American Campus Communities Inc. completed its due diligence related to the acquisition of 15 student housing properties with 6,579 beds, including two properties and an additional phase at an existing property currently under development. The acquisitions would be completed through a $627 million merger with affiliates of Campus Acquisitions LLC.
Consideration for the acquisition consists of the assumption of $231.6 million of outstanding mortgage debt, the issuance of between $15 million and $50 million in the form of units of common limited partnership interest in American Campus Communities' operating partnership and between $345.4 million and $380.4 million in cash.
American Campus said the assets represent some of the best product in their respective markets with a combined average distance to campus of 0.23 miles. The four tier one markets that will be new to American Campus are Baylor University, University of Southern California, Iowa State University and Purdue University.
American Campus Communities anticipates investing $13.7 million in capital improvements to drive future rental rate and revenue growth. The projected year-one cap rate is 5.9% nominal (inclusive of upfront capital improvements) and 5.6% economic (inclusive of the assumed $200 per bed capital reserves, upfront capital improvements, $2 million in loan assumption costs and $4.3 million in transaction expenses).
American Campus intends to fund the cash portion of the purchase price with available cash, borrowings under its revolving credit facility, a bridge loan facility. The company also this week completed the sale of 17.5 million shares of common stock receiving $731.9 million in net proceeds.
The transaction is expected to close in the third quarter of 2012.
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