In April, Blackstone agreed to acquire American Campus Communities in a transaction that took the industry’s largest public company private in a $12.8 billion deal. Many in the industry speculated how the transaction would affect ACC, which is the largest owner and operator of student housing in the country. Once the deal closed in August, Student Housing Business had the opportunity to interview Bill Bayless, and CEO of ACC, from his office in Austin, to find out more about what ownership under Blackstone will mean for the future of ACC.
SHB: It has been a while since the industry has been able to hear from ACC. In retrospect, how do you look back at ACC’s tenure as a public company?
Bayless: I’m very proud of our time as a public company. As most people know, ACC’s IPO was really the foundation for the institutionalization of the industry. It represented a paradigm shift in mainstreaming the sector within commercial real estate and, more importantly, led to a reduction in the overall cost of the capital available to the industry. Over our 18-year run as a public company, we delivered a total shareholder return of 703 percent, more than doubling the MSCI U.S. REIT Index, which returned 338 percent during the same period. Our shareholder return was also 1.6 times the S&P 500 and 1.7 times the Dow Jones Industrial Average. And we almost kept pace with the tech-driven Nasdaq. We are very proud of the legacy we left in the public markets as a top performer.
SHB: How does not being a public company change ACC? How does being involved with Blackstone affect the company going forward?
Bayless: For the executive team, it allows us to be uber-focused on the execution of our business. Wall Street changed a lot during the 18 years we were public. The mix of the shareholder base changed from a significant base of real estate dedicated investors in the early years to more generalists and hedge fund investors, who really didn’t understand real estate, and specifically the value proposition of student housing, in the latter years. We were constantly having to educate investors on the sector and spent a lot of time explaining the basics of our business. It’s a nice change to have a single owner/investor in Blackstone, who is perhaps the world’s most sophisticated owner of real estate. They are strategic and additive to everything we do and approach our business with a long-term outlook. This allows ACC’s executive team to focus on the growth and execution of our business, invest in our existing assets and create much-needed new housing in university markets. We are now supported and funded by some of the brightest minds in real estate. It is an exciting time for us.
SHB: In some ways that must free up a lot of your time.
Bayless: As the CEO of a public company, I spent a significant portion of my time day-to-day dealing with Wall Street analysts, investors, and the public company aspects of ACC. Now, I can focus on the core business of the company and have more time to be involved in the execution of our business strategies.
SHB: Now that you are not encumbered by all the Wall Street duties, do you feel like ACC will have more freedom to pursue new development and acquisition opportunities? And has going private changed your philosophy and strategy at all when it comes to leasing?
Bayless: Our priority remains the same. And that is to deliver the best living experience to our student residents that we can. At the same time, we are focused on our longstanding relationships with some of the most distinguished and fastest growing universities in the country. Blackstone’s long-term approach to our business and the resources it brings greatly enhance our ability to execute for all our constituents.
SHB: Can you now look at some opportunities that you might have had to pass on when you were a public company?
Bayless: We’re always looking for new opportunities and I believe we now have a greater ability to execute on some opportunities we may not have been able to in the past. Since closing the transaction I’ve personally been able to spend more of my time with the executive team on critical strategic initiatives and have been digging into our data of Business Intelligence (BI) with a renewed focus on growing the company.
SHB: Can you tell us how the deal with Blackstone came together? How did it evolve?
Bayless: Of course, we filed a proxy with the SEC that fully delineates how the transaction came to fruition and how our public board honored its fiduciary duties in managing the process on behalf our public shareholders. What I will say is that from our first conversation to closing, the teams got to know each other very well. From our perspective, they clearly demonstrated why they have the best-in-class reputation as an institutional investor and owner of real estate, and I believe that from their perspective they clearly came to recognize our best in class performance and experience in the sector. We found mutual admiration in how we both approach our roles as owners of housing.
SHB: A lot happened in the industry between the time the deal was announced and the time it closed. There were a few interest rate hikes and some uncertainty about the economy. Did any of these create any challenges for the deal?
