UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q




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




For the
quarterly period ended March 31, 2010.




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


For the
Transition Period From ______________________ to
_________________________.





Commission
file number 001-32265




AMERICAN
CAMPUS COMMUNITIES, INC.


(Exact
name of registrant as specified in its charter)




Maryland
            
            76-0753089(State
      or Other Jurisdiction of
              Incorporation
      or Organization)
            
            (IRS
      Employer Identification No.)805
      Las Cimas Parkway, Suite 400
              Austin,
      TX
              (Address
      of Principal Executive Offices)
            
            78746
              (Zip
      Code)




(512)
732-1000


Registrant’s
telephone number, including area code




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
o




Non-accelerated
filer o

(Do
not check if a smaller reporting
company)                                                                               
Smaller reporting company o




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)


Yeso    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 52,315,528 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
May 3, 2010.










FORM
10-Q


FOR
THE QUARTER ENDED MARCH 31, 2010




TABLE
OF CONTENTS


PAGE
      NO.PART
      I.Item
      1.
            Consolidated
      Financial StatementsConsolidated
      Balance Sheets as of March 31, 2010 (unaudited) and December
      31,2009
            1Consolidated
      Statements of Operations for thethree months ended
      March 31, 2010 and 2009 (all unaudited)
            2Consolidated
      Statement of Changes in Equity for thethree months ended
      March 31, 2010 (unaudited)
            3Consolidated
      Statements of Cash Flows for the three months ended March 31, 2010 and2009
      (all unaudited)
            4Notes to Consolidated Financial
      Statements
            5Item 2.
            Management’s
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
            23Item 3.
            Quantitative and
      Qualitative Disclosureabout Market
      Risk
            38Item 4.
            Controls and Procedures
            38PART II.Item 6.
            Exhibits
            39SIGNATURES
            40







AMERICAN CAMPUS COMMUNITIES, INC. AND
SUBSIDIARIES




CONSOLIDATED BALANCE SHEETS


(in
thousands, except share and per share data)




March
      31, 2010
            
            
            December
      31, 2009(unaudited)AssetsInvestments
      in real estate:Wholly-owned
      properties, net
            
            $
            1,977,067
            
            
            $
            2,014,970Wholly-owned
      property held for sale
            
            
            9,100
            
            
            
            -On-campus
      participating properties, net
            
            
            64,655
            
            
            
            65,690Investments
      in real estate, net
            
            
            2,050,822
            
            
            
            2,080,660Cash
      and cash equivalents
            
            
            21,550
            
            
            
            66,093Restricted
      cash
            
            
            28,451
            
            
            
            29,899Student
      contracts receivable, net
            
            
            4,520
            
            
            
            5,381Other
      assets
            
            
            50,212
            
            
            
            52,948Total
      assets
            
            $
            2,155,555
            
            
            $
            2,234,981Liabilities
      and equityLiabilities:Secured
      mortgage, construction and bond debt
            
            $
            974,539
            
            
            $
            1,029,455Senior
      secured term loan
            
            
            100,000
            
            
            
            100,000Secured
      agency facility
            
            
            94,000
            
            
            
            94,000Accounts
      payable and accrued expenses
            
            
            22,214
            
            
            
            26,543Other
      liabilities
            
            
            46,521
            
            
            
            45,487Total
      liabilities
            
            
            1,237,274
            
            
            
            1,295,485Redeemable
      noncontrolling interests
            
            
            36,015
            
            
            
            36,722Equity:American
      Campus Communities, Inc. stockholders’ equity:
              Common
      stock, $.01 par value, 800,000,000 shares authorized,
              52,293,300
      and 52,203,893 shares issued and outstanding at
              March
      31, 2010 and December 31, 2009, respectively
            
            
            521
            
            
            
            521Additional
      paid in capital
            
            
            1,092,301
            
            
            
            1,092,030Accumulated
      earnings and dividends
            
            
            (209,201
            )
            
            
            (189,165
            )Accumulated
      other comprehensive loss
            
            
            (5,188
            )
            
            
            (4,356
            )Total
      American Campus Communities, Inc. stockholders’ equity
            
            
            878,433
            
            
            
            899,030Noncontrolling
      interests
            
            
            3,833
            
            
            
            3,744Total
      equity
            
            
            882,266
            
            
            
            902,774Total
      liabilities and equity
            
            $
            2,155,555
            
            
            $
            2,234,981





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 March 31,2010
            
            
            2009Revenues:Wholly-owned
      properties
            
            $
            71,192
            
            
            $
            65,335On-campus
      participating properties
            
            
            7,311
            
            
            
            6,874Third
      party development services
            
            
            574
            
            
            
            1,052Third
      party management services
            
            
            2,214
            
            
            
            2,242Resident
      services
            
            
            252
            
            
            
            240Total
      revenues
            
            
            81,543
            
            
            
            75,743Operating
      expenses:Wholly-owned
      properties
            
            
            31,476
            
            
            
            30,490On-campus
      participating properties
            
            
            2,399
            
            
            
            2,030Third
      party development and management services
            
            
            3,099
            
            
            
            2,977General
      and administrative
            
            
            2,753
            
            
            
            2,748Depreciation
      and amortization
            
            
            17,488
            
            
            
            19,332Ground/facility
      leases
            
            
            571
            
            
            
            552Total
      operating expenses
            
            
            57,786
            
            
            
            58,129Operating
      income
            
            
            23,757
            
            
            
            17,614Nonoperating
      income and (expenses):Interest
      income
            
            
            17
            
            
            
            39Interest
      expense
            
            
            (15,301
            )
            
            
            (15,264
            )Amortization
      of deferred financing costs
            
            
            (1,042
            )
            
            
            (790
            )Loss
      from unconsolidated joint ventures
            
            
            (1,414
            )
            
            
            (554
            )Total
      nonoperating expenses
            
            
            (17,740
            )
            
            
            (16,569
            )Income
      before income taxes and discontinued operations
            
            
            6,017
            
            
            
            1,045Income
      tax provision
            
            
            (143
            )
            
            
            (135
            )Income
      from continuing operations
            
            
            5,874
            
            
            
            910Discontinued
      operations:Loss
      attributable to discontinued operations
            
            
            (4,283
            )
            
            
            (401
            )Loss
      from disposition of real estate
            
            
            (3,646
            )
            
            
            -Total
      discontinued operations
            
            
            (7,929
            )
            
            
            (401
            )Net
      (loss) income
            
            
            (2,055
            )
            
            
            509Net
      income attributable to noncontrolling interests
            
            
            (134
            )
            
            
            (232
            )Net
      (loss) income attributable to common shareholders
            
            $
            (2,189
            )
            
            $
            277Net
      (loss) income per share attributable to common
    shareholders-basic
      and diluted:Income
      from continuing operations per share
            
            $
            0.10
            
            
            $
            0.01Net
      (loss) income per share
            
            $
            (0.05
            )
            
            $
            0.00Weighted-average
      common shares outstanding:Basic
            
            
            52,235,644
            
            
            
            42,377,638Diluted
            
            
            52,805,966
            
            
            
            42,820,592Distributions
      declared per common share
            
            $
            0.3375
            
            
            $
            0.3375





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 Loss
            
            
            Noncontrolling
      Interests
            
            
            TotalEquity,
      December 31, 2009
            
            
            52,203,893
            
            
            $
            521
            
            
            $
            1,092,030
            
            
            $
            (189,165
            )
            
            $
            (4,356
            )
            
            $
            3,744
            
            
            $
            902,774Amortization
      of restricted stock awards
            
            
            -
            
            
            
            -
            
            
            
            929
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            929Vesting
      of restricted stock awards
            
            
            84,631
            
            
            
            -
            
            
            
            (916
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (916
            )Distributions
      to common and restricted stockholders
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (17,847
            )
            
            
            -
            
            
            
            -
            
            
            
            (17,847
            )Distributions
      to joint venture partners
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (48
            )
            
            
            (48
            )Conversion
      of common units to common stock
            
            
            4,776
            
            
            
            -
            
            
            
            126
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            126Reclassification
      of noncontrolling interests
            
            
            -
            
            
            
            -
            
            
            
            132
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            132Comprehensive
      loss:Change
      in fair value of interest rate swaps
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (832
            )
            
            
            -
            
            
            
            (832
            )Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,189
            )
            
            
            -
            
            
            
            137
            
            
            
            (2,052
            )Total
      comprehensive loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,884
            )Equity,
      March 31, 2010
            
            
            52,293,300
            
            
            $
            521
            
            
            $
            1,092,301
            
            
            $
            (209,201
            )
            
            $
            (5,188
            )
            
            $
            3,833
            
            
            $
            882,266





See
accompanying notes to consolidated financial statements




3




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited,
in thousands)




Three
      Months Ended March 31,2010
            
            
            2009Operating
      activitiesNet
      (loss) income attributable to common shareholders
            
            $
            (2,189
            )
            
            $
            277Adjustments
      to reconcile net (loss) income attributable to common shareholders to net
      cash provided by operating activities:Income
      attributable to noncontrolling interests
            
            
            134
            
            
            
            232Loss
      from disposition of real estate
            
            
            3,646
            
            
            
            -Provision
      for asset impairment
            
            
            4,036
            
            
            
            -Depreciation
      and amortization
            
            
            17,822
            
            
            
            20,102Amortization
      of deferred financing costs and debt premiums/discounts
            
            
            1,109
            
            
            
            739Share-based
      compensation
            
            
            929
            
            
            
            583Loss
      from unconsolidated joint ventures
            
            
            1,414
            
            
            
            554Income
      tax provision
            
            
            143
            
            
            
            135Changes
      in operating assets and liabilities:Restricted
      cash
            
            
            1,122
            
            
            
            2,878Student
      contracts receivable, net
            
            
            991
            
            
            
            1,072Other
      assets
            
            
            (95
            )
            
            
            5,755Accounts
      payable and accrued expenses
            
            
            (5,410
            )
            
            
            (9,423
            )Other
      liabilities
            
            
            137
            
            
            
            (3,001
            )Distributions
      received from unconsolidated joint ventures
            
            
            180
            
            
            
            -Net
      cash provided by operating activities
            
            
            23,969
            
            
            
            19,903Investing
      activitiesNet
      proceeds from disposition of real estate
            
            
            1,098
            
            
            
            -Cash
      paid for property acquisition
            
            
            (9,618
            )
            
            
            -Investments
      in wholly-owned properties
            
            
            (4,701
            )
            
            
            (35,813
            )Investments
      in on-campus participating properties
            
            
            (43
            )
            
            
            (38
            )Purchase
      of corporate furniture, fixtures and equipment
            
            
            (183
            )
            
            
            (146
            )Net
      cash used in investing activities
            
            
            (13,447
            )
            
            
            (35,997
            )Financing
      activitiesSecured
      revolving credit facility, net
            
            
            -
            
            
            
            63,600Proceeds
      from construction loans
            
            
            -
            
            
            
            3,028Pay-off
      of mortgage loans
            
            
            (34,536
            )
            
            
            (29,831
            )Principal
      payments on debt
            
            
            (2,180
            )
            
            
            (2,603
            )Change
      in construction accounts payable
            
            
            -
            
            
            
            (2,312
            )Distributions to common and restricted stockholders
            
            
            (17,854
            )
            
            
            (14,477
            )Distributions
      to noncontrolling partners
            
            
            (495
            )
            
            
            (715
            )Net
      cash (used in) provided by financing activities
            
            
            (55,065
            )
            
            
            16,690Net
      change in cash and cash equivalents
            
            
            (44,543
            )
            
            
            596Cash
      and cash equivalents at beginning of period
            
            
            66,093
            
            
            
            25,600Cash
      and cash equivalents at end of period
            
            $
            21,550
            
            
            $
            26,196Supplemental
      disclosure of non-cash investing and financing activitiesChange
      in fair value of derivative instruments, net
            
            $
            (832
            )
            
            $
            (783
            )Supplemental
      disclosure of cash flow informationInterest
      paid
            
            $
            15,512
            
            
            $
            17,116





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.




