Debt

12 Months Ended

Dec. 31, 2014

9. Debt

The following is a summary of the Company’s mortgage and construction notes payable, the Credit Facility (defined below), Exchangeable Senior Notes (defined below), and other debt (in thousands):

	Year Ended December 31,
	2014		2013
Fixed-rate mortgage loans	$	163,341	$	165,393
Variable-rate mortgage loans		16,613		-
Construction loans		120,719		40,138
Line of credit		217,500		108,500
Exchangeable senior notes		97,419		96,758
Other debt		2,827		2,694
	$	618,419	$	413,483

Mortgage and Construction Loans

Mortgage and construction loans are collateralized by properties and their related revenue streams. Mortgage loans are not cross-defaulted or cross-collateralized with any other indebtedness. The Company’s mortgage loans generally may not be prepaid prior to maturity; however, in certain cases, prepayment is allowed subject to prepayment penalties. The Company’s construction note agreements contain representations, warranties, covenants (including financial covenants upon commencement of operations) and other terms that are customary for construction financing. Construction loans are generally secured by a first deed of trust or mortgage on each property, primary UCC filings, and an assignment of rents, leases and profits from the respective property. Mortgage and construction loans for the periods presented consisted of the following (in thousands):

	Face Amount		Principal Outstanding at 12/31/2014		Principal Outstanding at 12/31/2013		Stated Interest Rate	Interest Rate at 12/31/2014			Maturity Date ⁽¹⁾	Amortization
Construction loans
The Grove at Muncie	$	14,567	$	13,892	$	12,237	LIBOR + 225 BPS		2.42	%	7/3/2015	Interest only
The Grove at Slippery Rock		17,961		16,031		-	LIBOR + 215 BPS		2.32	%	6/21/2016	Interest only
The Grove at Fort Collins		19,073		19,073		17,228	LIBOR + 190 BPS		2.07	%	7/13/2015	Interest only
The Grove at Pullman		16,016		10,886		10,673	LIBOR + 220 BPS		2.37	%	9/5/2015	Interest only
The Grove at Grand Forks		16,916		12,474		-	LIBOR + 200 BPS		2.17	%	2/5/2017	Interest only
The Grove at Gainesville		30,069		22,836		-	LIBOR + 215 BPS		2.32	%	3/13/2017	Interest only
Copper Beech at Ames		23,551		21,170		-	LIBOR + 225 BPS		2.42	%	5/2/2017	Interest only
Toledo Vivo		9,404		4,357		-	LIBOR + 215 BPS		2.32	%	11/25/2017	Interest only
Mortgage loans
The Grove at Denton		17,167		16,613		-	LIBOR + 215 BPS		2.32	%	3/1/2017	30 years	⁽²⁾
The Grove at Milledgeville		16,250		15,640		15,847	6.12%		6.12	%	10/1/2016	30 years	⁽²⁾
The Grove at Carrollton and The Grove at Las Cruces		29,790		28,674		29,052	6.13%		6.13	%	10/11/2016	30 years	⁽²⁾
The Grove at Asheville		14,800		14,304		14,500	5.77%		5.77	%	4/11/2017	30 years	⁽²⁾
The Grove at Ellensburg		16,125		15,845		16,070	5.10%		5.10	%	9/1/2018	30 years	⁽³⁾
The Grove at Nacogdoches		17,160		16,857		17,100	5.01%		5.01	%	9/1/2018	30 years	⁽³⁾
The Grove at Greeley		15,233		14,945		15,194	4.29%		4.29	%	10/1/2018	30 years	⁽³⁾
The Grove at Clarksville		16,350		16,238		16,350	4.03%		4.03	%	7/1/2022	30 years	⁽⁴⁾
The Grove at Columbia		23,775		22,738		23,180	3.83%		3.83	%	7/1/2022	30 years	⁽²⁾
The Grove at Statesboro		18,100		18,100		18,100	4.01%		4.01	%	1/1/2023	30 years	⁽⁵⁾
			$	300,673	$	205,531

⁽¹⁾

For the construction loans, the maturity date is the stated maturity date in the respective loan agreements, which can be extended for an additional one to two years, subject to the satisfaction of certain conditions, depending on the loan.

⁽²⁾

Loan requires monthly payments of principal and interest, plus certain reserve and escrows, until maturity when all principal is due.

⁽³⁾

Loan requires interest only payments plus certain reserves and escrows, payable monthly through September 2013. Thereafter, principal and interest, plus certain reserves and escrows, are payable monthly until maturity.

⁽⁴⁾

Loan requires interest only payments plus certain reserves and escrows, payable monthly through August 2014. Thereafter, principal and interest, plus certain reserves and escrows, are payable monthly until maturity.

⁽⁵⁾

Loan requires interest only payments plus certain reserves and escrows, payable monthly through January 2015. Thereafter, principal and interest, plus certain reserves and escrows, are payable monthly until maturity.

