
                
                
                
                727Management
      fees
                
                
                176
                
                
                
                182
                
                
                
                499
                
                
                
                490Impact
      of on-campus participating properties
                
                
                376
                
                
                
                550
                
                
                
                991
                
                
                
                1,217Funds from
      operations – modified for operational performance of on-campus
      participating properties (“FFOM”) (3)
                
                $
                16,211
                
                
                $
                10,589
                
                
                $
                34,714
                
                
                $
                21,796FFOM per share –
      diluted (3)
                
                $
                0.33
                
                
                $
                0.28
                
                
                $
                0.74
                
                
                $
                0.66Weighted
      average common shares outstanding – diluted
                
                
                49,666,473
                
                
                
                37,383,565
                
                
                
                46,864,604
                
                
                
                33,272,354




(1)
                Our
      share of the FFO from the Hampton Roads Military Housing unconsolidated
      joint venture is excluded from the calculation of FFOM, as management
      believes this amount does not accurately reflect the company’s
      participation in the economics of the 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. Represents amounts accrued for the interim
      periods.




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.




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 wholly-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
3. Quantitative and Qualitative Disclosures About Market Risk




Market
risk is the risk of loss from adverse changes in market prices and interest
rates. Our future earnings and cash flows are dependent upon prevailing market
rates. Accordingly, we manage our market risk by matching projected cash inflows
from operating, investing and financing activities with projected cash outflows
for debt service, acquisitions, capital expenditures, distributions to
stockholders and unitholders, and other cash requirements. The majority of our
outstanding debt has fixed interest rates, which minimizes the risk of
fluctuating interest rates. Our exposure to market risk includes interest rate
fluctuations in connection with our revolving credit facility and variable rate
construction loans and our ability to incur more debt without stockholder
approval, thereby increasing our debt service obligations, which could adversely
affect our cash flows. No material changes have occurred in relation to market
risk since our Annual Report on Form 10-K for the year ended December 31,
2008.


43




Item
4. Controls and Procedures




Evaluation
of Disclosure Controls and Procedures




As
required by SEC Rule 13a-15(b), we have carried out an evaluation, under
the supervision 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 quarter 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 quarter covered by this report were effective at the
reasonable assurance level.




There has
been no change in our internal controls over financial reporting during our most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.




PART
II. OTHER INFORMATION




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




(a)
                    The
      annual meeting of shareholders of the Company was held on May 7,
      2009.(b)
                    The
      following individuals were reelected as members of the Company’s Board of
      Directors at the annual meeting held on May 7, 2009: William C. Bayless,
      Jr., R.D. Burck (Chairman), G. Steven Dawson, Cydney C. Donnell, Edward
      Lowenthal, Joseph M. Macchione, Brian B. Nickel, Winston W.
      Walker.(c)
                    The
      following votes were taken in connection with the election of the members
      of the Company’s Board of Directors at the annual
  meeting:




Board
      Member
                    
                    Votes
      in Favor
                    
                    Votes
      WithheldWilliam
      C. Bayless, Jr.
                    
                    39,214,867
                    
                    48,300R.D.
      Burck
                    
                    39,201,148
                    
                    62,019G.
      Steven Dawson
                    
                    39,062,272
                    
                    200,895Cydney
      C. Donnell
                    
                    39,178,202
                    
                    84,965Edward
      Lowenthal
                    
                    38,489,275
                    
                    773,892Joseph
      M. Macchione
                    
                    39,202,191
                    
                    60,976Brian
      B. Nickel
                    
                    39,200,049
                    
                    63,118Winston
      W. Walker
                    
                    39,203,581
                    
                    59,586




(d)
              The
      appointment of Ernst & Young LLP as independent public accountants to
      audit our consolidated financial statements for the year ending December
      31, 2009, was ratified with 39,159,374 affirmative votes cast, 95,946
      negative votes cast and 7,847 abstentions. The affirmative vote of the
      holders of a majority of the outstanding shares of common stock
      represented at the annual meeting was required to ratify the appointment
      of Ernst & Young LLP.




Item
6. Exhibits


Exhibit
                    Number
                  
                  Description
      of Document31.1
                  
                  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.


44




SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




Dated:
August 7, 2009


AMERICAN
      CAMPUS COMMUNITIES, INC.By:
                                  /s/
      William C. Bayless, Jr.William
      C. Bayless, Jr.President
      and Chief Executive OfficerBy:
                                  /s/
      Jonathan A. GrafJonathan
      A. GrafExecutive
      Vice President,Chief Financial Officer and Treasurer






45