Bayless: No, it really didn’t. Blackstone has been very active in the sector, they understand the investment thesis student housing provides, especially our resiliency and stability in times of macro uncertainty. And their long-term approach to our business is key to navigating short term volatility. We continue to see positive fundamentals and sector tailwinds as the industry once again is demonstrating it resiliency and ability to thrive in different types of economic environments.
SHB: Everyone in commercial real estate knows the name Blackstone, but they may not be familiar with how Blackstone works. Any insight on how the company is to be involved with?
Bayless: As I’ve had the opportunity to meet and work with the Blackstone executives and their teams, I’ve been overwhelmed by the kind and caring culture at Blackstone. They truly care about their people, and that includes those who work at Blackstone, those who work at its portfolio companies, and all those that interact with its companies, be it customers, partners and others. They have been so thoughtful in welcoming us to the Blackstone family of companies. And it’s quite a bonus that they happen to also be some of the smartest and brightest real estate minds in the world. They have been additive to just about everything we have had the opportunity to collaborate on. There’s a ton of synergy between the culture and values of our companies and how we conduct business to create value for all our stakeholders. We also have great alignment with Blackstone with regard to our approach to ESG. ACC has been the leader with ESG in the student housing space, and Blackstone values that and will help us advance our program to new levels.
SHB: What is your message going forward about the identity of ACC? Who are you now? How are you going to differentiate yourself as a Blackstone portfolio company?
Bayless: We are who we have always been, and we will continue to be the same best-in-class company that students, parents and universities have come to trust and rely upon to deliver world class products and services. We certainly hope to continue to be the bellwether for our industry. We had a town hall with the Blackstone executives several weeks ago and our corporate team members and I were asked a similar question. I replied, ‘American Campus Communities – a Blackstone portfolio company,’ and did the ceremonial mic drop. When you put our two brands together, it is powerful. We only see the Blackstone brand further enhancing and bringing more credibility to the best-in-class brand we have created in the student housing space.
SHB: Rising interest rates aside, the student housing sector is in pretty good shape this fall. What is your take on the industry at this point in time?
Bayless: The fundamentals of our space are better than they have been at any point in the past decade. You really must go back to 2006 or 2007 to see the fundamentals line up like they are right now. National supply has been coming down, not because there is less interest in the space or because there are fewer developers, but due to the barriers to entry in so many college towns. At the same time, enrollment at top universities is growing. Companies across the board will tell you that the fall 2022 lease-up was very strong. It’s worth noting that universities continue to have limited capital and they are focused on using that capital for academic and research infrastructure. Public-private partnership transactions have become the preferred method of delivery for colleges and institutions in delivering new modern on-campus supply. Across the board, it is a great time to be in the student housing sector.
SHB: Are you excited about dipping your toes back into the off-campus acquisitions and development market?
Bayless: Yes, we’re excited about both potential development and acquisitions. There is currently a bit of a lull in the acquisitions market at the moment as pricing is settling out based on interest rate trends in the market. We will always be prudent in executing appropriately during the cycles of real estate in terms of when it’s time to buy, develop and/or sell, and with Blackstone’s support, we have the capability to do any of those things when they make the most sense.
SHB: When the industry has seen deals like this in the past, it seems a lot of company executives peel away from the new entity after a period of time. Is that going to happen at ACC?
Bayless: I think that you will see very little change at ACC. Our team is focused on operating the business for the long-term. When you look at some of the other industry acquisitions that took place, those were operators buying operators or existing platforms buying just the real estate assets. The Blackstone-ACC transaction was a portfolio acquisition of the entire company and the on-going enterprise as it has always existed.
SHB: Do you miss looking at the stock ticker every day? Are you going to miss those quarterly earnings calls?
Bayless: No, not at all. I’m excited to spend my time focused on the business and creating value and a positive experience for all our stakeholders. In the six months that I’ve been interacting with Blackstone’s team, every single question they ask is a prudent question that should be asked, and every input given has been constructive, additive, and meaningful. It’s truly refreshing. I’ve told the team many times that under Blackstone ownership, American Campus Communities will reach its full potential.
—Interview by Randall Shearin and Richard Kelley
This article was originally published in the September/October 2022 issue of Student Housing Business magazine