As of
March 31, 2010, the Company’s property portfolio contained 85 student housing
properties with approximately 52,100 beds and approximately 17,000 apartment
units.  The Company’s property portfolio consisted of 79 owned
off-campus properties that are in close proximity to colleges and universities,
two American Campus Equity (“ACE®”)
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
March 31, 2010, the Company also owned a noncontrolling interest in two joint
ventures that owned an aggregate of 18 student housing properties with
approximately 9,800 beds in approximately 2,900 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 March 31, 2010, the Company provided third-party
management and leasing services for 33 properties (five of which the Company
served as the third-party developer and construction manager) that represented
approximately 24,700 beds in approximately 9,400 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 March 31, 2010, the Company’s total owned, joint venture
and third-party managed portfolio included 136 properties with approximately
86,600 beds in approximately 29,300 units.





2. 
 Summary
of Significant Accounting Policies




Basis
of Presentation




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




Recent
Accounting Pronouncements




On
January 1, 2010 the Company adopted new accounting guidance related to variable
interest entities (“VIEs”).  These new accounting pronouncements amend
the existing accounting guidance to: (i) require an enterprise to perform an
analysis to determine whether the enterprise’s variable interest or interests
give it a controlling financial interest in a VIE, identifying the primary
beneficiary of the VIE, (ii) require an ongoing reassessment of whether an
enterprise is the primary beneficiary of a VIE, rather than only when specific
events occur, (iii) eliminate the quantitative approach previously required for
determining the primary beneficiary of a VIE, (iv) amend certain guidance for
determining whether an entity is a VIE, (v)  add an additional
reconsideration event when changes in facts and circumstances pertinent to a VIE
occur, (vi) eliminate the exception for troubled debt restructuring regarding
VIE reconsideration, and (vii) require advanced disclosures that will provide
users of financial statements with more transparent information about an
enterprise’s involvement in a VIE.  Upon the adoption of this new
accounting guidance, management reevaluated its potential VIEs and concluded
that there is no change from its initial assessment regarding which entities are
consolidated by the Company and those that are accounted for under the equity
method of accounting.




5




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,
2009.




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-campus
              participating
      properties
            
            25-34
      years (shorter of useful life or respective lease term)Furniture,
      fixtures and equipment
            
            3-7
      years


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 $-0- and $1.0 million was capitalized during the three
months ended March 31, 2010 and 2009, respectively.  There was no
amortization of deferred financing costs capitalized as construction in progress
during the three months ended March 31, 2010 and 2009.




Management
assesses whether there has been an impairment in the value of the Company’s
investments in real estate whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be
recoverable.  Impairment is recognized when estimated expected future
undiscounted cash flows are less than the carrying value of the
property.  The estimation of expected future net cash flows is
inherently uncertain and relies on assumptions regarding current and future
economics and market conditions.  If such conditions change, then an
adjustment to the carrying value of the Company’s long-lived assets could occur
in the future period in which the conditions change.  To the extent
that a property is impaired, the excess of the carrying amount of the property
over its estimated fair value is charged to earnings.  Other than the
impairment of a property discussed in Note 4 herein, the Company believes that
there were no impairments of the carrying values of its investments in real
estate as of March 31, 2010.




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




6


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




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




On-Campus
Participating Properties




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




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




Intangible
Assets




In
connection with a property acquisition completed in March 2010 and the
acquisition of GMH Communities Trust (“GMH”) in June 2008, the Company
capitalized approximately $0.2 million and $18.8 million, respectively, 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 $0.1 million and $4.1
million for the three months ended March 31, 2010 and 2009,
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.  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 for both three month periods ended March 31, 2010 and
2009.  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 acquisition completed during the three months ended March 31,
2010.




7




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




Deferred
Financing Costs




The
Company defers financing costs and amortizes the costs over the terms of the
related debt using the effective interest method.  Upon repayment of
or in conjunction with a material change in the terms of the underlying debt
agreement, any unamortized costs are charged to earnings.  Accumulated
amortization at March 31, 2010 and December 31, 2009 approximated $9.9 million
and $9.0 million, respectively.  Deferred financing costs, net of
amortization, are included in other assets on the accompanying consolidated
balance sheets.




Joint
Ventures




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





Debt
Premiums and Discounts




Debt
premiums and discounts represent fair value adjustments to account for the
difference between the stated rates and market rates of debt assumed in
connection with the Company’s property acquisitions.  The debt
premiums and discounts are amortized to interest expense over the term of the
related loans using the effective-interest method.  As of March 31,
2010 and December 31, 2009, net unamortized debt premiums were approximately
$3.4 million and $3.8 million, respectively, and net unamortized debt discounts
were approximately $7.9 million and $8.5 million, respectively.  Debt
premiums and discounts are included in secured mortgage, construction and bond
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.  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.




8




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




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 March 31, 2010, the Company has deferred
approximately $11.2 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




The
Company records all derivative financial instruments on the balance sheet at
fair value.  Changes in fair value are recognized either in earnings
or as other comprehensive income, depending on whether the derivative has been
designated as a fair value or cash flow hedge and whether it qualifies as part
of a hedging relationship, the nature of the exposure being hedged, and how
effective the derivative is at offsetting movements in underlying
exposure.  The Company discontinues hedge accounting when: (i) it
determines that the derivative is no longer effective in offsetting changes in
the fair value or cash flows of a hedged item; (ii) the derivative expires or is
sold, terminated, or exercised; (iii) it is no longer probable that the
forecasted transaction will occur; or (iv) management determines that
designating the derivative as a hedging instrument is no longer
appropriate.  In all situations in which hedge accounting is
discontinued and the derivative remains outstanding, the Company will carry the
derivative at its fair value on the balance sheet, recognizing changes in the
fair value in current-period earnings.  The Company uses interest rate
swaps to effectively convert a portion of its floating rate debt to fixed rate,
thus reducing the impact of rising interest rates on interest
payments.  These instruments are designated as cash flow hedges and
the interest differential to be paid or received is accrued as interest expense.
The Company’s counter-parties are major financial institutions.  See
Note 11 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 (loss) income attributable to common
shareholders and the weighted average number of shares of the Company’s common
stock outstanding during the period.  Diluted earnings per share
reflect common shares issuable from the assumed conversion of common and
preferred Operating Partnership units and common share awards
granted.  Only those items having a dilutive impact on basic earnings
per share are included in diluted earnings per share.




The
following potentially dilutive securities were outstanding for the three months
ended March 31, 2010 and 2009, respectively, but were not included in the
computation of diluted earnings per share because the effects of their inclusion
would be anti-dilutive.




9




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


Three
      Months Ended March 31,2010
            
            
            2009Common
      Operating Partnership units (Note 7)
            
            
            1,188,064
            
            
            
            1,096,047Preferred
      Operating Partnership units (Note 7)
            
            
            114,963
            
            
            
            114,963Total
      potentially dilutive securities
            
            
            1,303,027
            
            
            
            1,211,010




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




Three
      Months Ended March 31,2010
            
            
            2009Basic
      earnings per share calculation:Income
      from continuing operations
            
            $
            5,874
            
            
            $
            910Income
      from continuing operations attributable tononcontrolling
      interests
            
            
            (328
            )
            
            
            (245
            )Income
      from continuing operations attributable tocommon
      shareholders
            
            
            5,546
            
            
            
            665Amount
      allocated to participating securities
            
            
            (225
            )
            
            
            (182
            )Income
      from continuing operations attributable tocommon
      shareholders, net of amount allocated toparticipating
      securities
            
            
            5,321
            
            
            
            483Loss
      from discontinued operations
            
            
            (7,929
            )
            
            
            (401
            )Loss
      from discontinued operations attributable tononcontrolling
      interests
            
            
            194
            
            
            
            13Loss
      from discontinued operations attributable tocommon
      shareholders
            
            
            (7,735
            )
            
            
            (388
            )Net
      (loss) income attributable to common shareholders,as
      adjusted – basic
            
            $
            (2,414
            )
            
            $
            95Income from continuing operations attributable tocommon
      shareholders, as adjusted – per share
            
            $
            0.10
            
            
            $
            0.01Loss
      from discontinued operations attributable tocommon
      shareholders – per share
            
            $
            (0.15
            )
            
            $
            (0.01
            )Net
      (loss) income attributable to common shareholders,as
      adjusted – per share
            
            $
            (0.05
            )
            
            $
            0.00Basic
      weighted average common shares outstanding
            
            
            52,235,644
            
            
            
            42,377,638Diluted
      earnings per share calculation:Income
      from continuing operations attributable tocommon
      shareholders, net of amount allocated toparticipating
      securities
            
            $
            5,321
            
            
            $
            483Loss
      from discontinued operations attributable tocommon
      shareholders
            
            
            (7,735
            )
            
            
            (388
            )Net
      (loss) income attributable to common shareholders,as
      adjusted – diluted
            
            $
            (2,414
            )
            
            $
            95Income
      from continuing operations attributable tocommon
      shareholders, net of amount allocated toparticipating
      securities – per share
            
            $
            0.10
            
            
            $
            0.01Loss
      from discontinued operations attributable tocommon
      shareholders – per share
            
            $
            (0.15
            )
            
            $
            (0.01
            )Net
      (loss) income attributable to common shareholders -per
      share
            
            $
            (0.05
            )
            
            $
            0.00Basic
      weighted average common shares outstanding
            
            
            52,235,644
            
            
            
            42,377,638Restricted
      Stock Awards (Note 10)
            
            
            570,322
            
            
            
            442,954Diluted
      weighted average common shares outstanding
            
            
            52,805,966
            
            
            
            42,820,592





10





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




3.  Property Acquisitions




In March
2010, one of the Fidelity joint ventures in which the company owns a 10%
interest assigned its ownership interest in the University Heights property to
the Company for a price of $9.9 million, the value of the mortgage
indebtedness.  This 528-bed property, serving students attending the
University of Alabama at Birmingham, is now 100% wholly-owned by the
company.




The
acquired property’s results of operations have been included in the accompanying
consolidated statements of operations since the acquisition closing
date.  The following pro forma information for the three months ended
March 31, 2010 and 2009, presents consolidated financial information for the
Company as if the property acquisition discussed above, had occurred on January
1, 2009.  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 March 31,2010
            
            
            2009Total
      revenues
            
            $
            81,898
            
            
            $
            76,151Net
      (loss) income attributable to common shareholders
            
            $
            (2,191
            )
            
            $
            83Net
      loss per share – basic
            
            $
            (0.05
            )
            
            $
            0.00Net
      loss per share – diluted
            
            $
            (0.05
            )
            
            $
            0.00




4.  Property Dispositions and Discontinued
Operations




In March
2010, the Company classified Campus Walk – Oxford as held for sale and the
property was sold on April 30, 2010.  See Note 15 herein for an
expanded discussion on this
property disposition.  Concurrent with the held for sale
classification, the property was recorded at the lower of cost or fair value
resulting in an impairment charge of approximately $4.0 million, whichis
included in discontinued operations in the accompanying consolidated statement
of operations for the three months ended March 31, 2010.  Accordingly,
net loss for Campus Walk – Oxford is included in discontinued operations for all
periods presented.