Line of Credit

In January 2013, the Company entered into the second amended and restated credit agreement (the "Second Amended and Restated Credit Agreement"), which provides for a $250.0 million senior unsecured revolving credit facility (the "Revolving Credit Facility") and a $50 million term loan (the “Term Loan”, together with the “Revolving Credit Facility”, the “Amended Credit Facility”). Additionally, under certain circumstances, there is an accordion feature that allows the Company to request an increase in the total commitments of an additional $300.0 million to a total commitment of $600.0 million. The Second Amended and Restated Credit Facility will mature in January 2017 and contains a one-year extension option, subject to certain terms and conditions. Amounts outstanding under the Second Amended and Restated Credit Facility bears interest at a floating rate equal to, at the Company’s election, the Eurodollar Rate or the Base Rate (each as defined in the Amended Credit Facility) plus a spread. The spread for borrowings under the Revolving Credit Facility ranges from 1.75% to 2.50% for Eurodollar Rate based borrowings and from 0.75% to 1.50% for Base Rate based borrowings, and the spread for the Term Loan ranges from 1.70% to 2.45% for Eurodollar Rate based borrowings and from 0.70% to 1.45% for Base Rate based borrowings. At December 31, 2014 and 2013, the interest rate was 2.68% on the Revolving Credit Facility borrowings and 2.63% on the Term Loan.

As of December 31, 2014, the Company had approximately $167.5 million outstanding under the Revolving Credit Facility and $50.0 million outstanding under the Term Loan. The amounts outstanding under the Revolving Credit Facility and Term Loan, as well as outstanding letters of credit of $3.4 million, will reduce the amount that the Company may be able to borrow under this facility for other purposes. As of December 31, 2014, the Company had approximately $50.0 million in borrowing capacity under the Revolving Credit Facility, and amounts borrowed under the facility are due at its maturity in January 2017, subject to a one-year extension, which the Company may exercise at its option, subject to the satisfaction of certain terms and conditions, including the payment of an extension fee. The amount available for the Company to borrow under the Amended Credit Facility is based on the sum of (a) the lesser of (i) 60.0% of the "as-is" appraised value of the Company’s properties that form the borrowing base of the Amended Credit Facility and (ii) the amount that would create a debt service coverage ratio of not less than 1.5, and (b) 50% of the aggregate of the lesser of (i) the book value of each of the Company’s development assets (as such term is defined in the Second Amended and Restated Credit Agreement) and (ii) the "as-is" appraised value of each of the Company’s development assets, subject to certain limitations in the Second Amended and Restated Credit Agreement.

The Company incurs an unused fee on the balance between the amount available under the Revolving Credit Facility and the amount outstanding under the Revolving Credit Facility of (i) 0.30% per annum if the Company’s average borrowing is less than 50.0% of the total amount available or (ii) 0.25% per annum if the Company’s average borrowing is greater than 50.0% of the total amount available.

On February 25, 2015, the Company entered into the Second Amendment to the Revolving Credit Facility, which amended, among other things, certain of the financial covenants from and including December 31, 2014 until and including September 30, 2015 (the “Relief Period”).

The Company’s ability to borrow under the Amended Credit Facility is subject to its ongoing compliance with a number of customary financial covenants during the Relief Period, including:

a maximum leverage ratio of not greater than 0.65:1.00;

a minimum fixed charge coverage ratio of not less than 1.30:1.00;

a minimum ratio of fixed rate debt and debt subject to hedge agreements to total debt of not less than 66.67%;

a maximum secured recourse debt ratio of not greater than 20%;

a minimum tangible net worth of not less than the sum of $330,788,250 plus an amount equal to 75% of the net proceeds of any additional equity issuances; and

a maximum secured debt ratio of not greater than 47.5%

Pursuant to the terms of the Amended Credit Facility, the Company may not pay distributions that exceed the greater of (i) 95.0% of funds from operations, or (ii) the minimum amount required for the Company to qualify and maintain its status as a REIT. If a default or event of default occurs and is continuing, the Company also may be precluded from making certain distributions (other than those required to allow the Company to qualify and maintain its status as a REIT). On September 30, 2014, the Company received a waiver with respect to the distribution payout ratio for each distribution payout date through the end of 2015. The waiver was expressly conditioned on the following: (i) no default or event of default shall have occurred and be continuing and (ii) as each test date during 2015, the payout ratio shall be equal to or less than (A) 105% or (B) such greater amount as may be required by applicable law for the Company to maintain its status of a REIT. Additionally, on February 25, 2015, the dividend payout ratio was amended to be calculated on a rolling twelve month pro forma basis based on the current quarterly dividend of $0.09 per share.

During 2013, there were several amendments to the Second Amended and Restated Credit Agreement. In February 2013, the Company amended the Second Amended Credit Facility to provide for certain exclusions related to its investments in joint ventures as well as the treatment of certain other investments within the compliance calculation of its secured debt ratio and certain negative covenants.

In April 2013, as a result of the CB Portfolio Acquisition, the Company received a waiver from its lender group allowing for distributions up to, and not to exceed, 110.0% of funds from operations for the remainder of 2013.

