Investment in Unconsolidated Entities

6 Months Ended

Jun. 30, 2011

Investment in Unconsolidated Entities [Abstract]

Investment in Unconsolidated Entities

8. Investment in Unconsolidated Entities

          We have investments in two real estate venture entities with HSRE. The first real estate venture, HSRE-Campus Crest I, LLC (“HSRE I”), is not consolidated by the Company. At June 30, 2011 and December 31, 2010, this entity, in which our investment is accounted for under the equity method, owned six student housing properties. Three of these properties, The Grove at Lawrence, The Grove at Moscow and The Grove at San Angelo, opened in 2009. The remaining three properties, The Grove at Huntsville, The Grove at Conway and The Grove at Statesboro opened in 2010. We held a 49.9% noncontrolling interest in this unconsolidated entity at June 30, 2011 and December 31, 2010. Prior to the Offering and Formation Transactions, we held a 10% noncontrolling interest in this venture. As discussed in note 6, also prior to the Offering, the HSRE I venture owned an additional student housing property, The Grove at San Marcos. The Company acquired the remaining ownership interest in this property, which opened in 2009, concurrent with the Offering and Formation Transactions.

          The second real estate venture, HSRE-Campus Crest IV, LLC (“HSRE IV”), was entered into on January 20, 2011. HSRE will contribute up to $50 million to the venture, which will develop and operate additional purpose-built student housing properties. The Company’s investment in this real estate venture is accounted for under the equity method. We own a 20% noncontrolling interest in this unconsolidated entity at June 30, 2011. HSRE IV is currently constructing two new student housing properties with completion targeted for the 2011-2012 academic year, The Grove at Denton and The Grove at Valdosta. The Company made contributions to HSRE IV of approximately $3.0 million during the six months ended June 30, 2011, consisting of cash and assigned interests in Campus Crest at Denton, LP and Campus Crest at Valdosta, LLC.

          We recorded equity in loss from these ventures of approximately $(0.3) million and $(0.1) million for the three months ended June 30, 2011 and 2010, respectively, and approximately $(0.6) million and $(0.2) million for the six months ended June 30, 2011 and 2010, respectively. In addition to acting as the operating member for these ventures, the Company and its Predecessor are entitled to receive fees for providing development and construction services (as applicable) and management services to the ventures. The Company earned approximately $11.3 million and $15.1 million in fees for the three months ended June 30, 2011 and 2010, respectively, and approximately $21.6 million and $30.9 million in fees for the six months ended June 30, 2011 and 2010, respectively, for services provided to the ventures. The development, construction and management service fees from these unconsolidated entities are reflected in the development, construction and management services line item in the accompanying condensed consolidated and combined statements of operations.

          The Company is the guarantor of the construction debt of these ventures, which totaled approximately $102.7 million and $83.2 million at June 30, 2011 and December 31, 2010, respectively. The ventures’ construction debt matures at various dates between 2011 and 2013.

          Condensed combined financial information for these unconsolidated entities as of June 30, 2011 and December 31, 2010 and for the three and six month periods ended June 30, 2011 and 2010 are as follows (amounts in thousands):

Balance Sheets

				December 31,
	June 30, 2011			2010
Assets:
Student housing properties, net	$	110,690			112,224
Development in process		38,211			—
Other assets		7,231			5,444
Total assets	$	156,132			117,668
Liabilities and owners’ equity:
Construction debt	$	102,717			83,222
Other liabilities		9,561			5,117
Owners’ equity		43,854			29,329
Total liabilities and owners’ equity	$	156,132			117,668
Share of historical owners’ equity	$	14,952			12,479
Preferred investment (1, 2)		6,839			4,781
Net difference in carrying value of investment versus net book value of underlying net assets (3)		(3,682	)		(3,509	)
Carrying value of investment in unconsolidated entities	$	18,109			13,751

(1)	As of June 30, 2011, the Company has a Class B member interest in The Grove at Valdosta of approximately $1.1 million. This preferred interest entitles the Company to a 9.0% return on its investment but otherwise does not change the Company’s effective 20% ownership interest in this entity.
(2)	As of June 30, 2011, the Company has a Class B member interest in both The Grove at San Angelo and The Grove at Moscow of approximately $2.8 million and $3.0 million, respectively. As of December 31, 2010, the Company had a Class B member interest in both The Grove at San Angelo and The Grove at Moscow of approximately $2.3 million and $2.5 million, respectively. These preferred interests entitle the Company to a 9.0% return on its investment but otherwise do not change the Company’s effective 49.9% ownership interest in these entities or operating properties.
(3)	This amount represents the aggregate difference between our historical cost basis and the basis reflected at the entity (i.e., venture) level, which is typically amortized over the life of the related asset. The basis differential occurs primarily due to the difference between the allocated value to acquired entity interests and the ventures’ basis in those interests, the capitalization of additional investment in the unconsolidated entities, and the elimination of profit earned by us from services provided to these entities to the extent of our percentage ownership.

Statements of Operations

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Revenues	$	3,768			2,091			7,509			4,111
Expenses:
Operating expenses		2,139			1,369			4,121			2,672
Interest expense		1,465			931			2,944			1,893
Depreciation and amortization		1,115			794			2,238			1,589
Total expenses		4,719			3,094			9,303			6,154
Net loss	$	(951	)		(1,003	)		(1,794	)		(2,043	)
Company’s and Predecessor’s share of net loss (1)	$	(340	)		(114	)		(635	)		(194	)

(1) Amount differs from net loss multiplied by the Company’s ownership percentage due to the amortization of the aggregate difference between our historical cost basis and our basis reflected at the entity (i.e., venture) level.