On March
26, 2010, the Company sold Cambridge at Southern for a purchase price of $19.5
million, including the assumption of the existing $18.4 million mortgage loan,
resulting in net proceeds of approximately $0.9 million.  The
resulting loss on disposition of approximately $3.6 million is included in
discontinued operations in the accompanying consolidated statement of operations
for the three months ended March 31, 2010.  Accordingly, net loss for
Cambridge at Southern is included in discontinued operations for all periods
presented.




On
December 31, 2009, the Company sold Riverside Estates for a purchase price of
$18.2 million, including the assumption of the existing $16.2 million mortgage
loan, resulting in net proceeds of approximately $1.3
million.   Accordingly, net loss for Riverside Estates is
included in discontinued operations for all periods presented.




The
related net loss for the afore-mentioned properties is reflected in the
accompanying consolidated statements of operations as discontinued operations
for the periods presented.  Below is a summary of the results of
operations for Cambridge at Southern and Riverside Estates through their
respective disposition dates as well as the results of operations for Campus
Walk – Oxford for all periods presented:




Three
      Months Ended
              March
      31,2010
            
            
            2009Total
      revenues
            
            $
            1,163
            
            
            $
            1,997Total
      operating expenses
            
            
            1,036
            
            
            
            1,766Provision
      for asset impairment
            
            
            4,036
            
            
            
            -Operating
      (loss) income
            
            
            (3,909
            )
            
            
            231Total
      nonoperating expenses
            
            
            (374
            )
            
            
            (632
            )Net
      loss
            
            $
            (4,283
            )
            
            $
            (401
            )




11




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  5.  Investments in Wholly-Owned
Properties




Wholly-owned
properties consisted of the following:




March
      31, 2010
              
              
              December
      31, 2009Land (1)
              
              $
              247,017
              
              
              $
              250,044Buildings
      and improvements
              
              
              1,807,115
              
              
              
              1,825,915Furniture,
      fixtures and equipment
              
              
              110,790
              
              
              
              112,8312,164,922
              
              
              
              2,188,790Less
      accumulated depreciation
              
              
              (187,855
              )
              
              
              (173,820
              )Wholly-owned
      properties, net (2)
              
              $
              1,977,067
              
              
              $
              2,014,970


(1)
            The land balance
      above includes undeveloped land parcels with a total book value of $27.6
      million as of both March 31,

              2010
      and December 31, 2009.(2)
            The
      balance above excludes Campus Walk – Oxford which is classified as
      wholly-owned property held for sale in the accompanying consolidated
      balance sheet as of March 31,
2010.





6.  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.




12




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





On-campus
participating properties are as follows:




Historical
      CostLessor/University
            
            Lease
      Commencement
            
            Required Debt
      Repayment(1)
            
            March
      31, 2010
            
            
            December
      31, 2009Texas
      A&M University System /Prairie View A&M
      University (2)
            
            2/1/96
            
            9/1/23
            
            $
            38,943
            
            
            $
            38,918Texas
      A&M University System /Texas
      A&M International
            
            2/1/96
            
            9/1/23
            
            
            6,217
            
            
            
            6,216Texas
      A&M University System /Prairie View A&M
      University(3)
            
            10/1/99
            
            8/31/25  /  8/31/28
            
            
            24,409
            
            
            
            24,398University
      of Houston System /University of
      Houston(4)
            
            9/27/00
            
            8/31/35
            
            
            35,198
            
            
            
            35,192104,767
            
            
            
            104,724Less
      accumulated amortization
            
            
            
            
            
            
            (40,112
            )
            
            
            (39,034
            )On-campus
      participating properties, net
            
            
            
            
            
            $
            64,655
            
            
            $
            65,690




(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.




7.   Noncontrolling Interests




Third-party
joint venture partners:  The Company consolidates four joint
ventures that own and operate the Callaway House, University Village at Sweet
Home, University Centre and Villas at Chestnut Ridge owned-off campus
properties.  The portion of net assets attributable to the third-party
partners in these joint ventures is classified as “noncontrolling interests”
within equity on the accompanying consolidated balance
sheets.  Accordingly, the third-party partners’ share of the income or
loss of the joint ventures is reported on the consolidated statements of
operations as “noncontrolling interests share of net income /
loss.”




Operating
Partnership units:  Certain partners in the Operating
Partnership hold their ownership through common and preferred units of limited
partnership interest, hereinafter referred to as “Common Units” or “Series A
Preferred Units.”  Common Units and Series A Preferred Units are
exchangeable into an equal number of shares of the Company’s common stock, or,
at the Company’s election, cash.  A Common Unit and a share of the
Company’s common stock have essentially the same economic characteristics, as
they effectively participate equally in the net income and distributions of the
Operating Partnership.  Series A Preferred Units have a cumulative
preferential per annum cash distribution rate of 5.99%, payable quarterly
concurrently with the payment of dividends on the Company’s common
stock.




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




During
the three months ended March 31, 2010 and 2009, 4,776 and 1,000 Common Units,
respectively, were converted into shares of the Company’s common
stock.  As of March 31, 2010 and December 31, 2009, approximately 2%
of the equity interests of the Operating Partnership was held by owners of
Common Units and Series A Preferred Units.




13




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




8.   Investment in Unconsolidated Joint
Ventures




Investments
in unconsolidated joint ventures are accounted for utilizing the equity
method.  As discussed in Note 2 herein, the equity method is used when
the Company has the ability to exercise significant influence over operating and
financial policies of the joint venture but does not have control of the joint
venture.  Under the equity method, these investments are initially
recognized in the balance sheet at cost and are subsequently adjusted to reflect
the Company’s proportionate share of net earnings or losses of the joint
venture, distributions received, contributions, and certain other adjustments,
as appropriate.   When circumstances indicate there may have been
a loss in value of an equity method investment, the Company evaluates the
investment for impairment by estimating the Company’s ability to recover its
investment from future expected discounted cash flows.  If the Company
determines the loss in value is other than temporary, the Company recognizes an
impairment charge to reflect the investment at fair value.The Company
believes that there were no impairments of the carrying values of its equity
method investments as of March 31, 2010.




Fidelity
Joint Ventures:  The Company owns a 10% interest in two joint
ventures with Fidelity that own 18 properties containing approximately 9,800
beds.  The Company serves as property manager for all of the joint
venture properties.  These joint ventures are 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 $293.5 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’s $6.8 million and $8.0 million investment in these two joint ventures
at March 31, 2010 and December 31, 2009, respectively, is included in other
assets in the accompanying consolidated balance sheets, and the Company’s $0.9
million and $0.3 million share in the loss from these two joint ventures for the
three months ended March 31, 2010 and 2009, respectively, is included in loss
from unconsolidated joint ventures in the accompanying consolidated statements
of operations.  For the three months ended March 31, 2010 and 2009,
the Company earned approximately $0.5 million and $0.6 million, respectively, in
property management fees from these joint ventures.  Due to the
respective limited liability company agreements not providing for maximum
capital commitments from the members, the Company’s maximum exposure to loss
stemming from its investment in the Fidelity Joint Ventures could be
unlimited.




Hampton
Roads Joint Venture:The Company
also holds a noncontrolling equity interest in a joint venture that owns a
military housing privatization project with the United States Navy to design,
develop, construct, renovate, and manage unaccompanied soldier housing located
on naval bases in Norfolk and Newport News, Virginia.  The
project is financed through taxable revenue bonds.  The Company’s $-0-
and $0.5 million investment in this joint venture at March 31, 2010 and December
31, 2009, respectively, is included in other assets in the accompanying
consolidated balance sheets, and the Company’s share in the loss from this joint
venture of $0.5 million and $0.3 million for the three months ended March 31,
2010 and 2009, 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 approximately $0.3 million for both three month
periods ended March 31, 2010 and 2009.





14




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


9.   Debt




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




March
      31, 2010
            
            
            December
      31, 2009Debt
      secured by wholly-owned properties:Mortgage
      loans payable
            
            $
            795,023
            
            
            $
            850,046Construction
      loan payable
            
            
            100,000
            
            
            
            100,000895,023
            
            
            
            950,046Debt
      secured by on-campus participating properties:Mortgage
      loans payable
            
            
            32,637
            
            
            
            32,718Bonds
      payable
            
            
            51,390
            
            
            
            51,39084,027
            
            
            
            84,108Senior
      secured term loan
            
            
            100,000
            
            
            
            100,000Secured
      agency facility
            
            
            94,000
            
            
            
            94,000Unamortized
      debt premiums
            
            
            3,381
            
            
            
            3,765Unamortized
      debt discounts
            
            
            (7,892
            )
            
            
            (8,464
            )Total
      debt
            
            $
            1,168,539
            
            
            $
            1,223,455




Pay-off
of Mortgage Debt




During
the three months ended March 31, 2010, the Company paid off $34.5 million of
fixed-rate mortgage debt secured by two of its wholly-owned properties (Campus
Club – Statesboro and University Trails), which was scheduled to mature on March
1, 2010.  As of March 31, 2010, the Company has an additional $49.3
million of outstanding fixed-rate mortgage debt scheduled to mature throughout
the remainder of 2010, all of which we expect to pay-off on or before their
respective maturity dates.




Secured
Revolving Credit Facility




The
Operating Partnership has a $225 million revolving credit facility that may be
expanded by up to an additional $75 million upon the satisfaction of certain
conditions.  The maturity date of the facility is August 14, 2012 and
can be extended 12 months through August 2013.  The facility is
currently secured by seven of the Company’s wholly-owned
properties.




Availability
under the revolving credit facility is limited to an “aggregate borrowing base
amount” equal to the lesser of (i) 50% to 65% of the value of certain
properties, calculated as set forth in the credit facility, and (ii) the
adjusted net operating income from these properties divided by a formula
amount.  The facility bears interest at a variable rate, at the
Company’s option, based upon a base rate or one-, two-, or three-month LIBOR,
with a LIBOR floor of 2.0%, plus, in each case, a spread based upon the
Company’s total leverage.  Additionally, the Company is required to
pay an unused commitment fee of 0.35% per annum.  As of March 31,
2010, there was no balance on the facility and availability under the facility
totaled $154.3 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 and
total indebtedness.  The Company may not pay distributions that exceed
a specified percentage of funds from operations, as adjusted, for any four
consecutive quarters.  The financial covenants also include
consolidated net worth and leverage ratio tests.  As of March 31,
2010, the Company was in compliance with all such covenants.




Secured
Agency Facility




The
Company has a $125 million secured revolving credit facility with a Freddie Mac
lender.  The facility has a five-year term and is currently secured by
11 properties referred to as the “Collateral Pool.”  The facility
bears interest at one- or three-month LIBOR plus a spread that varies based on
the debt service ratio of the Collateral Pool.  Additionally, the
Company is required to pay an unused commitment fee of 1.0% per
annum.  As of March 31, 2010, the balance outstanding on the secured
agency facility totaled $94.0 million, bearing interest at a weighted average
rate of 2.2%.  The secured agency facility includes certain financial
covenants which are the same as are required for the secured revolving credit
facility, described above.




15




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




Senior
Secured Term Loan




The
Operating Partnership has a $100 million senior secured term loan that matures
on May 23, 2011 and can be extended through May 2012 through the exercise of a
12-month extension option.  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.  As of March 31, 2010, the balance outstanding on the
secured term loan was $100 million.  The Company guarantees the
Operating Partnership’s obligations under the secured term loan.  The
secured term loan includes the same restrictions and covenants as the secured
revolving credit facility, described above.




