5. Investment in Unconsolidated Entities

We have investments in real estate ventures with HSRE, the former members (the “CB Investors”) of Copper Beech Townhome Communities, LLC ("CBTC") and Copper Beech Townhome Communities (PA), LLC (“CBTC PA,” together with CBTC, "Copper Beech"), and Beaumont Partners SA (“Beaumont”) 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 have significant influence but not control 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 our investments with HSRE and Beaumont and earn fees for these management services. Additionally, we provide development and construction services to our ventures with HSRE, Copper Beech and Beaumont and recognize fees as the services are performed.

In January 2014, CSH Montreal LP (“CSH Montreal”), our joint venture with Beaumont, acquired ownership of HIM Holdings LP (“HIM Holdings”), an entity formed to facilitate the acquisition of the Holiday Inn Midtown in Montréal, Québec for approximately CAD 65 million ($58.6 million). CSH Montreal intends to convert the property into an upscale evo student housing tower near McGill University. In connection with the acquisition of the Holiday Inn property, we increased our ownership interest from 20.0% to 35.0% in CSH Montreal, the joint venture that holds the evo à Sherbrooke (Holiday Inn Midtown) and the previously announced evo à Square Victoria. In January 2014, with the acquisition of the Holiday Inn Midtown property, we provided CAD 16.0 million ($14.4 million) of preferred bridge equity financing to CSH Montreal. If our preferred equity is not repaid in full on or prior to September 2, 2014, it will effectively convert to a common interest in CSH Montreal, which would result in us holding a 60.54% interest in CSH Montreal (while Beaumont and its partners would own the remaining 39.46% interest in CSH Montreal).

In conjunction with the Holiday Inn Midtown acquisition, CSH Montreal entered into a CAD 112.0 million ($100.9 million) acquisition and development credit facility to help fund the conversion of both hotels into upscale student housing towers. The credit facility provides for variable interest-only payments at the higher of the Canadian Prime rate, which was 3.00% at March 31, 2014, plus a weighted average spread of 3.37% or the Canadian Dealer Offered Rate (“CDOR”), which was 1.23% at March 31, 2014, plus a weighted average spread of 4.37% through its maturity date on January 13, 2016. This facility has one twelve-month extension option, subject to lender approval.

In January 2014, we amended and restated the HSRE-Campus Crest I, LLC operating agreement, which had the effect of exchanging our preferred interests in The Grove at San Angelo, Texas, and The Grove at Conway, Arkansas, for additional membership interests in HSRE-Campus Crest I, LLC, effectively increasing our equity investment in the joint venture to 63.9% from 49.9%. HSRE-Campus Crest I, LLC owns The Grove at San Angelo, Texas, The Grove at Lawrence, Kansas, and The Grove at Conway, Arkansas. In the event the joint venture is sold, the partners will share equally in the net proceeds. There were no other material changes to the agreement.

We are the guarantor of the construction and mortgage debt or credit facilities of our joint ventures with HSRE and Beaumont. Details of our unconsolidated investments at March 31, 2014 are presented in the following table (dollars in thousands):

												Debt
														Weighted
						Number of Properties								Average
	Our			Year		In		Under		Our Total		Amount		Interest
Unconsolidated Entities	Ownership			Founded		Operation		Development		Investment		Outstanding		Rate			Maturity Date / Range
HSRE-Campus Crest I, LLC		63.9	%		2009		3		-	$	10,578	$	32,485		2.65	%(1)	2/9/2015
HSRE-Campus Crest V, LLC		10.0	%		2011		3		-		3,426		49,614		2.87	%(1)	12/20/2014 – 01/05/2015
HSRE-Campus Crest VI, LLC		20.0	%		2012		3		-		13,527		32,998		2.52	%(1)	5/08/2015 – 12/19/2015
HSRE-Campus Crest IX, LLC		30.0	%		2013		-		1		18,573		23,795		2.35	%(1)	7/25/2016
HSRE-Campus Crest X, LLC		30.0	%		2013		-		2		9,389		9,224		2.33	%(1)	9/06/2016-9/30/2018
CB Portfolio		67.0	%(3)		2013		28		-		254,252		390,936		5.65	%(1)	6/01/2014 – 10/01/2020
CB Ames		67.0	%		2013		-		1		11,758		-		n/a		n/a
CSH Montreal LP		35.0	%(4)		2013		-		2		36,238		61,831		6.37	%(1)	1/13/2016
Other		20.0	%		2013		-		-		1,560		-		n/a		n/a
Total Unconsolidated Entities							37		6	$	359,301	$	600,883		4.98	%

⁽¹⁾

Variable interest rates.

