American Campus Communities (NYSE:ACC) is shooting up today on the announcement that it is about to be acquired by Blackstone (NYSE:BX). The former is the U.S.’s largest owner and developer of student housing communities. Its assets include 166 properties extended across 71 university campus markets throughout the country. This includes big names such as the University of Texas at Austin and Arizona State University. With ACC stock surging this morning, the little-known company has come sharply into Wall Street’s focus.
What’s Happening With ACC Stock
Since news of the acquisition broke this morning, ACC stock has been rising. After a week of remaining rather stagnant, it shot up almost 13% this morning. While gains have remained steady for the past hour, the stock is still trading very well overall. The deal has also been good for BX stock, which has also been rising since markets opened. As of this writing, it is up 4% for the day and shows no signs of slowing down.
Why It Matters
It’s not hard to see why this acquisition would push ACC stock up. The all-cash deal values the company at the per-share price of $65.47, roughly 14% higher than ACC’s price at close of markets last week. A statement released by the company noted that the entire deal is worth roughly $12.8 billion, including the assumption of debt. Reuters reports that it will mean ACC being taken private by Blackstone Real Estate Income Trust and Blackstone Property Partners.
Wall Street focus rarely shifts to companies in the student housing space. For investors, it is important to see the bigger picture at play. This is Blackstone’s largest foray into the student housing sector, and it represents an important bet — that rents will keep rising as students return to campus. It’s also important to note that even in the worst of the pandemic, student housing was not too negatively affected. In May 2020, the National Apartment Association reported that “student housing’s resiliency has shown it was able to outperform the traditional rental housing industry as well as within its own cohort.”
Now as the pandemic shows signs of winding down, students who left campus are focused on returning. And Blackstone has perceived something important: that high rent trends are likely to nudge students toward living on campus. A company like ACC, with vast holdings across large state universities, is the perfect play to cash in on the student housing rush that we are a few months away from witnessing.
This comes only a few months after Blackstone’s acquisition of fellow real estate investment trust (REIT) Bluerock Residential Growth REIT, a deal valued at $3.6 billion.
What It Means
ACC stock has been hailed as a REIT to buy for anyone confident about economic recovery. Clearly, Blackstone is confident about it, particularly in the section of the real estate sector that caters to students. Most colleges have already resumed in-person classes. That trend will only continue as Covid-19 numbers fall.
As the Wall Street Journal reports, the student housing sector “looks poised to benefit from a number of tailwinds,” such as rising rents and housing shortages. For many students, living off campus will be a less desirable option. The acquisition of ACC stock will work out well for all parties involved, but especially for Blackstone.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