On
February 23, 2009, the Company entered into two $50.0 million interest rate swap
agreements effective March 20, 2009 through February 20, 2012, which are both
used to hedge the Company’s exposure to fluctuations in interest payments on its
LIBOR-based senior secured term loan.  Under the terms of the two interest
rate swap agreements, the Company pays an average fixed rate of 1.7925% and
receives a one-month LIBOR floating rate.  As a result of these two
interest rate swaps, the Company effectively fixed the interest rate on its
senior secured term loan to 3.55% as of March 31, 2010 (1.7925% + 1.75%
spread).  In the event that the swaps at any time have a negative fair
value below a certain threshold level, the Company is required to post cash into
a collateral account pledged to the interest rate swap providers.  As
of March 31, 2010, the Company had deposited approximately $0.7 million into a
collateral account related to one of the interest rate swaps.  See
Note 11 herein for a more detailed discussion of the Company’s derivative
instruments and hedging activities.




10.  Incentive Award Plan




The
Company has adopted the 2004 Incentive Award Plan (the “Plan”).  The
Plan provides for the grant of various stock-based incentive awards to selected
employees and directors of the Company and the Company’s
affiliates.  The Company has reserved a total of 1,210,000 shares of
the Company’s common stock for issuance pursuant to the Plan, subject to certain
adjustments for changes in the Company’s capital structure, as defined in the
Plan.  As of March 31, 2010, 211,767 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 restricted stock units (“RSUs”).  Upon
the Settlement Date, 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.  There were no RSU grants or settlements during the three
months ended March 31, 2010 and there were 5,376 RSUs that had not yet been
settled as of March 31, 2010.




Restricted
Stock Awards




The
Company awards restricted stock awards (“RSAs”) to its executive officers and
certain employees that vest in equal annual installments over a five year
period.  Unvested awards are forfeited upon the termination of an
individual’s employment with the Company under specified
circumstances.  Recipients of RSAs receive dividends, as declared by
the Company’s Board of Directors, on unvested shares, provided that the
recipient continues to be employed by the Company.  A summary of the
Company’s RSAs under the Plan as of March 31, 2010 and changes during the three
months ended March 31, 2010, is presented below:




Number
      of
              RSAsNonvested
      balance at December 31, 2009
            
            
            461,935Granted
            
            
            206,711Vested
            
            
            (84,631
            )Forfeited
            
            
            (63,918
            )Nonvested
      balance at March 31, 2010
            
            
            520,097





16





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





The
Company recognizes the value of these awards as an expense over the vesting
periods, which amounted to approximately $0.9 million and $0.6 million for the
three months ended March 31, 2010 and 2009, respectively.




Common
Units




Upon
vesting of awards under the Company’s 2004 Outperformance Bonus Plan in August
2007, the Compensation Committee of the Board of Directors exercised its
permitted discretion and granted 132,400 Common Units to selected
recipients.




11. 
 Derivatives
Instruments and Hedging Activities




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




Cash
Flow Hedges of Interest Rate Risk




The
Company’s objectives in using interest rate derivatives are to add stability to
interest expense and to manage its exposure to interest rate
movements.  To accomplish this objective, the Company primarily uses
interest rate swaps as part of its interest rate risk management
strategy.  Interest rate swaps designated as cash flow hedges involve
the receipt of variable-rate amounts from a counterparty in exchange for the
Company making fixed-rate payments over the life of the agreements without
exchange of the underlying notional amount.




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 three
months ended March 31, 2010, 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 March 31, 2010:




Date Entered
            Effective Date
            MaturityDate
            Pay
      Fixed Rate
            Receive
      Floating
              Rate
      Index
            NotionalAmount
            Fair
      ValueFeb. 12, 2007
            Feb. 15, 2007
            Feb.
      15, 2014
            6.689%
            LIBOR
      – 1 mo. plus 1.35%
            $         33,156
            $      (3,730)Feb. 23, 2009
            March 20, 2009
            Feb.
      20, 2012
            1.785%
            LIBOR
      – 1 month
            50,000
            (724)Feb.
      23, 2009
            March 20, 2009
            Feb.
      20, 2012
            1.800%
            LIBOR
      – 1 month
            50,000
            (734)




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 March
31, 2010 and December 31, 2009:




Derivative
      LiabilitiesAs
      of March 31, 2010
            
            
            As
      of December 31, 2009Balance
      Sheet
              Location
            
            Fair
      Value
            
            
            Balance
      SheetLocation
            
            Fair
      ValueInterest
      rate swap contracts
            Other
      liabilities
            
            $
            5,188
            
            
            Other
      Liabilities
            
            $
            4,356Total
      derivatives designated as hedging
              instruments
            
            
            $
            5,188
            
            
            
            
            $
            4,356




17




AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  The table
below presents the effect of the Company’s derivative financial instruments on
other comprehensive income (“OCI”) for the three months ended March 31, 2010 and
2009:


Amount
      of Loss Recognized
                in
      OCI on Derivative
                (Effective
      Portion)Cash Flow
    Hedging
              
              Three
      Months Ended
                March
      31,Relationships
              
              2010
              
              
              2009Interest
      rate swap contracts
              
              $
              (832
              )
              
              $
              (783
              )Total
              
              $
              (832
              )
              
              $
              (783
              )




The
Company reported comprehensive loss of $0.3 million for the three months ended
March 31, 2009, which includes net income of $0.5 million offset by an
unrealized loss of $0.8 million (reflected in the table above).




12.   Fair Value Disclosures




The
following table presents information about the Company’s assets and liabilities
measured at fair value on a recurring and nonrecurring basis as of March 31,
2010, and indicate 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:




Fair
Value Measurements on a Recurring or Nonrecurring Basis as of March 31,
2010




Quoted
      Prices in Active Markets for Identical Assets and Liabilities
      (Level 1)
            
            
            Significant
      Other Observable Inputs (Level 2)
            
            
            Significant
      Unobservable Inputs (Level 3)
            
            
            Balance
      atMarch
      31, 2010Assets:Real
      estate (1)
            
            $
            9,100
            
            
            $
            -
            
            
            $
            -
            
            
            $
            9,100Liabilities:Derivative
      financial
              Instruments
      (2)
            
            $
            -
            
            
            $
            5,188
            
            
            $
            -
            
            
            $
            5,188




(1)
              During
      the three months ended March 31, 2010, we recognized an impairment loss of
      approximately $4.0 million on a wholly-owned property classified as held
      for sale as of March 31, 2010. We estimated the fair value based on a
      contract price less selling costs.(2)
              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 March 31, 2010,
      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.  18
  AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  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
      March 31, 2010, 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.




Other
Fair Value Disclosures
 
 Cash and Cash Equivalents,
Restricted Cash, Student Contracts Receivable, Other Assets, Account Payable and
Accrued Expenses and Other Liabilities:  The Company estimated
that the carrying amount approximates fair value, due to the short maturity of
these instruments.
 
 Derivative Instruments: These
instruments are reported on the balance sheet at fair value, which is based on
calculations provided by independent, third-party financial institutions and
represent the discounted future cash flows expected, based on the projected
future interest rate curves over the life of the instrument.
 
 Senior Secured Term Loan, Secured
Credit Facilities and Construction Loans: the fair value of the Company’s
secured term loan, secured credit facilities and construction loans approximate
carrying values due to the variable interest rate feature of these
instruments.
 
 Mortgage Loans: the fair
value of mortgage loans is based on the present value of the cash flows at
current rates through maturity.
 
 Bonds Payable: the fair value
of bonds payable is based on market quotes for bonds outstanding.
 
 The table
below contains the estimated fair value and related carrying amounts for the
Company’s mortgage loans and bonds payable as of March 31, 2010 and December 31,
2009:
 
 March
      31, 2010
              
              
              December
      31, 2009Fair
      Value
              
              
              Carrying
      Amount
              
              
              Fair
      Value
              
              
              Carrying
      AmountMortgage
      loans
              
              $
              861,872
              
              
              $
              823,149
              
              
              $
              912,332
              
              
              $
              878,065Bonds
      payable
              
              
              50,484
              
              
              
              51,390
              
              
              
              49,865
              
              
              
              51,390
 
 13.  Commitments
and Contingencies
 Commitments
 
 Development-related
guarantees:For
its third-party development projects, the Company commonly provides alternate
housing and project cost guarantees, subject to force majeure.  These
guarantees are typically limited, on an aggregate basis, to the amount of the
projects’ related development fees or a contractually agreed-upon maximum
exposure amount.  Alternate housing guarantees typically expire five
days after construction is complete and generally require the Company to provide
substitute living quarters and transportation for students to and from the
university if the project is not complete by an agreed-upon completion
date.  Under project cost guarantees, the Company is responsible for
the construction cost of a project in excess of an approved
budget.   The budget consists primarily of costs included in the
general contractors’ guaranteed maximum price contract (“GMP”).  In
most cases, the GMP obligates the general contractor, subject to force majeure
and approved change orders, to provide completion date guarantees and to cover
cost overruns and liquidated damages.  In addition, the GMP is
typically secured with payment and performance bonds.  Project cost
guarantees expire upon completion of certain developer obligations, which are
normally satisfied within one year after completion of the project.
  19
 
 AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  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 March 31, 2010, management did not anticipate any material
deviations from schedule or budget related to third-party development projects
currently in progress.
 
 Guaranty of Joint Venture Mortgage
Debt:As mentioned in Note 8, the Fidelity Joint Ventures are funded in
part with secured third party debt in the amount of $293.5 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 to be
immaterial.  The Company’s estimated maximum exposure amount under the
above guarantees is approximately $303.1 million.
 
 Contingencies
 
 Litigation:In the
normal course of business, the Company is subject to claims, lawsuits, and legal
proceedings.  While it is not possible to ascertain the ultimate outcome of
such matters, management believes that the aggregate amount of such liabilities,
if any, in excess of amounts provided or covered by insurance, will not have a
material adverse effect on the consolidated financial position or results of
operations of the Company.
 
 Letters of
Intent:  In the ordinary course of the Company’s business, the
Company enters into letters of intent indicating a willingness to negotiate
for acquisitions, dispositions or joint ventures.  Such letters of
intent are non-binding, and neither party to the letter of intent is obligated
to pursue negotiations unless and until a definitive contract is entered into by
the parties.  Even if definitive contracts are entered into, the
letters of intent relating to the acquisition and disposition of real property
and resulting contracts generally contemplate that such contracts will provide
the acquirer with time to evaluate the property and conduct due diligence,
during which periods the acquiror will have the ability to terminate the
contracts without penalty or forfeiture of any deposit or earnest
money.  There can be no assurance that definitive contracts will be
entered into with respect to any matter covered by letters of intent or that the
Company will consummate any transaction contemplated by any definitive
contract.  Furthermore, due diligence periods for real property are
frequently extended as needed.  Once the due diligence period expires,
the Company is then at risk under a real property acquisition contract, but only
to the extent of any earnest money deposits associated with the
contract.
  Environmental
Matters:The Company is not aware of any environmental
liability with respect to the properties that would have a material adverse
effect on the Company’s business, assets or results of operations. However,
there can be no assurance that such a material environmental liability does not
exist. The existence of any such material environmental liability could have an
adverse effect on the Company’s results of operations and cash
flows.
 
