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Debt

6 Months Ended

Jun. 30, 2012

5. Debt

The following is a summary of our mortgage and construction notes payable, the Credit Facility (defined below) and other debt for the periods presented (amounts in thousands):

	June 30, 2012		December 31, 2011
Fixed-rate mortgage notes payable	$	149,122	$	109,276
Variable-rate mortgage notes payable		28,726		28,726
Construction loans		21,028		48,912
Line of credit		80,500		79,500
Other debt		2,475		2,552
	$	281,851	$	268,966

Line of Credit

We have a revolving credit facility (the “Credit Facility”) with Citibank, N.A. and certain other parties thereto. The Credit Facility provides for borrowing capacity up to $200 million and includes an accordion feature that allows us to request an increase in the total commitments of an additional $125 million to a total commitment of $325 million. The Credit Facility matures in August 2014 and provides us a one-year extension option, subject to certain terms and conditions. Amounts outstanding under the Credit Facility bear interest at a floating rate equal to, at our election, the Eurodollar Rate or the Base Rate (each as defined in the Credit Facility) plus a spread. The spread depends upon our leverage ratio and ranges from 1.75% to 2.50% for Eurodollar Rate based borrowings and from 0.75% to 1.50% for Base Rate based borrowings. At June 30, 2012, the interest rate on the Credit Facility was 2.24%. Under the Credit Facility, our distributions may not exceed the greater of (i) 95.0% of our FFO or (ii) the amount required for us to qualify and maintain our status as a REIT. If a default or event of default occurs and is continuing, we may be precluded from making certain distributions (other than those required to allow us to qualify and maintain our status as a REIT).

As of June 30, 2012 and December 31, 2011, we had approximately $80.5 million and $79.5 million outstanding under the Credit Facility, respectively. At June 30, 2012, we had approximately $61.4 million of borrowing capacity under the Credit Facility. Our ability to borrow under this facility is subject to our ongoing compliance with a number of customary financial covenants, as described further in our Annual Report on Form 10-K for the year ended December 31, 2011.

We and certain of our subsidiaries guarantee the obligations under the Credit Facility and we and certain of our subsidiaries have provided a pledge to not encumber assets comprising the borrowing base used to determine the borrowing capacity under the Credit Facility. At June 30, 2012, we were in compliance with the above financial covenants with respect to the Credit Facility.

Mortgage Notes Payable

Mortgage notes payable are collateralized by properties and their related revenue streams or properties under construction. The following presents our mortgage notes payable outstanding for the periods presented (dollar amounts in thousands):

					Principal
			Principal		Outstanding					Interest
	Face		Outstanding		at		Stated Interest			Rate at			Maturity
	Amount		at 6/30/2012		12/31/2011		Rate			6/30/2012			Date			Amortization
Construction loans
The Grove at Orono	$	15,206	$	5,236	$	-		LIBOR + 275 bps			2.99	%		6/30/2014			Interest only
The Grove at Auburn		16,294		10,018		-		LIBOR + 295 bps			3.19	%		7/22/2014			Interest only
The Grove at Flagstaff		19,842		5,774		-		Prime + 25 bps			3.50	%		12/9/2014			Interest only
Construction (three properties)		37,523		-		33,536		LIBOR + 475 bps			N/A	⁽²⁾		N/A	⁽²⁾		Interest only
Mortgage loans
The Grove at Huntsville and
The Grove at Stateboro		28,726		28,726		28,726		LIBOR + 250 bps			2.74	%		1/9/2013	⁽¹⁾		Interest only
The Grove at Milledgeville		16,250		16,133		16,221		6.12	%		6.12	%		10/1/2016			30 years
The Grove at Carrollton and
The Grove at Las Cruces		29,790		29,574		29,738		6.13	%		6.13	%		10/11/2016			30 years
The Grove at Asheville		14,800		14,772		14,800		5.77	%		5.77	%		4/11/2017			30 years
The Grove at Ellensburg		16,125		16,125		16,125		5.10	%		5.10	%		9/1/2018			30 years
The Grove at Nacogdoches		17,160		17,160		17,160		5.01	%		5.01	%		9/1/2018			30 years
The Grove at Greeley		15,233		15,233		15,233		4.29	%		4.29	%		10/1/2018			30 years
The Grove at Clarksville⁽³⁾		16,350		16,350		-		4.03	%		4.03	%		7/1/2022			30 years	⁽⁴⁾
The Grove at Columbia⁽³⁾		23,775		23,775		15,375		3.83	%		3.83	%		7/1/2022			30 years
			$	198,876	$	186,914

⁽¹⁾

Note has a twelve-month extension option for a 1/9/2014 maturity date.

⁽²⁾

Not applicable as the loan was paid off during the first quarter of 2012.

⁽³⁾

Represents variable rate construction loan at December 31, 2011 which was paid off during the first quarter of 2012. Permanent financing was secured second quarter of 2012.

⁽⁴⁾

Interest only for the first two years, followed by 30 year amortization.

During the period January 1, 2012 through February 13, 2012, we had an aggregate of approximately $48.9 million outstanding under two construction loans that were utilized to partially finance the construction of four properties opened for the 2011-2012 academic year. These construction loans were repaid in full on February 13, 2012 with proceeds from the Series A Preferred Stock offering (see Note 8).

In June 2012, we closed on approximately $40.1 million of Freddie Mac financings on The Grove at Clarksville, Tennessee, and The Grove at Columbia, Missouri. The proceeds from the financings were used to reduce outstanding balances under the Credit Facility.

The estimated fair value of our mortgage and construction notes payable at June 30, 2012 and December 31, 2011 was approximately $209.9 million and $185.2 million, respectively. Estimated fair values are determined by comparing current borrowing rates and risk spreads to the stated interest rates and risk spreads (Level 2 fair value measurement).

Scheduled maturities of debt as of June 30, 2012 are as follows (in thousands):

For the year ending:	Total
Remainder of 2012	$	515
2013		30,179
2014		103,818
2015		2,572
2016		45,720
Thereafter		99,047
	$	281,851

In July 2012, we secured financing for our wholly-owned projects in Ft. Collins, Colorado and Muncie, Indiana, anticipated to be delivered for the 2013-2014 academic year (see Note 13).

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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