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Investment in Unconsolidated Entities

3 Months Ended

Mar. 31, 2013

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

5. Investment in Unconsolidated Entities

We have investments in real estate ventures with Harrison Street Real Estate Capital ("HSRE") that we do not consolidate. These joint ventures are engaged primarily in developing, constructing, owning and managing student housing properties. Both we and our joint venture partners hold joint approval rights for major decisions, including those regarding property acquisition and disposition as well as property operation. As such, we hold noncontrolling interests in these joint ventures and account for them under the equity method of accounting.

We act as the operating member and day-to-day manager for these joint ventures and as such are entitled to receive fees for providing development and construction services (as applicable) and management services. We recognized revenues of approximately $11.4 million and $14.3 million for the three months ended March 31, 2013 and 2012, respectively, for services provided to the joint ventures, which are reflected in Development, Construction and Management Services in the accompanying condensed consolidated statements of operations.

In March 2013, we entered into a joint venture agreement with HSRE, HSRE-Campus Crest X, LLC ("HSRE X"), to develop and operate additional purpose-built student housing properties. HSRE X is currently building two new student housing properties with completion targeted for the 2014-2015 academic year. The properties, located in Louisville, Kentucky and Greensboro, North Carolina are expected to have approximately 1,200 beds and have an estimated cost of $65.6 million. We own a 30% interest in this venture and affiliates of HSRE own the balance.

We are the guarantor of the construction and mortgage debt of our ventures with HSRE. Details of our unconsolidated investments at March 31, 2013 are presented in the following table (in thousands):

									Debt
											Weighted
				Number of Properties							Average
	Our		Year		In	Under		Our Total		Amount		Interest
Unconsolidated Entities	Ownership		Founded		Operations	Development		Investment		Outstanding		Rate		Maturity Date / Range
HSRE-Campus Crest I, LLC	49.9	%	2009		3	-	$	10,823	$	33,532		2.70	%⁽¹⁾	11/09/2013 – 1/09/2014
HSRE-Campus Crest IV, LLC	20.0	%	2011		1	-		2,285		16,979		5.75	%⁽²⁾	12/1/2013
HSRE-Campus Crest V, LLC	10.0	%	2011		3	-		3,296		45,670		2.96	%⁽¹⁾	12/20/2014 – 01/05/2015
HSRE-Campus Crest VI, LLC	20.0	%	2012		-	3		6,872		693		2.85	%⁽¹⁾	5/08/2015 – 12/19/2015
HSRE-Campus Crest IX, LLC	30.0	%	2013		-	1		5,443		-		n/a		n/a
HSRE-Campus Crest X, LLC	30.0	%	2013		-	2		6,378		-		n/a		n/a
Total Unconsolidated Grove Entities					7	6	$	35,097	$	96,874		3.36	%
CB Portfolio	25.3	%	2013		33	2		130,591		515,200		5.65	%⁽³⁾	6/01/2013 - 10/01/2020
Total Unconsolidated Entities					40	8	$	165,688	$	612,074		5.27	%

⁽¹⁾

Variable interest rates.

⁽²⁾

Comprised of one fixed rate loan.

⁽³⁾

At March 31, 2013, our effective interest in the CB Portfolio was 25.3%. We will continue to close on our 48.0% interest, anticipating completion by the third quarter of 2013, in each remaining property at such time as we obtain the requisite lender consent relating thereto.

We recorded equity in earnings from these ventures for the three months ended March 31, 2013 and 2012 of approximately $0.4 million and $0.1 million, respectively.

The following is a summary of the financial position of our unconsolidated entities in their entirety, not only our interest in the entities, including provisional fair value balances for the CB Portfolio that are subject to the completion of our allocation analyses and appraisals, for the periods presented (amounts in thousands):

	March 31,			December 31,
	2013			2012
Assets
Student housing properties, net	$	1,140,638		$	143,108
Other assets		78,156			40,154
Total assets	$	1,218,794		$	183,262

Liabilities and Equity
Mortgage and construction loans	$	612,074		$	92,456
Other liabilities		35,263			30,402
Owner’s equity		571,457			60,404
Total liabilities and owner’s equity	$	1,218,794		$	183,262

Company's share of owner’s equity	$	152,655		$	14,078
Preferred investment⁽¹⁾		16,469			11,828
Net difference in carrying value of investment versus net book
value of underlying net assets⁽²⁾		(3,436	)		(3,351	)
Carrying value of investment in unconsolidated entities	$	165,688		$	22,555

⁽¹⁾

As of March 31, 2013, we held aggregate Class B interests in The Grove at Greensboro, The Grove at Louisville, The Grove at San Angelo, The Grove at Indiana and The Grove at Conway of approximately $16.5 million. As of December 31, 2012, we held aggregate Class B interests in The Grove at San Angelo, The Grove at Indiana and The Grove at Conway of approximately $11.8 million. These preferred interests entitle us to a 9.0% return on our investment but otherwise do not change our effective ownership interest in these properties.

⁽²⁾

This amount represents the aggregate difference between our historical cost basis and the basis reflected at the entity 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 venture’s basis in those interests, the capitalization of additional investment in the unconsolidated entity and the elimination of service related revenue to the extent of our percentage ownership.

The following is a summary of the operating results for our unconsolidated entities in their entirety, not only our interest in the entities, including results for the CB Portfolio based on the provisional fair value adjustments, for the periods presented (in thousands):

	Three months ended
	March 31, 2013			March 31, 2012

Revenues	$	8,353		$	4,614
Expenses:
Operating expenses		3,901			2,556
Interest expense		2,381			1,337
Depreciation and amortization		3,083			1,207
Other expense		122			-
Total expenses		9,487			5,100
Net loss	$	(1,134	)	$	(486	)

Company’s share of net income (loss)⁽¹⁾	$	308		$	(60	)
Income on preferred investments		102			156
Equity in earnings of unconsolidated entities	$	410		$	96

⁽¹⁾

Amount differs from net loss multiplied by our ownership percentage due to the amortization of the aggregate difference between our historical cost basis and our basis reflected at the entity level, elimination of management fees, and income on preferred investments.

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

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