 14.   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.
  20
  AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Three
      Months Ended March 31,2010
              
              
              2009Wholly-Owned
      PropertiesRental
      revenues
              
              $
              71,444
              
              
              $
              65,575Interest
      and other income
              
              
              11
              
              
              
              11Total
      revenues from external customers
              
              
              71,455
              
              
              
              65,586Operating
      expenses before depreciation, amortization,ground/facility
      lease, and allocation of corporate overhead
              
              
              31,691
              
              
              
              30,758Ground/facility
      lease
              
              
              265
              
              
              
              260Interest
      expense
              
              
              12,181
              
              
              
              13,680Operating
      income before depreciation, amortizationand
      allocation of corporate overhead
              
              $
              27,318
              
              
              $
              20,888Depreciation
      and amortization
              
              $
              16,066
              
              
              $
              17,901Capital
      expenditures
              
              $
              4,701
              
              
              $
              35,813Total
      segment assets at March 31,
              
              $
              2,032,798
              
              
              $
              2,070,872On-Campus
      Participating PropertiesRental
      revenues
              
              $
              7,311
              
              
              $
              6,874Interest
      and other income
              
              
              3
              
              
              
              24Total
      revenues from external customers
              
              
              7,314
              
              
              
              6,898Operating
      expenses before depreciation, amortization,ground/facility
      lease and allocation of corporate overhead
              
              
              2,232
              
              
              
              1,897Ground/facility
      lease
              
              
              306
              
              
              
              292Interest
      expense
              
              
              1,503
              
              
              
              1,559Operating
      income  before depreciation, amortizationand
      allocation of corporate overhead
              
              $
              3,273
              
              
              $
              3,150Depreciation
      and amortization
              
              $
              1,079
              
              
              $
              1,090Capital
      expenditures
              
              $
              43
              
              
              $
              38Total
      segment assets at March 31,
              
              $
              79,883
              
              
              $
              82,318Development
      ServicesDevelopment
      and construction management fees fromexternal
      customers
              
              $
              574
              
              
              $
              1,052Operating
      expenses
              
              
              2,327
              
              
              
              2,267Operating
      loss before depreciation, amortizationand
      allocation of corporate overhead
              
              $
              (1,753
              )
              
              $
              (1,215
              )Total
      segment assets at  March 31,
              
              $
              5,217
              
              
              $
              6,277Property
      Management ServicesProperty
      management fees from external customers
              
              $
              2,214
              
              
              $
              2,242Intersegment
      revenues
              
              
              2,875
              
              
              
              2,696Total
      revenues
              
              
              5,089
              
              
              
              4,938Operating
      expenses
              
              
              2,027
              
              
              
              1,831Operating
      income before depreciation, amortizationand
      allocation of corporate overhead
              
              $
              3,062
              
              
              $
              3,107Total
      segment assets at March 31,
              
              $
              4,412
              
              
              $
              6,209ReconciliationsTotal
      segment revenues
              
              $
              84,432
              
              
              $
              78,474Unallocated
      interest income earned on corporate cash
              
              
              3
              
              
              
              4Elimination
      of intersegment revenues
              
              
              (2,875
              )
              
              
              (2,696
              )Total
      consolidated revenues, including interest income
              
              $
              81,560
              
              
              $
              75,782Segment
      operating income before depreciation, amortizationand
      allocation of corporate overhead
              
              $
              31,900
              
              
              $
              25,930Depreciation
      and amortization
              
              
              (18,530
              )
              
              
              (20,122
              )Net
      unallocated expenses relating to corporate overhead
              
              
              (5,939
              )
              
              
              (4,209
              )Loss
      from unconsolidated joint ventures
              
              
              (1,414
              )
              
              
              (554
              )Income
      tax provision
              
              
              (143
              )
              
              
              (135
              )Income
      from continuing operations
              
              $
              5,874
              
              
              $
              910Total
      segment assets
              
              $
              2,122,310
              
              
              $
              2,165,676Unallocated
      corporate assets
              
              
              33,245
              
              
              
              24,261Total
      assets at March 31,
              
              $
              2,155,555
              
              
              $
              2,189,937
  21
  AMERICAN
CAMPUS COMMUNITIES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  15.  Subsequent Events
 
 Pay-off of Mortgage
Debt:On April 1, 2010, the Company paid off $17.4 million in
fixed-rate mortgage debt secured by one of our wholly-owned properties (River
Club Apartments) that was scheduled to mature on August 1, 2010.
 
 Property Disposition:On
April 30, 2010, the Company sold Campus Walk – Oxford for a purchase price of
$9.2 million, including the assumption of the existing $8.1 million mortgage
loan, resulting in net proceeds of approximately $0.8 million.
 
 Distributions:  On
May 5, 2010, the Company declared a first quarter 2010 distribution per share of
$0.3375 which will be paid on May 28, 2010 to all common stockholders of record
as of May 18, 2010.  At the same time, the Operating Partnership will
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 (see Note 7).
  Adoption of New Incentive Award
Plan:  On May 6, 2010, the Company’s stockholders, upon the
recommendation of the Board of Directors, approved the American Campus
Communities, Inc. 2010 Incentive Award Plan (the “2010 Plan”).  The 2010
Plan includes an authorization to issue up to 1,683,110 shares of the Company’s
common stock (1,500,000 newly authorized shares plus 183,110 shares available
for grant under the Company’s 2004 Incentive Award Plan as of March 15,
2010.  The 2010 Plan provides for various types of equity awards to
directors, executive and other officers and key employees. The types of awards
that may be granted under the 2010 Plan include incentive stock options,
nonqualified stock options, RSAs, RSUs, profits interest units (“PIUs”) and
other stock-based awards.
  22
 
  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.
  As of
March 31, 2010, our property portfolio contained 85 student housing properties
with approximately 52,100 beds and approximately 17,000
apartment units.  Our property portfolio consisted of 79 owned
off-campus properties that are in close proximity to colleges and universities,
two American Campus Equity (“ACE®”)
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
March 31, 2010, we also owned a noncontrolling interest in two joint ventures
that owned an aggregate of 18 student housing properties with approximately
9,800 beds in approximately 2,900 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.
  23
  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 March 31,
2010, we provided third-party management and leasing services for 33 properties
(five of which we served as the third-party developer and construction manager)
that represented approximately 24,700 beds in approximately 9,400
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 March 31, 2010, our total
owned, joint venture and third-party managed portfolio was comprised of 136
properties with approximately 86,600 beds in approximately 29,300
units.
  Third-Party
Development Services
  Our
third-party development and construction management services as of March 31,
2010 consisted of three projects under contract and currently in progress with
fees ranging from $2.5 million to $7.6 million.  As of March 31, 2010,
fees of approximately $2.2 million remained to be earned by us with respect to
these projects, which have scheduled completion dates of July 2010 through
August 2011.
  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.
 
 American
Campus Equity (“ACE®”)
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.
  24
  Property
Operations
  As
      of March 31, 2010 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
  25
  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.
      Campus Club – Statesboro
                    
                    2008
                    
                    Statesboro,
      GA
                    
                    Georgia
      Southern University
                    
                    
                    276
                    
                    
                    
                    98456.
      University Pines
                    
                    2008
                    
                    Statesboro,
      GA
                    
                    Georgia
      Southern University
                    
                    
                    144
                    
                    
                    
                    55257.
      Lakeside
                    
                    2008
                    
                    Athens,
      GA
                    
                    University
      of Georgia
                    
                    
                    244
                    
                    
                    
                    77658.
      The Club
                    
                    2008
                    
                    Athens,
      GA
                    
                    University
      of Georgia
                    
                    
                    120
                    
                    
                    
                    48059.
      The Edge
                    
                    2008
                    
                    Orlando,
      FL
                    
                    Central
      Florida
                    
                    
                    306
                    
                    
                    
                    93060.
      University Place
                    
                    2008
                    
                    Charlottesville,
      VA
                    
                    University
      of Virginia
                    
                    
                    144
                    
                    
                    
                    52861.
      Southview
                    
                    2008
                    
                    Harrisonburg,
      VA
                    
                    James
      Madison University
                    
                    
                    240
                    
                    
                    
                    96062.
      Stonegate
                    
                    2008
                    
                    Harrisonburg,
      VA
                    
                    James
      Madison University
                    
                    
                    168
                    
                    
                    
                    67263.
      The Commons
                    
                    2008
                    
                    Harrisonburg,
      VA
                    
                    James
      Madison University
                    
                    
                    132
                    
                    
                    
                    52864.
      University Gables
                    
                    2008
                    
                    Murfreesboro,
      TN
                    
                    Middle
      Tennessee State University
                    
                    
                    168
                    
                    
                    
                    64865.
      Campus Ridge
                    
                    2008
                    
                    Johnson
      City, TN
                    
                    East
      Tennessee State University
                    
                    
                    132
                    
                    
                    
                    52866.
      The Enclave I
                    
                    2008
                    
                    Bowling
      Green, OH
                    
                    Bowling
      Green State University
                    
                    
                    120
                    
                    
                    
                    48067.
      Hawks Landing
                    
                    2008
                    
                    Oxford,
      OH
                    
                    Miami
      University of Ohio
                    
                    
                    122
                    
                    
                    
                    48468.
      Willow Tree Apartments
                    
                    2008
                    
                    Ann
      Arbor, MI
                    
                    University
      of Michigan
                    
                    
                    310
                    
                    
                    
                    56869.
      Willow Tree Towers
                    
                    2008
                    
                    Ann
      Arbor, MI
                    
                    University
      of Michigan
                    
                    
                    163
                    
                    
                    
                    28370.
      Abbott Place
                    
                    2008
                    
                    East
      Lansing, MI
                    
                    Michigan
      State University
                    
                    
                    222
                    
                    
                    
                    65471.
      University Centre – Kalamazoo
                    
                    2008
                    
                    Kalamazoo,
      MI
                    
                    Western
      Michigan University
                    
                    
                    232
                    
                    
                    
                    70072.
      University Meadows
                    
                    2008
                    
                    Mt.
      Pleasant, MI
                    
                    Central
      Michigan University
                    
                    
                    184
                    
                    
                    
                    61673.
      Campus Way
                    
                    2008
                    
                    Tuscaloosa,
      AL
                    
                    University
      of Alabama
                    
                    
                    196
                    
                    
                    
                    68474. Campus Walk –
      Oxford (3)
                    
                    2008
                    
                    Oxford,
      MS
                    
                    University
      of Mississippi
                    
                    
                    108
                    
                    
                    
                    43275.
      Campus Trails
                    
                    2008
                    
                    Starkville,
      MS
                    
                    Mississippi
      State University
                    
                    
                    156
                    
                    
                    
                    48076.
      University Pointe
                    
                    2008
                    
                    Lubbock,
      TX
                    
                    Texas
      Tech University
                    
                    
                    204
                    
                    
                    
                    68277.
      University Trails
                    
                    2008
                    
                    Lubbock,
      TX
                    
                    Texas
      Tech University
                    
                    
                    240
                    
                    
                    
                    68478. Vista del Sol
      (4)
                    
                    2008
                    
                    Tempe,
      AZ
                    
                    Arizona
      State University
                    
                    
                    613
                    
                    
                    
                    1,86679.
      Villas at Chestnut Ridge
                    
                    2008
                    
                    Amherst,
      NY
                    
                    State
      University of New York – Buffalo
                    
                    
                    196
                    
                    
                    
                    55280. Barrett Honors
      College (4)
                    
                    2009
                    
                    Tempe,
      AZ
                    
                    Arizona
      State University
                    
                    
                    604
                    
                    
                    
                    1,72181.
      University Heights
                    
                    2010
                    
                    Birmingham,
      AL
                    
                    University
      of Alabama at Birmingham
                    
                    
                    176
                    
                    
                    
                    528Total
      wholly-owned properties
                    
                    
                    
                    
                    
                    
                    
                    
                    15,095
                    
                    
                    
                    47,563
  26
  PROPERTY
                  
                  YEAR ACQUIRED
      /DEVELOPED (1)
                  