In June 2013, in connection with the Company’s investment in its joint venture with Beaumont to acquire a property in Montreal, Quebec, Canada, the Company received a waiver from its lender group allowing the Company to guarantee debt incurred by its subsidiary, Campus Crest at Montreal I, LLC, to fund such investment, as there were no assets held by the joint venture at the time the Second Amended and Restated Credit Agreement was entered into.

The Company and certain of its subsidiaries guarantee the obligations under the Amended Credit Facility and the Company and certain of its subsidiaries have provided a negative pledge against specified assets (including real property), stock and other interests.

Exchangeable Senior Notes

The Company has outstanding $100.0 million of Exchangeable Senior Notes due 2018 (the “Exchangeable Senior Notes”) which bear interest at 4.75% per annum. Interest is payable on April 15 and October 15 of each year beginning April 15, 2014 until the maturity date of October 15, 2018. The Operating Partnership’s obligations under the Exchangeable Senior Notes are fully and unconditionally guaranteed by the Company. The Exchangeable Senior Notes are senior unsecured obligations of the Operating Partnership and rank equally in right of payment with all other existing and future senior unsecured indebtedness of the Operating Partnership.

The Exchangeable Senior Notes contain an exchange settlement feature which allows the holder, under certain circumstances, to exchange its Exchangeable Senior Notes for cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the option of the Operating Partnership, based on an initial exchange rate of 79.602 shares of common stock per $1,000 principal amount of Exchangeable Senior Notes. At the initial exchange rate, the Exchangeable Senior Notes are exchangeable for common stock at an exchange price of approximately $12.56 per share of common stock.

The Exchangeable Senior Notes will be exchangeable by the holder under the following circumstances on or prior to July 15, 2018: i) during any calendar quarter beginning after December 31, 2013 (and only during such quarter) if the closing sale price of the common stock, $0.01 par value per share, of the Company is more than 130% of the then-current exchange price for at least 20 trading days (whether or not consecutive) in the period of the 30 consecutive trading days ending on the last trading day of the previous calendar quarter; ii) during the five consecutive business-day period following any five consecutive trading-day period in which the trading price per $1,000 principal amount of notes for each trading day during such five trading day period was less than 98% of the closing sale price of the common stock of Campus Crest, or Campus Crest common stock, for each trading day during such five trading-day period multiplied by the then current exchange rate; or iii) upon the occurrence of specified corporate transactions described in the indenture governing the Exchangeable Senior Notes. On or after July 15, 2018, and on or prior to the second scheduled trading day immediately preceding the maturity date, holders of the Exchangeable Senior Notes may exchange their notes without regard to the foregoing conditions. Following certain corporate transactions that occur prior to maturity of the Exchangeable Senior Notes and that also constitute a make-whole fundamental change, the Operating Partnership will increase the exchange rate for holders who elect to exchange notes in connection with such make-whole fundamental change in certain circumstances. If specified fundamental changes involving the Operating Partnership or the Company occur, holders may require the Operating Partnership to repurchase the Exchangeable Senior Notes for cash at a price equal to 100% of the principal amount of the Exchangeable Senior Notes to be purchased plus any accrued and unpaid interest to, but excluding, the repurchase date.

The Operating Partnership may not redeem the Exchangeable Senior Notes prior to the maturity date. At any time prior to July 15, 2018, the Operating Partnership may irrevocably elect, in its sole discretion without the consent of the holders of the Exchangeable Senior Notes, to settle all of the future exchange obligation entirely in shares of the Company's common stock. On or after July 15, 2018, the Exchangeable Senior Notes will be exchangeable at any time prior to the close of business on the second business day immediately preceding the maturity date.

In connection with the issuance of the Exchangeable Senior Notes, the Company recorded approximately $97.4 million within line of credit and other debt on the accompanying consolidated balance sheet, based on the fair value of the instrument at the time of issuance, and approximately $2.6 million in additional paid-in-capital, net of offering costs, in the accompanying consolidated statements of changes in equity. Amortization related to the $2.6 million in additional paid in capital was $0.5 million and $0.1 million for the years ended December 31, 2014 and 2013, respectively.

Other Debt

In June 2013, the Company entered into a $33.4 million (CAD 35.0 million) unsecured note payable in connection with its acquisition of a hotel in Montreal, Quebec, Canada. The note payable provided for interest-only payments at a variable interest rate equal to the Canadian Dealer Offered Rate (“CDOR”), which was 1.30% at December 31, 2014, plus a spread of 2.50%. During the year ended December 31, 2014, this facility was assigned to and assumed by CSH Montreal, an unconsolidated joint venture, at which time the Company became the sole guarantor of the facility. The note was repaid in full during the year ended December 31, 2014.

Schedule of Debt Maturities

Scheduled debt maturities for each of the five years subsequent to December 31, 2014 and thereafter, are as follows (in thousands):

2015	$	47,022
2016		62,379
2017		310,493
2018		146,583
2019		1,353
Thereafter		53,170
		621,000
Debt discount		(2,581)
Outstanding as of December 31, 2014, net of debt discount	$	618,419

Amortization of deferred financing costs was approximately $2.3 million, $1.8 million and $2.8 million for the years ended December 31, 2014, 2013, and 2012, respectively.

- 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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