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It's difficult to assess where colleges will be this spring: CEO

American Campus Communities CEO Bill Bayless joins Yahoo Finance’s Zack Guzman to discuss the outlook on student housing as coronavirus cases continue to spread through college campuses.

Video Transcript

ZACK GUZMAN: Meantime, a focus on college campuses here, as we've been highlighting a few universities that have moved back from plans to bring students back. We saw that play out at UNC a couple weeks ago. But one of these companies that is tied to that space is one that we have not highlighted on the show before. That would be American Campus Communities, a REIT founded in 1993 based in Austin, Texas, the largest owner, manager, and developer of high-quality student housings-- housing buildings here in the US, I should say. And shares were about 20% lower so far on the year.

They just gave investors an update about the lease-- or I guess I should say rentals there on these properties, as of the latest clip, down by about 7% versus what they saw last year at this time. So for more on what these buildings are seeing, occupancy rates on campus, a lot here to deal with in the pandemic-- here to chat all that is the CEO of American Campus Communities. Bill Bayless joins us now. And Bill, good to be chatting with you. I guess--

BILL BAYLESS: Good to be with you.

ZACK GUZMAN: First we'll start on that decline. I mean, it seems pretty large, but how do you put that in historical context here when you think about that drop and students being in it?

BILL BAYLESS: Yeah, and we're actually very pleased with where we are today, as the universities have commenced the new academic year. Last year at this time, we read 97.4% in terms of occupancy, and this year, we're currently at just over 90%, so about a 7% decrease, which overall, is really not bad. When you dissect that number further, with sophomores and upper classmen, our occupancies are really at about 92%, only about a 5% diminishment.

And where we saw a little bit of apprehension this year is among first-year students that have graduated from high school among this COVID pandemic. They're leaving home for the first time. And there we see first-year residence hall products down to about 80% occupancy. That's a very small portion of our portfolio, though-- only about 10% of our beds.

And so overall, we're very pleased. And the students demonstrated that regardless of university curriculum delivery-- whether it's in-person, online, or realistically, what most schools are doing, they're toggling back and forth-- that they want to be in the college towns, in the university environment as they pursue higher learning.

ZACK GUZMAN: Yeah, and when we think about the recovery, obviously it's kind of hard to predict where things go from here. To your point there when you think about first-year students coming in, we saw a lot of students, including some big name colleges, Harvard, seeing quite a few defer their time on campus here. So when you project out how long that trend might last, how important is that for you guys, and how do you see it continuing here past 2020?

BILL BAYLESS: Well, it actually-- the one thing that we've seen from our university partners-- and we predominantly serve large, public, four-year land-grant institutions-- is that they're reporting that first-year student enrollment is not down and it's holding relatively steady. So the good news is while about, you know, one in five students said maybe I'll go ahead and stay at home for the first semester while I'm taking classes online, they still enrolled at the colleges and university.

And so many universities are managing the pandemic to see-- many of these students may still come back for the spring semester and certainly by the fall of 2020. So we're very pleased that in the enrollment numbers that we're hearing early on from colleges and universities, it doesn't look like any long-term diminishment in demand for higher education. And in fact, some universities-- you know, our partners at Arizona State University-- are saying they're seeing some of the highest overall enrollment numbers for the fall of this year.

ZACK GUZMAN: Yeah, and I mean, I guess-- I would assume there'd be no one more attuned to this than you, in terms of where colleges are going and how students are thinking about all this. But I imagine graduation is also pretty busy, when you think about the influx of people coming in-- maybe not to live there, but your parents coming back to campus, that being a big driver. I don't know who wants to go to college if you're not going to be able to step across that stage there and get your diploma.

But when you think about that coming up in 2020, how do you see it playing out? Because I think a lot of people were caught flat-footed by the idea of this all still seeing a shift to virtual classes. And when you look out to graduation in the spring of next year, are you projecting that those are going to be virtual as well? What do you see playing out?

BILL BAYLESS: You know, in the universities, the one thing that they have done-- when this hit in March, none of us were prepared for a pandemic of this type. The universities and colleges certainly hadn't contemplated operating in this environment. And the institutions have done just a fantastic job in creating flexibility. And throughout this entire academic year, they're prepared to be able to have whatever in-person classes they can to immediately toggle into online where they need to.

You've seen that. As there have been some spikes in colleges and universities, they said, OK, we're going to go online for the next two to four weeks, and then they'll reassess and be able to do it. And so as we look out as far as May, I think it's very difficult to say exactly where we may be at that point in time. But the universities have done a phenomenal job in being able to have the flexibility to go back and forth.

And where we've been less impacted than I think we ever thought that was going to be the case early on in the pandemic it that, you know, modern student housing is households of two to four students living in apartments. And so it's just like any other household-- apartment or household. They're able to isolate. They're able to quarantine as necessary. And so it's been normalcy for them, in regards to their living conditions. And where are the actual commencement ceremonies end up, I think we'll have to wait and see, whether it's a Zoom commencement ceremony or they're going to be able to actually walk across that stage with a mask and social distancing.