CHICAGO—Another REIT has opted to be taken private after considering its options. Chicago-based private equity firm Harrison Street Real Estate Capital LLC will acquire Campus Crest Communities Inc. for $6.90 per share, its single-largest investment in student housing to date. When the student housing REIT's sale of its joint-venture interest in two Montreal properties is factored in, the total transaction is valued at approximately $1.9 billion.

“The need for high-quality off-campus housing continues to grow and we believe this sector has strong long-term fundamentals that will drive sustainable returns,” says Christopher Merrill, Harrison Street's co-founder, president and CEO. Since its founding in 2005, Harrison Street has developed or acquired more than 63,000 student housing beds; the CCG deal will add another 42,000 across 79 properties.

Not included in that tally will be the two Montreal assets in which the Charlotte, NC-based CCG owns a 35% JV interest. Terms of the sale to Beaumont Partners, its Geneva, Switzerland-based JV partner since 2013, were not disclosed, although CCG says proceeds are currently estimated at up to 13 cents per share, based on current exchange rates.

CCG's board began a strategic review process in October 2014. The following month, the REIT suspended all new construction and put its development pipeline on the market. At that time, cofounder Ted Rollins resigned as CEO, and CFO Donnie Bobbitt also stepped down, with lead independent director Richard Kahlbaugh named interim CEO and non-executive chairman.

This past February, CCG announced that it was exploring “a broad range of strategic, operational and financial alternatives,” and that Moelis & Co. and Kilpatrick Townsend & Stockton LLP, respectively its financial and legal advisors, were assisting with the exploration. That announcement coincided with a proposal by shareholder Clinton Group Inc. to install a new executive team led by Andrew Stark, CEO of Campus Evolution Villages.

In a letter to CCG's board, Joseph A. De Perio, senior portfolio manager at New York City-based Clinton Group, said his company had partnered with CEV, a student housing operator that over the past three years had enjoyed “tremendous success turning around sub-performing assets in markets with similar characteristics to those of CCG.” Although the bid to name Stark as CCG's chief executive did not pan out, Clinton Group and the REIT in May announced a settlement agreement to expand its board with three new members nominated by Clinton Group.

Merrill explained Harrison Street's investment strategy, focusing on self-storage and healthcare real estate in addition to student housing, in an interview with GlobeSt.com this past April. “What you have is asset classes with good long-term demand, yet because they're hard to access and because of the fragmentation, you can drive better returns,” he said. “That's what exciting about these investments, because it's not just for a short period of time. It's really for the next 10 to 15 years, given some of the demographic changes that are happening within our country.”

That GlobeSt.com interview with Merrill noted that Harrison Street had just closed on an equity stake in a mixed-use project to be developed adjacent to Texas A&M University in College Station, TX. The Wall Street Journal reported that the $172-million project, Century Square, represented a departure for Harrison Street in that it did not include any student housing, although it will include rental aprtments.

“There are a lot of other ways to invest and make money in university towns,” Merrill told the WSJ this past April. “We hope that we can replicate this at other universities.”

The acquisition of CCG is expected to close in the first quarter of 2016. With Moelis & Co. and Kilpatrick Townsend & Stockton LLP serving in their previously announced advisory roles on behalf of CCG, Raymond James and Associates Inc. is serving as Harrison Street's financial advisor and DLA Piper LLP (US) is acting as the buyer's legal advisor.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.