Moody’s lifts American Campus

Moody's Investors Service said it upgraded American Campus Communities, Inc.’s long-term issuer rating to Baa2 from Baa3.

The outlook is stable.

Moody’s said the upgrade reflects American Campus’ balance sheet improvements, which include moderate leverage and a substantial increase in unencumbered assets. In the first quarter of 2016, the REIT issued about $708 million in a public equity offering, the proceeds of which were used to prepay outstanding debt and, to a lesser extent, fund the company's development and acquisition pipeline.

Net debt/EBITDA at the first quarter was 5.9 times, down from 7.3 times at the first quarter of 2015 and is expected to trend in the mid 5 times through market and development cycles.

Moody's expects American Campus to operate with effective leverage (debt plus preferred stock as a percentage of gross assets) in the low 30% range over the intermediate-term, which will provide the REIT with ample cushion at the current ratings to absorb modest cash flow volatility that will result from development and opportunistic acquisitions.

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