EDR
#Yes, actually in the low 5%s.
It is not.
Continued increase in land cost and construction cost relative to increases in revenues and ---+ but importantly, we believe that the premium that you need for the added risk of developments over acquisitions needs to be 150 basis points and so with acquisitions for true pedestrian to campus Tier 1 institutions being approximately 5, we think we're still being properly rewarded for the added risk of development.
Probably both.
Yes, it does incorporate Oklahoma and Mizzou netted out by some upside at some of our other communities.
Well, in our new developments, in the past we averaged approximately 94% occupancy in all of our first years on all new developments, so it doesn't equate to same-store kind of norms.
Sometimes it's because there's ---+ the lower occupancy is driven by apprehension of completion in a market where maybe another deal hasn't completed on time.
You've also got the missing renewal base which is the first piece of everybody's leasing season, you don't have anybody to renew to, so that takes away from some of it.
Depending on the market, we don't necessarily underwrite year one to same-store level.
<UNK>, as <UNK> noted in her comments, right, our same-community portfolio is performing in line with expectations.
We reaffirmed the full-year NOI growth guidance of 3.5% to 4.5%.
So overall obviously that means it's performing in line with expectations.
You're right, full year real estate taxes are only ---+ are up less than 4%, in line with our budget expectations.
The six-month number is in line with the full-year run rate.
So you are exactly right, that quarterly can be lumpy depending on timing of receipt of assessments from various taxing authorities.
And, finally, when we look at it as we think about it for a portfolio as a whole, we're modeling somewhere in the 5% to 6% increase of real estate taxes year-over-year on a same store basis.
Sure.
As you know, <UNK>, when we look at our 2018 pipeline, if you include Cornell in it, it goes up to $230 million from $115 million.
We have until March of 2017 to add more properties to the 2018 pipeline.
That's another nine months.
Our average and guidance in May was $250 million a year, just on average developments for 2018.
It's likely we will exceed that given our new debt-to-gross asset targets of 25% to 30% that's inclusive of everything we've announced.
As you can see in the supplement, we're just under 27, so we're still solidly in the line of the guidance range we gave.
I think it just depends on the specific facts and circumstances, <UNK>.
Obviously the ATM is the cheapest form of raising equity versus a spot or an overnight offering.
As you can see, we renewed our ATM program again at $300 million authorization from the Board.
So, again, it's facts and circumstances specific.
Sure, Alex.
So this project is one block north of campus.
It's in between Carnegie Mellon and Pitt.
The number of parking spaces that we're going to have, I'm looking at my write-up.
Well, I can't seem to find that.
There is structured parking beneath.
It is 400 parking spaces.
What we really liked about the market is there's no purpose-built student housing in the market.
There is one smaller project that's delivering this year 400 beds and then there's another one that's delivering I think in 2018 of another 400 beds.
With full-time enrollment of 25,000, essentially none or very, very small number of purpose built student housing, we think this market is ripe for this development.
No, they're right in the span that <UNK> mentioned earlier.
The 2017 new supply projections are I'll say new.
AXIOMetrics just came out with them I think it was two weeks ago and of course we just released ours today.
Look, we were a little bit surprised.
Frankly, that new supply in our markets was going to be up a little bit.
But realize what we've done and I think AXIOMetrics is similar, is it's new supply that is out of the ground but we also include in our numbers stuff that we think has a reasonable shot of coming out of the ground.
As we all know, it's August 1 and so if you're not out of the ground now it may be a little difficult to get done in time.
So with all that said, I think the span for AXIOMetrics was supply being down 8% but if none of the planned stuff gets done it's down 30%.
For us, we think it's up a little bit but is it possible it could be better than that for us.
Sure, it's possible, depending on if things get out of the ground.
But we think our analysis is ---+ or the numbers that we've shown here is I'll say worse case.
The great thing about that is worse case is essentially the same gap that we've seen in the past where we had good leasing.
Moving on to your question about 2018 supply.
We are seeing in our joint venture program a lot of activities from merchant developers that are not liking the first indications that they're getting from banks on construction lending.
As you know, it doesn't impact us but it does impact them.
So it's too early to tell about 2018's supply, but that marker is a favorable possible indication.
Well, in that market, Alex, there's two kind of separate sets of communities, right.
So there's a lower end set with a lower price point and then there's the higher end, the new developments that have come out of the ground, and there's quite a bit of gap between the two.
And so we ---+ this property is over 10 years old, and although close to campus, it sits on a dead-end street.
It's not new like the new ones with the new bells and whistles, so we had always kind of favored the lower end of the price point and that didn't include utilities.
One of the objections that we continued to get coming in the door was why are your you utilities not included like everybody else's.
I think it was hard for the students to comp it.
So we decided ---+ we did it in two other markets, Orlando and Athens, in the past and had great results there, and so we decided to do that here this year.
What it left us was with rates kind of in the mid range.
There was no comp for us, right.