⁽²⁾

Comprised of fixed rate debt.

⁽³⁾

As of March 31, 2014, we had a 67.0% effective interest in the CB Portfolio.

⁽⁴⁾

As of March 31, 2014, we had CAD 16.0 million ($14.4 million) of preferred bridge equity in CSH Montreal. See discussion above.

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

	March 31,		December 31,
	2014		2013
Assets
Student housing properties, net	$	321,644	$	289,797
Development in process		120,444		81,994
Other assets		18,249		15,341
Total assets	$	460,337	$	387,132

Liabilities and Equity
Mortgage and construction loans	$	210,325	$	165,445
Other liabilities		58,800		58,948
Owners' equity		191,212		162,739
Total liabilities and owners' equity	$	460,337	$	387,132

Company's share of historical owners' equity	$	67,446	$	41,390
Preferred investment⁽¹⁾		21,799		16,468
Net difference in carrying value of investment versus net book value of underlying net assets⁽²⁾		4,046		5,388
Carrying value of investment in unconsolidated entities	$	93,291	$	63,246

⁽¹⁾

As of March 31, 2014, we had Class B member interest in The Grove at Indiana, Pennsylvania, The Grove at Greensboro, North Carolina, and The Grove at Louisville, Kentucky, of approximately $2.7 million, $2.7 million and $1.9 million, respectively, entitling us to a 9.0% return on our investment upon the respective property being operational. We also had a CAD 16 million ($14.4 million) Class A interest in CSH Holdings entitling us to a commitment fee of 1.0% of the Class A interest each quarter and 10.0% annual return on our investment. As of December 31, 2013, we had Class B member interest in The Grove at San Angelo, Texas, The Grove at Conway, Arkansas, The Grove at Indiana, Pennsylvania, The Grove at Greensboro, North Carolina, and The Grove at Louisville, Kentucky, of approximately $2.8 million, $6.4 million, $2.7 million, $2.7 million and $1.9 million, respectively, entitling us to a 9.0% return on our investment upon the respective property being operational.

⁽²⁾

This amount represents the aggregate excess of our carrying amount above our underlying equity in the net assets of our investments, 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 financial position reflecting the cost basis of our investments in the Copper Beech entities in their entirety for the 30 properties in the CB Portfolio as of March 31, 2014 and December 31, 2013 (amounts in thousands):

	March 31,		December 31,
	2014		2013
Assets
Student housing properties, net	$	742,530	$	748,280
Intangible assets		23,340		37,100
Other assets		4,948		5,201
Total assets	$	770,818	$	790,581

Liabilities and Equity
Mortgage and construction loans	$	417,096	$	421,239
Other liabilities		6,896		13,112
Owners' equity		346,826		356,230
Total liabilities and owners' equity	$	770,818	$	790,581

Company's share of historical owners' equity	$	247,688	$	244,964
Net difference in carrying value of investment versus net book value of underlying net assets⁽¹⁾		18,322		16,628
Carrying value of investment in unconsolidated entity	$	266,010	$	261,592

⁽¹⁾

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 capitalization of transaction costs incurred to acquire the Company's interest in the entity.

The following is a summary of the combined operating results for our unconsolidated entities with HSRE in their entirety, not only our interest in the entities, for the periods presented (in thousands):

	Three Months Ended
	March 31, 2014		March 31, 2013

Revenues	$	6,456	$	4,762
Expenses:
Operating expenses		3,561		2,577
Interest expense		1,051		1,140
Depreciation and amortization		2,030		1,360
Other (income) expense		(53)		24
Total expenses		6,589		5,101
Net loss	$	(133)	$	(339)

The following is a summary of the operating results for our unconsolidated Copper Beech entities in their entirety, not only our interest in the entities. The summary includes the results for 37 properties from March 18, 2013 (the date of the transaction) through March 31, 2013, and the results for 30 properties from January 1, 2014 through March 31, 2014 (in thousands):

	Three Months		Period from
	Ended		March 18, 2013 to
	March 31, 2014		March 31, 2013

Revenues	$	19,265	$	3,591
Expenses:
Operating expenses		7,300		1,310
Interest expense		2,940		799
Depreciation and amortization		9,777		1,723
Other expenses		339		48
Total expenses		20,356		3,880
Net loss	$	(1,091)	$	(289)