17. Commitments and Contingencies

Commitments

In the ordinary course of business, certain liens related to the construction of the student housing real estate property may be attached to the Company’s assets by contractors or suppliers. Campus Crest Construction, LLC, a wholly-owned subsidiary of the Company, is responsible as the general contractor for resolving these liens. There can be no assurance that the Company will not be required to pay amounts greater than currently recorded liabilities to settle these claims.

The Company has properties that are subject to long-term ground leases. Typically, these properties are located on the campuses of colleges or universities. The Company has the right to encumber its leasehold interests with specific property mortgages for the purposes of constructing, remodeling or making improvements on or to these properties. Title to all improvements paid for and constructed on the land remains with the Company until the earlier of termination or expiration of the lease, at which time the title of any buildings constructed on the land will revert to the landlord. Should the Company decide to sell its leasehold interests during the initial term or any renewal terms, the landlord has a right of first refusal to purchase the interests for the same purchase price under the same terms and conditions as contained in the Company’s offer to sell its leasehold interests.

Campus Crest leases space for its corporate headquarters office. Rent is recognized on a straight-line basis. Future minimum payments over the life of the Company’s corporate office lease and long-term ground leases subsequent to March 31, 2015 are as follows (in thousands):

2015	$	1,923
2016		2,270
2017		1,963
2018		1,513
2019		1,327
Thereafter		26,821	⁽¹⁾
Total future minimum lease payments	$	35,817

⁽¹⁾

The Company’s lease obligations total $1.3 million per year through the year 2023. In addition to operating and office leases, the Company has ground leases that average $0.4 million per year through the year 2081.

The Company paid rent for its corporate headquarters office of $0.3 million and $0.2 million for the three months ended March 31, 2015 and 2014, respectively.

The Company guarantees certain mortgage and construction loans and revolving credit facilities related to the Company’s unconsolidated joint ventures. As of March 31, 2015, the Company guarantees: up to 100% of $11.2 million of debt through May 2015 for HSRE I; up to 50% of $132.6 million of debt with varying maturity dates from May 2015 through September 2018 for HSRE V, HSRE VI and HSRE X; and up to 25% of $90.1 million of debt maturing in July 2016 related to HSRE IX. Certain loans which matured in May 2015 and are scheduled to mature during July 2015 are in the process of being refinanced as of the date of this filing. In connection with the guarantee for HSRE I, there is $3.0 million held in escrow that could be used to satisfy a portion of the amount potentially paid under the guarantee. Should there be an event of default in connection with this debt, the Company could be required to fund under these guarantees a maximum amount up to the percentage of the guaranteed amount of the balance of the debt outstanding as of March 31, 2015. The Company estimated the fair value of the guarantees to be $9.4 million, $3.2 million of which relates to the Company's HSRE I investment and is netted against its investment and $6.2 million of which relates to the Company's HSRE V investment and is netted against the value of the investment to the extent the investment is reduced to zero. Following the reduction of the HSRE V investment to zero, a remaining accrual of $5.5 million is presented in other liabilities in the accompanying consolidated balance sheet as of March 31, 2015 and December 31, 2014. The estimated fair value of these guarantees was the amount of the Company’s obligation to fund the excess of the joint ventures’ indebtedness over the estimated fair value of the collateral of the joint ventures’ indebtedness, which is the underlying value of the properties.

In connection with the Company’s investment in CSH Montreal, the Company provides a guarantee of up to 50% of the outstanding balance of the acquisition and development credit facility (“CSH Montreal Debt”) of CAD 112.0 million ($88.4 million at March 31, 2015 exchange rate). As of March 31, 2015, the outstanding balance of the CSH Montreal Debt was CAD 104.0 million ($82.1 million at March 31, 2015 exchange rate), of which the Company guaranteed CAD 52.0 ($41.1 million at March 31, 2015 exchange rate). The term of the guarantee follows the term of the underlying debt, which matures on January 13, 2016, unless the twelve month extension, which is subject to lender approval, is exercised. The CSH Montreal Debt is secured by, among other things, a first mortgage position on the real estate and improvements owned by CSH Montreal. The Company has estimated the fair value of this guarantee to be immaterial.

The Company does not expect to be required to perform under any of the guarantees discussed above. In the event that the Company is required to perform under one of the guarantees, it believes the borrower’s assets collateralizing the debt would be sufficient to cover the maximum potential amount of future payments under the guarantee, except as disclosed above.

See Note 18 for a discussion of guarantees related to a Copper Beech entity in which the Company expects that it may be required to perform under.

Contingencies

In the normal course of business, the Company is subject to claims, lawsuits and legal proceedings. In addition to the matters described below, the Company is involved in various routine legal proceedings arising in the ordinary course of business. Although the outcomes of such routine legal proceedings cannot be predicted with certainty, in the opinion of management, the ultimate resolution of such routine matters will not have a material adverse effect on the Company’s financial position or results of operations.

On January 21, 2015, the Company and certain of its subsidiaries were named as defendants in a lawsuit filed in the 7th Division of the Jefferson Circuit Court in Jefferson County in Louisville, Kentucky. The case arose from an individual who fell to his death at a construction site located at 2501 South 4th Street, Louisville, Jefferson County, Kentucky. Also named as co-defendants in the case are three other companies associated with the construction and/or employment of the deceased individual. The plaintiffs allege, among other things, the Company was negligent and/or allowed a dangerous or hazardous condition to exist on the premises. The plaintiffs’ initial complaint did not specify the amount of damages sought. The Company has filed its responsive pleadings. Based upon the totality of the circumstances, including the existence of insurance coverage and anticipated indemnity from third-parties, the Company does not believe that the lawsuit, if adversely determined, would have a material adverse effect on the Company's financial position or results of operations.

The Company is not aware of any environmental liability with respect to the properties that could have a material adverse effect on the Company’s business, assets or results of operations. However, there can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Company’s financial position or results of operations and cash flows.