So we were lower than the new developments that we weren't new and we were much higher than the lower price point kind of comps and so we didn't fit.
I don't think it was a case of ---+ it wasn't a case of marketing materials or not getting the word out.
But as we discussed in the of past, renewals start early and renewals are a big component to how well your same-store portfolio does and when we came out with a higher price point we lost some of the renewals.
We did react.
We just reacted later than we should have.
Even in the last 30 days we picked up over 15% or almost 15% new leasing.
So it was truly a judgment call on whether or not this action would work and it didn't.
Sure.
On the surface, Northern Michigan is not equal to the stature of our other ONE Plan assets at Kentucky, Texas, TCU, Syracuse, Boise State, but we found a lot of positives up at Northern Michigan.
One, the enrollment is about 9,000, so the enrollment is not too small.
And it is ---+ it does cater to a certain demographic that is attracted to that university and that upper peninsula.
But what we were also able to do is working with the university, the university provided us with a variety of items that help in case there's some difficulties from occupancy.
For instance, they've agreed essentially to shut down or close other beds on campus if for some reason there's a difficulty.
So the way we looked at it is are we creating value and so both the pricing of our yields there and the enhancements that we received from the university in our opinion equated to our usual spread between what we think the development yield is going to be and what we think the asset would trade for if for sale.
But, as you know, we've never sold an on campus asset and don't intend to, but that's part of our analysis.
That's fair.
Right.
Well, as we said, the big driver for the pressure in this market is enrollment and what we've learned from universities over the years, in particular land-grant institutions, is that universities have a kind of tool kit full of levers that they can pull when they have enrollment pressure.
And what we believe will happen is that Missouri will start pulling these levers to increase their enrollment over the next several years.
So, unfortunately, it impacts some of the other schools, right, in the State of Missouri because it pulls from some of the lower tier institutions, but I believe that's what will happen.
Last year it was 50% freshmen and a little over 10% graduate and then sophomore, junior, senior kind of fell in the middle.
I don't think it changes it any but realize what Missouri has done for their on-campus portfolio.
I assume you're asking about on-campus University of Kentucky exposure versus off.
On campus is different.
What the University of Missouri has done is they've closed two different dorms that had 890 beds ---+ I'm sorry, four dorms that had 890 beds.
And as you can imagine, the dorms that they closed were not the you newest and best, they were the oldest and worst.
So when you're looking at our exposure at any university, I think that's very important to consider is how many beds do we not own on campus and whether that provides enough cushion for an event like this.
At Kentucky, for instance, today we do not own 650 beds and it does not appear that we will own those at any time in the future.
Economic forward.
$200 a bed.
The dispositions of the two assets we sold, keep in mind these were older products about 1.9 miles from campus, pretty much in keeping with some of the dispositions we did earlier in the year which is in the low 6%s.
Yes.
I would not assume that it will grow as significantly next year as it has this year.
There are a lot of programs in place to bolster this.
In addition, there's a pick-up in other income this year with EdR assuming the responsibility of the summer conference housing at the University of Kentucky which falls in the other income line.
We did not manage the marketing and the process last year.
We do this year, which has been part of the pick-up.
UK.
UK actually made up a larger percentage of the new beds last year than it does this year and those are all at 100% as of May 10 or something.
That's the difference.
In the past our average has been 94%.
Totally agree.
Obviously Cornell has a very large endowment, but at the end of the day in talking to the chief financial officer, they want to preserve their debt capacity for other purposes at the university.
So it is the same thought process that we see with somewhat lesser universities.
Look, there are other companies that are trying to explore into ---+ venture into I'll call it the inequity model.
At this point in time the only two companies that have been awarded any are us and that other company down in <UNK>, Texas, which is our friendly competitor.
But look, people are taking notice.
At recent conferences, the merchant developers I think very much are shying away from the P3 processes.
It is a time-consuming process.
Sometimes decisions take a year to a year and-a-half.
And those that have played in this segment of the business and have a positive track record have a distinct competitive advantage.
So I do think we'll see more companies try to find outside sources of capital, but we and ACC have a real competitive advantage.
Good question.
I guess time will tell.
Not at this time.
No plans to put them back on the market.
Good morning.
So allow me to explain.
First of all, this is replacement housing and so the university will house students and as new beds are made available, old beds will be taken out of service.
So it gives us flexibility relative to potential weather conditions and all.
We're targeting 400 beds to open in the summer of 2017 and then additional 400 beds in January that actually open to be completed in December, and then the final 400 beds summer of 2018.
But it is a wonderful situation to have existing beds available so that if, because of weather conditions, the schedule slips or whatever, the project will be full.
We won't be sitting and looking with any vacancies because students will actually transfer out of the older housing into the new housing.
The intent is to have them transfer at the end of the first semester for second semester.
You're welcome.
Thank you for your time today and for the people in the field, thanks for your efforts in the first half of the year and I know you'll do an outstanding job welcoming our new and returning residents in the days ahead.
Thank you, everyone.