                  LOCATION
                  
                  PRIMARY
      UNIVERSITY SERVED
                  
                  UNITS
                  
                  
                  BEDSOn-campusparticipating
      properties:82.
      University Village – PVAMU
                  
                  1996
      / 97 / 98
                  
                  Prairie
      View, TX
                  
                  Prairie
      View A&M University
                  
                  
                  612
                  
                  
                  
                  1,92083.
      University College – PVAMU
                  
                  2000
      / 2003
                  
                  Prairie
      View, TX
                  
                  Prairie
      View A&M University
                  
                  
                  756
                  
                  
                  
                  1,47084.
      University Village – TAMIU
                  
                  1997
                  
                  Laredo,
      TX
                  
                  Texas
      A&M International University
                  
                  
                  84
                  
                  
                  
                  25085.
      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
                  
                  
                  
                  
                  
                  
                  
                  
                  16,958
                  
                  
                  
                  52,082
  (1)
                  As
      of March 31, 2010, the average age of our wholly-owned properties was
      approximately 10.1 years.
  (2)
                  Subject
      to a 75-year ground lease with Temple
  University.
  (3)
                  This
      property is classified as held for sale as of March 31, 2010 and was sold
      on April 30, 2010.
  (4)
                  Subject
      to a 65-year ground/facility lease with Arizona State
      University.
  27
  Results
of Operations
  Comparison
of the Three Months Ended March 31, 2010 and March 31, 2009
  The
following table presents our results of operations for the three months ended
March 31, 2010 and 2009, including the amount and percentage change in these
results between the two periods:
  Three
      Months Ended March 31,2010
                  
                  
                  2009
                  
                  
                  Change
      ($)
                  
                  
                  Change
      (%)Revenues:Wholly-owned
      properties
                  
                  $
                  71,192
                  
                  
                  $
                  65,335
                  
                  
                  $
                  5,857
                  
                  
                  
                  9.0
                  %On-campus
      participating properties
                  
                  
                  7,311
                  
                  
                  
                  6,874
                  
                  
                  
                  437
                  
                  
                  
                  6.4
                  %Third
      party development services
                  
                  
                  574
                  
                  
                  
                  1,052
                  
                  
                  
                  (478
                  )
                  
                  
                  (45.4
                  %)Third
      party management services
                  
                  
                  2,214
                  
                  
                  
                  2,242
                  
                  
                  
                  (28
                  )
                  
                  
                  (1.2
                  %)Resident
      services
                  
                  
                  252
                  
                  
                  
                  240
                  
                  
                  
                  12
                  
                  
                  
                  5.0
                  %Total
      revenues
                  
                  
                  81,543
                  
                  
                  
                  75,743
                  
                  
                  
                  5,800
                  
                  
                  
                  7.7
                  %Operating
      expenses:Wholly-owned
      properties
                  
                  
                  31,476
                  
                  
                  
                  30,490
                  
                  
                  
                  986
                  
                  
                  
                  3.2
                  %On-campus
      participating properties
                  
                  
                  2,399
                  
                  
                  
                  2,030
                  
                  
                  
                  369
                  
                  
                  
                  18.2
                  %Third
      party development and management services
                  
                  
                  3,099
                  
                  
                  
                  2,977
                  
                  
                  
                  122
                  
                  
                  
                  4.1
                  %General
      and administrative
                  
                  
                  2,753
                  
                  
                  
                  2,748
                  
                  
                  
                  5
                  
                  
                  
                  0.2
                  %Depreciation
      and amortization
                  
                  
                  17,488
                  
                  
                  
                  19,332
                  
                  
                  
                  (1,844
                  )
                  
                  
                  (9.5
                  %)Ground/facility
      leases
                  
                  
                  571
                  
                  
                  
                  552
                  
                  
                  
                  19
                  
                  
                  
                  3.4
                  %Total
      operating expenses
                  
                  
                  57,786
                  
                  
                  
                  58,129
                  
                  
                  
                  (343
                  )
                  
                  
                  (0.6
                  %)Operating
      income
                  
                  
                  23,757
                  
                  
                  
                  17,614
                  
                  
                  
                  6,143
                  
                  
                  
                  34.9
                  %Nonoperating
      income and (expenses):Interest
      income
                  
                  
                  17
                  
                  
                  
                  39
                  
                  
                  
                  (22
                  )
                  
                  
                  (56.4
                  %)Interest
      expense
                  
                  
                  (15,301
                  )
                  
                  
                  (15,264
                  )
                  
                  
                  (37
                  )
                  
                  
                  0.2
                  %Amortization
      of deferred financing costs
                  
                  
                  (1,042
                  )
                  
                  
                  (790
                  )
                  
                  
                  (252
                  )
                  
                  
                  31.9
                  %Loss
      from unconsolidated joint ventures
                  
                  
                  (1,414
                  )
                  
                  
                  (554
                  )
                  
                  
                  (860
                  )
                  
                  
                  155.2
                  %Total
      nonoperating expenses
                  
                  
                  (17,740
                  )
                  
                  
                  (16,569
                  )
                  
                  
                  (1,171
                  )
                  
                  
                  7.1
                  %Income
      before income taxes and discontinued operations
                  
                  
                  6,017
                  
                  
                  
                  1,045
                  
                  
                  
                  4,972
                  
                  
                  
                  475.8
                  %Income
      tax provision
                  
                  
                  (143
                  )
                  
                  
                  (135
                  )
                  
                  
                  (8
                  )
                  
                  
                  5.9
                  %Income
      from continuing operations
                  
                  
                  5,874
                  
                  
                  
                  910
                  
                  
                  
                  4,964
                  
                  
                  
                  545.5
                  %Discontinued
      operations:Loss
      attributable to discontinued operations
                  
                  
                  (4,283
                  )
                  
                  
                  (401
                  )
                  
                  
                  (3,882
                  )
                  
                  
                  968.1
                  %Loss
      from disposition of real estate
                  
                  
                  (3,646
                  )
                  
                  
                  -
                  
                  
                  
                  (3,646
                  )
                  
                  
                  100.0
                  %Total
      discontinued operations
                  
                  
                  (7,929
                  )
                  
                  
                  (401
                  )
                  
                  
                  (7,528
                  )
                  
                  
                  1,877.3
                  %Net
      (loss) income
                  
                  
                  (2,055
                  )
                  
                  
                  509
                  
                  
                  
                  (2,564
                  )
                  
                  
                  (503.7
                  %)Net
      income attributable to noncontrolling interests
                  
                  
                  (134
                  )
                  
                  
                  (232
                  )
                  
                  
                  98
                  
                  
                  
                  (42.2
                  %)Net
      (loss) income attributable to common
                    shareholders
                  
                  $
                  (2,189
                  )
                  
                  $
                  277
                  
                  
                  $
                  (2,466
                  )
                  
                  
                  (890.3
                  %)
  Wholly-Owned
Properties Operations
  Revenues
from our wholly-owned properties for the three months ended March 31, 2010
compared to the three months ended March 31, 2009 increased by $5.9 million
primarily due to the completion of construction of Barrett Honors College in
August 2009 and the improved lease-up for the GMH portfolio for the 2009/2010
academic year.  Operating expenses increased approximately $1.0
million for the three months ended March 31, 2010 as compared to the prior year,
primarily due to the same factors which affected the increase in
revenues.
  New
Property Operations.  In August 2009, we completed construction
of and opened Barrett Honors College at Arizona State University.  In
March 2010, one of the Fidelity joint ventures in which the company owns a 10%
interest assigned its ownership interest in the University Heights property to
the company.  This property, serving students attending the University
of Alabama at Birmingham, is now 100% wholly-owned by the
company.  These two new properties contributed an additional $3.7
million of revenues and an additional $0.8 million of operating expenses during
the three months ended March 31, 2010 as compared to the three months ended
March 31, 2009.
  28
  Same
Store Property Operations (Excluding New Property
Activity).  We had 79 properties containing 45,314 beds which
were operating during both of the three month periods ended March 31, 2010 and
2009.  These properties produced revenues of $68.2 million and $65.9
million during the three months ended March 31, 2010 and 2009, respectively, an
increase of $2.3 million.  This increase was primarily due to an
increase in average occupancy from 92.8% during the three months ended March 31,
2009 to 96.2% during the three months ended March 31,
2010.   Future revenues will be dependent on our ability to
maintain our current leases in effect for the 2009/2010 academic year and our
ability to obtain appropriate rental rates and desired occupancy for the
2010/2011 academic year at our various properties during our leasing period,
which typically begins in January and ends in August.
  At these
existing same store properties, operating expenses remained relatively flat at
$30.8 million for the three months ended March 31, 2009 as compared to $30.9
million for the three months ended March 31, 2010.  We anticipate that
operating expenses for our same store property portfolio in 2010 will increase
slightly as compared with 2009 as a result of expected increases in utility
costs, employee benefit costs, property taxes and general
inflation.
  On-Campus
Participating Properties (“OCPP”) Operations
  We had
four participating properties containing 4,519 beds which were operating during
both of the three month periods ended March 31, 2010 and
2009.  Revenues from our participating properties increased to $7.3
million during the three months ended March 31, 2010 from $6.9 million for the
three months ended March 31, 2009, an increase of $0.4 million.  This
increase was primarily a result of an increase in average rental rates during
the three months ended March 31, 2010 as compared to the prior year, as well as
an increase in average occupancy from 92.1% for the three months ended March 31,
2009 to 96.6% for the three months ended March 31, 2010.
  At these
properties, operating expenses increased from $2.0 million for the three months
ended March 31, 2009 to $2.4 million for the three months ended March 31, 2010,
an increase of $0.4 million.  This increase was primarily due to an
increase in bad debt expense and other expected inflationary
increases.   We anticipate that operating expenses in 2010 will
increase slightly as compared with 2009 as a result of expected increases in
utility costs, employee benefit costs and general inflation.
  Third
Party Development Services Revenue
  Third
party development services revenue decreased by $0.5 million, from $1.1 million
during the three months ended March 31, 2009 to $0.6 million for the three
months ended March 31, 2010.  This decrease was due to three projects
in progress during the three months ended March 31, 2010 as compared to four
projects in progress during the three months ended March 31,
2009.  Closing of third-party development services projects during
2010 will be dependent upon the Company’s university clients obtaining project
financing, which has been adversely affected by current capital market
conditions.
  Development
services revenues are dependent on our ability to successfully be awarded such
projects, the amount of the contractual fee related to the project and the
timing and completion of the development and construction of the
project.  In addition, to the extent projects are completed under
budget, we may be entitled to a portion of such savings, which are recognized as
revenue when performance has been agreed upon by all parties, or when
performance has been verified by an independent third-party.  It is
possible that projects for which we have deferred pre-development costs will not
close and that we will not be reimbursed for such costs.  The
pre-development costs associated therewith will ordinarily be charged against
income for the then-current period.
 
 Third
Party Development and Management Services Expenses
  Third
party development and management services expenses increased by $0.1 million,
from $3.0 million during the year ended three months ended March 31, 2009 to
$3.1 million for the three months ended March 31, 2010.  This increase
was primarily due to an increase in payroll and related costs as a result of an
increase in activity for potential ACE and third party development
projects.  Third-party development and management services expenses
for 2010 will be dependent on the level of awards we pursue, the level of new
management contracts obtained, and as previously mentioned, any pre-development
costs charged against income for projects which do not close.
 
