New York City and Austin, Texas — Blackstone Inc. (NYSE: BX) has agreed to acquire American Campus Communities (NYSE: ACC) in a deal valued at $12.8 billion, including the assumption of debt. ACC is the largest publicly traded owner, manager and developer of student housing in the United States.
Blackstone plans to take the company private following the acquisition. This move comes as the price of public equity has been more expensive than private institutional capital over the past few years, according to Bill Bayless, co-founder and CEO of ACC, in a letter to employees. During that time, many of the private players in the sector were able to acquire and develop more aggressively than the cost of public equities permitted.
The purchase price represents a premium of 22 percent against ACC’s 90-day, volume-weighted average share price as of April 18, and a 30 percent premium over the company’s closing stock price on Feb. 16, the day prior to ACC disclosing an indication of willingness from Blackstone to acquire the Austin-based firm.
This transaction marks Blackstone’s largest investment in the student housing industry to date, following its joint venture partnership with Landmark Properties — another major developer in the student housing sector — announced in August 2021, which included the acquisition and recapitalization of eight properties valued at $784 million. In February, New York City-based Blackstone acquired four student housing communities with Landmark and in 2020 the firm acquired U.K.-based student housing firm iQ Student Accommodation for $6 billion.
ACC’s portfolio comprises 166 owned properties totaling 111,900 beds in 71 university markets, including Arizona State University, The University of Texas at Austin, Florida State University and the University of California, Berkeley. The majority of the company’s communities are located within walking distance of their respective university campuses, with 24 percent of ACC’s portfolio located on campus. The company’s total managed portfolio consists of 203 properties featuring 140,900 beds.
The acquisition has been unanimously approved by ACC’s board of directors and the independent special committee of ACC’s board, and is expected to close during the third quarter of 2022 subject to approval by shareholders and other customary closing conditions.
“This transaction delivers compelling, immediate and certain value to our shareholders while positioning ACC to further expand our competitive advantage as we continue in our quest to lead the student housing industry to new heights,” says Bayless.
“Blackstone’s expertise, resources and consistent access to capital will allow us to rapidly leverage our platform and core competencies to entrepreneurially grow our core business and to pursue additional innovative opportunities. Moving forward together, the combined synergies of our organizations will enable us to better serve our current and future residents and university partners,” he continues.
As a condition of the transaction, ACC has agreed to suspend payment of its quarterly dividend effective immediately. BofA Securities is serving as ACC’s lead financial advisor alongside KeyBanc Capital Markets Inc., and Dentons US LLP is serving as the company’s legal counsel.
Wells Fargo Securities LLC, J.P. Morgan Securities LLC and TSB Capital Advisors are serving as Blackstone’s financial advisors, and Simpson Thacher & Bartlett LLP is acting as Blackstone’s legal counsel.
Blackstone is a global leader in real estate investment with $279 billion of investor capital under management in the U.S. The company is one of the largest owners of commercial real estate globally, owning and operating assets across all sectors including residential, office, hospitality, retail and logistics.
ACC’s stock price closed at $57.58 per share on Monday, April 18, up from $42.66 on April 19, 2021. Blackstone’s stock price closed at $111.99 per share on April 18, up from $76.65 on April 19, 2021.
The Industry Responds
“While we are excited for ACC and believe there won’t be a topping bid, we are saddened to see the last public student housing REIT leave REIT-land given our enthusiasm for the sector,” says Alexander Goldfarb, managing director at Piper Sandler & Co. “The unfortunate part for ACC is that it became too easy for dedicated investors to not own it, given it was a one-off and its small index weighting.”
“ACC isn’t alone, as we believe one-off REITs in general face a higher bar to succeed relative to those with public peers,” continues Goldfarb. “Further, ACC’s years of dilutive capital events coupled with the annual pre-leasing exercise likely didn’t help. That said, we hope to see future public student housing, as it does offer investors different cash flow profiles from other residential types. The bigger takeaway is other similar REITs trading at NAV discounts are likely to explore privatizations, especially given the explosion in NTRs.”
Randy Churchey, former CEO of EdR — which was acquired by Greystar Real Estate Partners in 2018 — was not surprised by the announcement. “Blackstone has been a very active purchaser in all real estate sectors and student housing is no exception,” he says. “They continue to raise enormous sums of money and have to be a continuous investor. This acquisition continues a trend of niche real estate sectors like student housing being acquired by long-term private real estate holders. Student housing is a very attractive and stable asset class. These acquisitions by large real estate funds represent a large percentage of the student housing transactions, but a small percentage of their fund’s transactions, and I expect it to continue.”
Avi Lewittes, chief investment officer at The Scion Group, notes that the acquisition is another major endorsement of the student housing industry by institutional investors. “The student housing sector has demonstrated its resiliency through the COVID-19 pandemic and prior economic cycles, and is now benefiting from the convergence of some of the strongest macro trends we’ve seen, including increased enrollments at top-tier universities, reduced new supply, higher occupancies and strong rental rate growth,” he says. “Therefore, it is not surprising that Blackstone is interested in more exposure to the sector. This is consistent with the proliferation of other new private capital entrants to the sector over the past several years.”
Christopher Merrill, co-founder, chairman and CEO of Harrison Street, also expects further consolidation and institutional investment in the sector moving forward. “Since our first student housing investment in 2006, we have seen more interest from large institutional investors seeking access to the student housing space at scale, further validating a core thesis we have been investing behind since our inception,” he says. “We expect there to be continued long-term interest in the student housing sector due to its proven resilience through black swan events such as the COVID-19 pandemic and global financial crisis; the importance students and families place on in-person learning; and its stability relative to more traditional asset classes like office and retail.”