Campus Crest Agrees to Sale to Private Equity Firm

Student housing REIT Campus Crest Communities, Inc. (NYSE: CCG) announced Oct. 16 that it has agreed to be purchased by affiliates of the private equity firm Harrison Street Real Estate Capital, LLC in a deal valued at approximately $1.9 billion.

Harrison Street has agreed to pay $7.03 per Campus Crest share, a 24 percent premium on the Oct. 16 closing price of $5.68. The offer price includes the anticipated net sale proceeds of up to 13 cents per share from the separate sale of Campus Crest’s stake in a joint venture in Montreal.

Campus Crest said the final terms of the deal would not be settled until after the close of the JV sale, currently expected to occur before Oct. 30.

If the Montreal sale does not occur prior to the closing of the merger with Harrison, which is expected to be completed in the first quarter of 2016, Campus Crest shareholders would receive about $6.23 per share in cash and one non-transferable contingent value right (CVR) per share. The CVR would allow Campus Crest shareholders to receive a portion of the net proceeds of the JV sale when it eventually occurs.

In October 2014, Campus Crest began a strategic repositioning process to simplify its business model, change executive management and maximize shareholder value. In February, the company announced it would conduct a thorough analysis of all potential financial and strategic alternatives.

“We are pleased that Harrison Street recognizes the value inherent in our portfolio of high-quality student housing properties,” said Richard Kahlbaugh, non-executive chairman of Campus Crest.

Christopher Merrill, the co-founder, president and CEO of Harrison Street, said the need for high-quality off-campus student housing continues to grow. “We believe this sector has strong long-term fundamentals that will drive sustainable returns,” he said.

Craig Kucera, an analyst at Wunderlich Securities, Inc, said the sale “makes good sense strategically,” given Harrison Street’s student housing expertise and its familiarity with properties in the Campus Crest portfolio.

Michael Bilerman, managing director at Citi Research, said the Campus Crest sale is a positive for the student housing REIT sector as pricing is above expectations and highlights increased institutional interest. This should result in a deeper buyer pool for student housing going forward and keep transaction capitalization rates low, he added.

The proposed sale of Campus Crest comes on the heels of an announcement that private equity firm Blackstone Group L.P. has agreed to acquire the life sciences office and lab space REIT in an all-cash transaction valued at $8 billion. Analysts say they expect to see more privatizations as a number of REITs are currently trading at a discount to their net asset value.