 Depreciation
and Amortization
  Depreciation
and amortization decreased by $1.8 million, from $19.3 million during the three
months ended March 31, 2009 to $17.5 million for the three months ended March
31, 2010.  This decrease was due to a decrease in depreciation and
amortization expense of approximately $4.1 million related to the value assigned
to in-place leases at the properties acquired from GMH, which were fully
amortized by the end of 2009. This decrease was offset by the completion of
construction and opening of Barrett Honors College in August 2009 and renovation
projects completed at several properties acquired from GMH.  These two
items contributed an additional $0.8 million and $0.7 million, respectively, to
depreciation and amortization expense for the three months ended March 31,
2010.  We expect depreciation and amortization expense to decrease in 2010
as a result of the value assigned to in-place leases at the time of the GMH
acquisition being fully amortized in 2009, which should be slightly offset by
increased depreciation on both Barrett Honors College, placed in service during
2009, and renovations during 2009 at several GMH properties.
  29
  Amortization
of Deferred Financing Costs
  Amortization
of deferred financing costs increased approximately $0.2 million from $0.8
million during the three months ended March 31, 2009 to $1.0 million for the
three months ended March 31, 2010, primarily due to an additional $0.4 million
of finance cost amortization incurred during the three months ended March 31,
2010 related to the refinancing of our revolving credit facility in August 2009
and the Freddie Mac revolving credit facility entered into in September
2009.  This increase was offset by a decrease in finance cost
amortization of $0.2 million as a result of mortgage loans paid off during the
year ended December 31, 2009 and the three months ended March 31,
2010.  We anticipate that amortization of deferred financing costs
will increase in 2010 as compared to 2009 due to the factors discussed
above.
  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 our two joint ventures with
Fidelity that own a total of 18 properties as of March 31, 2010.  Loss
from unconsolidated joint ventures increased approximately $0.8 million from
$0.6 million during the three months ended March 31, 2009 to $1.4 million for
the three months ended March 31, 2010.  This increase was primarily
due an impairment charge recorded by one of the Fidelity joint ventures for a
property that was placed into receivership in March 2010.
  Discontinued
Operations
  Discontinued
operations on the accompanying consolidated statements of operations includes
the following properties:  (i) Cambridge at Southern, a wholly-owned
property that was sold in March 2010 for a sale price of $19.5 million, (ii)
Campus Walk – Oxford, a wholly-owned property that is anticipated to be sold
during the second quarter 2010, and (iii) Riverside Estates, a wholly-owned
property sold in December 2009 for a sale price of $18.2
million.  Discontinued operations for the three months ended March 31,
2010 includes a $3.6 million loss from the disposition of Cambridge at Southern,
as well as an impairment charge of $4.0 million recorded for the Campus Walk –
Oxford property, which is classified as Held for Sale as of March 31, 2010 on
the accompanying consolidated balance sheet.  Refer to Note 4 in the
accompanying Notes to Consolidated Financial Statements contained in Item 1
herein for a table summarizing the results of operations of the properties
classified within discontinued operations.
  Cash
Flows
  Comparison
of Three Months Ended March 31, 2010 and 2009
  Operating
Activities
  For the
three months ended March 31, 2010, net cash provided by operating activities was
approximately $24.0 million, as compared to $19.9 million for the three months
ended March 31, 2009, an increase of $4.1 million.  This increase was
primarily due to operating cash flows provided from the timing of the
acquisition of the GMH student housing business on June 11, 2008 and the
completion of construction and opening of Vista del Sol and Villas at Chestnut
Ridge in August 2008 and Barrett Honors College in August 2009.
  30
  Investing
Activities
  Investing
activities utilized $13.4 million and $36.0 million for the three months ended
March 31, 2010 and 2009, respectively.  The $22.6 million decrease in
cash utilized in investing activities during the three months ended March 31,
2010 related primarily to a $24.1 million decrease in cash used to fund the
construction of our wholly-owned development properties.  During the
three months ended March 31, 2009, one wholly-owned property was under
development, which was completed and opened for occupancy in August 2009, while
there were no properties under development during the three months ended March
31, 2010.  In addition, there was a $7.0 million decrease in cash used
for capital expenditures at our wholly-owned properties as a result of
renovations at several GMH properties during the three months ended March 31,
2009.  Finally, we received $1.1 million of net proceeds from the
disposition of a property in March 2010.  These decreases in cash
utilized in investing activities were offset by a $9.6 million use of cash to
acquire a property from one of the Fidelity Joint Ventures in March
2010.  For the three months ended March 31, 2010 and 2009, our cash
utilized in investing activities was comprised of the following:
  Three
      Months Ended March 31,2010
                  
                  
                  2009Property
      disposition
                  
                  $
                  1,098
                  
                  
                  $
                  -Property
      acquisition
                  
                  
                  (9,618
                  )
                  
                  
                  -Capital
      expenditures for on-campus participating properties
                  
                  
                  (43
                  )
                  
                  
                  (38
                  )Capital
      expenditures for wholly-owned properties
                  
                  
                  (4,400
                  )
                  
                  
                  (11,392
                  )Investment
      in wholly-owned properties under development
                  
                  
                  (301
                  )
                  
                  
                  (24,421
                  )Purchase
      of corporate furniture, fixtures, and equipment
                  
                  
                  (183
                  )
                  
                  
                  (146
                  )Total
                  
                  $
                  (13,447
                  )
                  
                  $
                  (35,997
                  )
  Financing
Activities
  Cash used
for financing activities totaled $55.1 million for the three months ended March
31, 2010 as compared to $16.7 million in cash provided by financing activities
during the three months ended March 31, 2009.  The $71.8 million
decrease in cash provided by financing activities was primarily a result of a
$63.6 million decrease in proceeds (net of paydowns) received from our secured
revolving credit facility.  During the three months ended March 31,
2009, we borrowed from our secured revolving credit facility to fund the
construction of Barrett Honors College, one of our owned ACE development
projects, and to pay-off $29.8 million in mortgage loan debt.  In
addition, we had a $4.7 million increase in cash used to pay-off mortgage loans
as we paid off $34.5 million in mortgage loan debt during the three months ended
March 31, 2010 as compared to $29.8 million in mortgage loan debt during the
three months ended March 31, 2009.  Finally, we experienced a $3.4
million increase in distributions to stockholders as a result of the issuance of
common stock in connection with our May 2009 equity offering.
  Structure
of Owned On-Campus Properties
  We have
entered into two 65-year ground/facility leases (each with two ten-year
extensions available) with a university system to finance, construct, and manage
two student housing facilities.  Under the terms of these
ground/facility leases, the university system owns both the land and
improvements, and we 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.
  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 (“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.
  31
  The
following table reflects the amounts included in our consolidated financial
statements for the three months ended March 31, 2010 and 2009:
  Three
      Months Ended March 31,2010
                  
                  
                  2009Revenues
                  
                  $
                  7,311
                  
                  
                  $
                  6,874Direct operating
      expenses (1)
                  
                  
                  (2,232
                  )
                  
                  
                  (1,897
                  )Amortization
                  
                  
                  (1,079
                  )
                  
                  
                  (1,090
                  )Amortization
      of deferred financing costs
                  
                  
                  (49
                  )
                  
                  
                  (46
                  )Ground/facility
      leases (2)
                  
                  
                  (306
                  )
                  
                  
                  (292
                  )Net
      operating income
                  
                  
                  3,645
                  
                  
                  
                  3,549Interest
      income
                  
                  
                  3
                  
                  
                  
                  24Interest
      expense
                  
                  
                  (1,503
                  )
                  
                  
                  (1,559
                  )Net
      income
                  
                  $
                  2,145
                  
                  
                  $
                  2,014
  (1)
                  Excludes
      property management fees of $0.3 million for both three month periods
      ended March 31, 2010 and 2009.  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.
  Liquidity
and Capital Resources
  Cash
Balances and Liquidity
  As of
March 31, 2010, excluding our on-campus participating properties, we had $38.1
million in cash and cash equivalents and restricted cash as compared to $87.5
million in cash and cash equivalents and restricted cash as of December 31,
2009.  Restricted cash primarily consists of escrow accounts held by
lenders and resident security deposits, as required by law in certain
states.  The decrease in cash and cash equivalents was primarily due
to the use of cash to pay-off $34.5 million of fixed-rate mortgage debt and $9.6
million used to acquire a property from one of the Fidelity Joint ventures in
March 2010.  Additionally, restricted cash as of March 31, 2010 also
included $0.1 million of funds held in escrow in connection with potential
development opportunities.
  As of
March 31, 2010, 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 $71.3 million based on an assumed
annual cash distribution of $1.35 per share based on the number of our shares
outstanding as of March 31, 2010, (ii) anticipated distribution payments to our
Operating Partnership unitholders totaling approximately $1.8 million based on
an assumed annual distribution of $1.35 per common unit of limited partnership
interest (“Common Unit”) and a cumulative preferential per annum cash
distribution rate of 5.99% on our preferred units of limited partnership
interest (“Series A Preferred Units”) based on the number of units outstanding
as of March 31, 2010, (iii) the pay-off of approximately $98.5 million of
fixed-rate mortgage debt scheduled to mature during the next 12 months, and (iv)
funds for other potential development projects.  As of March 31, 2010,
we had $100.0 million of outstanding variable rate construction debt scheduled
to mature in December 2010.  We expect to extend the maturity date
through December 2011 by exercising the remaining 12-month extension option
available to us.  We have a $225 million revolving credit facility
scheduled to mature in August 2012 that is currently secured by seven of our
wholly-owned properties.  In addition, we have a $125 million secured
revolving credit facility with a Freddie Mac lender scheduled to mature in
September 2014 that is currently secured by 11 of our wholly-owned
properties.  We expect to meet our short-term liquidity requirements
by (i) borrowing under our existing secured revolving credit facilities
discussed above, (ii) potentially disposing of properties depending on market
conditions, and (iii) utilizing net cash provided by operations.
  We may
seek additional funds to undertake initiatives not contemplated by our business
plan or obtain additional cushion against possible shortfalls.  We
also may pursue additional financing as opportunities arise.  Future
financings may include a range of different sizes or types of financing,
including the incurrence of additional secured debt and the sale of additional
debt or equity securities.  These funds may not be available on
favorable terms or at all.  Our ability to obtain additional financing
depends on several factors, including future market conditions, our success or
lack of success in penetrating our markets, our future creditworthiness, and
restrictions contained in agreements with our investors or lenders, including
the restrictions contained in the agreements governing our revolving credit
facilities and term loan.  These financings could increase our level
of indebtedness or result in dilution to our equity holders.
  32
 
 Secured Revolving Credit Facility
  The
Operating Partnership has a $225 million revolving credit facility that may be
expanded by up to an additional $75 million upon the satisfaction of certain
conditions.  The maturity date of the facility is August 14, 2012 and
can be extended 12 months through August 2013.  The facility is
currently secured by seven of our wholly-owned properties.
  Availability
under the revolving credit facility is limited to an “aggregate borrowing base
amount” equal to the lesser of (i) 50% to 65% of the value of certain
properties, calculated as set forth in the credit facility, and (ii) the
adjusted net operating income from these properties divided by a formula
amount.  The facility bears interest at a variable rate, at our
option, based upon a base rate or one-, two-, or three-month LIBOR, with a LIBOR
floor of 2.0%, plus, in each case, a spread based upon our total
leverage.  Additionally, we are required to pay an unused commitment
fee of 0.35% per annum.  As of March 31, 2010, there was no balance on
the facility and availability under the facility totaled $154.3
million.
  The terms
of the facility include certain restrictions and covenants, which limit, among
other items, the incurrence of additional indebtedness, liens, and the
disposition of assets. The facility contains customary affirmative and negative
covenants and also contains financial covenants that, among other things,
require us to maintain certain minimum ratios of “EBITDA” (earnings before
interest, taxes, depreciation and amortization) to fixed charges and total
indebtedness.  We may not pay distributions that exceed a specified
percentage of funds from operations, as adjusted, for any four consecutive
quarters.  The financial covenants also include consolidated net worth
and leverage ratio tests.  As of March 31, 2010, we were in compliance
with all such covenants.
  Secured
      Agency Facility
  We have a
$125 million secured revolving credit facility with a Freddie Mac
lender.  The facility has a five-year term and is currently secured by
11 properties referred to as the “Collateral Pool.”  The facility
bears interest at one- or three-month LIBOR plus a spread that varies based on
the debt service ratio of the Collateral Pool.  Additionally, we are
required to pay an unused commitment fee of 1.0% per annum.  As of
March 31, 2010, the balance outstanding on the facility totaled $94.0 million,
bearing interest at a weighted average rate of 2.2%.  The secured
agency facility includes certain financial covenants which are the same as are
required for the secured revolving credit facility, described
above.
  Senior
      Secured Term Loan
  The
Operating Partnership has a $100 million senior secured term loan that matures
on May 23, 2011 and can be extended through May 2012 through the exercise of a
12-month extension option.  The secured term loan bears interest at a
variable rate, at our option, based upon a base rate or one-, two-, three-, or
six-month LIBOR plus, in each case, a spread based upon our total
leverage.  As of March 31, 2010, the balance outstanding on the
secured term loan was $100 million.
  On
February 23, 2009, we entered into two $50.0 million interest rate swap
agreements effective March 20, 2009 through February 20, 2012, which are both
used to hedge our exposure to fluctuations in interest payments on its
LIBOR-based senior secured term loan.  Under the terms of the two interest
rate swap agreements, we pay an average fixed rate of 1.7925% and receive
one-month LIBOR floating rate.  As a result of these two interest rate
swaps, we have effectively fixed the interest rate on our senior secured term
loan to 3.55% as of March 31, 2010 (1.7925% + 1.75% spread).  In the
event that the swaps at any time have a negative fair value below a certain
threshold level, we could be required to post cash into a collateral account
pledged to the interest rate swap providers.   As of March 31,
2010, we had deposited approximately $0.7 million into a collateral account
related to one of the interest rate swaps.  Refer to Note 11 in the
accompanying Notes to Consolidated Financial Statements contained in Item 1
herein for a more detailed discussion of our derivative instruments and hedging
activities.
  Distributions
  We are
required to distribute 90% of our REIT taxable income (excluding capital gains)
on an annual basis in order to qualify as a REIT for federal income tax
purposes.  Distributions to common stockholders are at the discretion
of the Board of Directors. We may use borrowings under our secured revolving
credit facility to fund distributions.  The Board of Directors
considers a number of factors when determining distribution levels, including
market factors and our Company’s performance in addition to REIT
requirements.
  On May 5,
2010, we declared a first quarter 2010 distribution per share of $0.3375, which
will be paid on May 28, 2010 to all common stockholders of record as of May 18,
2010.  At the same time, the Operating Partnership paid an equivalent
amount per unit to holders of Common Units, as well as the quarterly cumulative
preferential distribution to holders of Series A Preferred Units.
  33
  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 March 31, 2010, we have deferred approximately $11.2
million in pre-development costs related to third-party and owned development
projects that have not yet commenced construction.
  Indebtedness
  As of
March 31, 2010, we had approximately $1,173.0 million of outstanding
consolidated indebtedness (excluding net unamortized debt discounts and debt
premiums of approximately $7.9 million and $3.4 million, respectively),
comprised of a $100.0 million balance on our senior secured term loan, $94.0
million balance on our secured agency facility, $895.0 million in mortgage and
construction loans secured by our wholly-owned properties, $32.6 million in
mortgage loans secured by two phases of an on-campus participating property, and
$51.4 million in bond issuances secured by three of our on-campus participating
properties.  The weighted average interest rate on our consolidated
indebtedness as of March 31, 2010 was 5.07% per annum.  As of March
31, 2010, approximately 16.6% of our total consolidated indebtedness was
variable rate debt, comprised of our secured agency facility and our Vista del
Sol construction loan discussed below.
  Wholly-Owned
Properties
  The
weighted average interest rate of the $895.0 million of wholly-owned mortgage
and construction debt was 5.34% per annum as of March 31, 2010.  Each
of the mortgage loans is a non-recourse obligation subject to customary
exceptions 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.
  The
development and construction of Vista del Sol, an owned on-campus property, was
partially financed with a $100.0 million construction loan.  For each
borrowing we have the option of choosing the Prime rate or one-, two-, or
three-month LIBOR plus 1.20%.  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, 2010.  We
expect to extend the maturity date through December 2011 by exercising the
remaining 12-month extension option available to us.  As of March 31,
2010, the balance outstanding on the construction loan totaled $100.0 million,
bearing interest at a rate of 1.45% per annum.
  On-Campus
Participating Properties
  Three of
our on-campus participating properties are 100% financed with $51.4 million of
outstanding project-based taxable bonds.  Under the terms of these
financings, one of our special purpose subsidiaries publicly issued three series
of taxable bonds and loaned the proceeds to three special purpose subsidiaries
that each hold a separate leasehold interest.  Although a default in
payment by these special purpose subsidiaries could result in a default under
one or more series of bonds, the indebtedness of any of these special purpose
subsidiaries is not cross-defaulted or cross-collateralized with indebtedness of
the Company, the Operating Partnership or other special purpose
subsidiaries.  Repayment of principal and interest on these bonds is
insured by MBIA, Inc.  The loans encumbering the leasehold interests
are non-recourse, subject to customary exceptions.
  34
  Cullen
Oaks Phase I and Phase II are currently encumbered by mortgage loans with
balances as of March 31, 2010 of approximately $16.2 million and $16.4 million,
respectively.  The loans mature in February 2014 and bear interest at
a rate of LIBOR plus 1.35%.  In connection with these loans, we
entered into an 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 loans.  Under the terms of the interest rate swap
agreement, we pay a fixed rate of 6.69% per annum and receive a floating rate of
LIBOR plus 1.35%.  Pursuant to the Leases, in the event the leasehold
estate does not achieve Financial Break Even (defined as revenues less operating
expenses, excluding management fees, less debt service), the applicable Lessor
would be required to make a rental payment, also known as the Contingent
Payment, sufficient to achieve Financial Break Even.  The Contingent
Payment provision remains in effect until such time as any financing placed on
the facilities would receive an investment grade rating without the Contingent
Payment provision.  In the event that the Lessor is required to make a
Contingent Payment, future net cash flow distributions would be first applied to
repay such Contingent Payments and then to unpaid management fees prior to
normal distributions.  We have guaranteed payment of this property’s
indebtedness.
  The
weighted average interest rate of the indebtedness encumbering our on-campus
participating properties was 7.18% at March 31, 2010.
  Off Balance Sheet
Items
  As
discussed in Note 8 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
$293.5 million as of March 31, 2010.  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.
  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.
  35
  The
following table presents a reconciliation of our FFO to our net (loss) income
attributable to common shareholders:
  Three
      Months Ended March 31,2010
                  
                  
                  2009Net
      (loss) income attributable to common shareholders
                  
                  $
                  (2,189
                  )
                  
                  $
                  277Noncontrolling
      interests
                  
                  
                  134
                  
                  
                  
                  232Loss
      from disposition of real estate
                  
                  
                  3,646
                  
                  
                  
                  -Loss
      from unconsolidated joint ventures
                  
                  
                  1,414
                  
                  
                  
                  554FFO from
      unconsolidated joint ventures (1)
                  
                  
                  (807
                  )
                  
                  
                  (39
                  )Real
      estate related depreciation and amortization
                  
                  
                  17,438
                  
                  
                  
                  19,732Funds
      from operations (“FFO”)
                  
                  $
                  19,636
                  
                  
                  $
                  20,756FFO
      per share – diluted
                  
                  $
                  0.36
                  
                  
                  $
                  0.47Weighted
      average common shares outstanding –diluted
                  
                  
                  54,108,993
                  
                  
                  
                  44,031,602
  (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 $7.3 million and $6.9 million to
our revenues for the three months ended March 31, 2010 and 2009, 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.  We also exclude
impairment charges from FFOM, as we believe the inclusion of such charges is
inconsistent with the treatment of gains and losses on the disposition of real
estate, which are not included in FFO. Additionally, we believe that excluding
impairment charges from FFOM more appropriately presents the operating
performance of the company’s real estate investments on a comparative
basis.
  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.
  36
  Funds
From Operations—Modified (“FFOM”):
  Three
      Months Ended March 31,2010
                  
                  
                  2009Funds
      from operations
                  
                  $
                  19,636
                  
                  
                  $
                  20,756Elimination
      of operations of on-campus participating properties and unconsolidated
      joint venture:Net
      income from on-campus participating  properties
                  
                  
                  (2,145
                  )
                  
                  
                  (2,014
                  )Amortization
      of investment in on-campus participating properties
                  
                  
                  (1,079
                  )
                  
                  
                  (1,090
                  )FFO
      from Hampton Roads unconsolidated joint venture (1)
                  
                  
                  160
                  
                  
                  
                  23616,572
                  
                  
                  
                  17,888Modifications
      to reflect operational performance of on-campus
                    participating
      properties:Our
      share of net cash flow (2)
                  
                  
                  306
                  
                  
                  
                  292Management
      fees
                  
                  
                  333
                  
                  
                  
                  323Impact
      of on-campus participating properties
                  
                  
                  639
                  
                  
                  
                  615Elimination
      of provision for asset impairment – wholly-owned
                    property
      (3)
                  
                  
                  4,036
                  
                  
                  
                  -Elimination
      of provision for asset impairment – unconsolidated joint
                    venture
      (4)
                  
                  
                  782
                  
                  
                  
                  -Funds
      from operations – modified (“FFOM”)
                  
                  $
                  22,029
                  
                  
                  $
                  18,503FFOM
      per share – diluted
                  
                  $
                  0.41
                  
                  
                  $
                  0.42Weighted
      average common shares outstanding – diluted
                  
                  
                  54,108,993
                  
                  
                  
                  44,031,602
  (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.
  (3)
                  Represents
      an impairment charge recorded for Campus Walk – Oxford, a property that
      was sold on April 30, 2010.  The impairment charge is included
      in loss attributable to discontinued operations on the accompanying
      consolidated statements of operations for the three months ended March 31,
      2010.  Although impairment charges are included in the
      calculation of net income (loss) and FFO, the company excludes such
      charges from FFOM because it believes the inclusion of such charges is
      inconsistent with the treatment of gains and losses on the disposition of
      real estate, which are not included in FFO.  Additionally, the
      company believes that excluding impairment charges from FFOM more
      appropriately presents the operating performance of the company’s real
      estate investments on a comparative
basis.
  (4)
                  Represents
      our share of an impairment charge recorded during the three months ended
      March 31, 2010 for a property owned through one of our unconsolidated
      Fidelity Joint Ventures.
  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.
  37
  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,
2009.
  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.
  38
  PART II.   OTHER INFORMATION
  Item 6.  Exhibits
  ExhibitNumber
                  
                  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.
  39
  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:
                  May 7, 2010
  AMERICAN
      CAMPUS COMMUNITIES, INC.By:
                  /s/
      William C. Bayless, Jr.William
      C. Bayless, Jr.
                    President
      and Chief Executive OfficerBy:
                  /s/
      Jonathan A. GrafJonathan
      A. Graf
                    Executive
      Vice President,
                    Chief
      Financial Officer and Treasurer