18. Subsequent Events

In addition to certain matters discussed elsewhere in these notes, the Company noted the following subsequent events:

Copper Beech Transaction

As stated in Note 6, as of April 30, 2015, the Company has completed the acquisition of the Sellers’ interests in two of the properties in the Copper Beech Portfolio in which the Company previously held a 48% interest – Copper Beech San Marcos Phase 1 and Copper Beech IUP Buy. As consideration for the Second CB Closing, the Company paid to the Sellers $1.4 million in cash and the Operating Partnership issued to the Sellers 2.0 million in OP Units. The Company preliminarily estimates that the gain recognized in connection with the Second CB Closing during the three months ending June 30, 2015 will be approximately $7.7 million.

On April 30, 2015, the Company entered into a purchase agreement with Pennsylvania State University (the “Penn State Seller”) to purchase its 15% interest in Copper Beech Klondike and its 16% interest in Copper Beech Northbrook for $4.6 million. The closing occurred on June 25, 2015 with $2.3 million being paid to the Penn State Seller with the remaining balance of $2.3 million expected to be paid on September 23, 2015. The transactions to purchase the remaining interests in these two properties were contemplated and structured as of the date of the First CB Closing. As of June 25, 2015, the Company owned 100% of both Copper Beech Klondike and Copper Beech Northbrook. As the purchase price of $4.6 million for these interests were known prior to the issuance of these consolidated financial statements, the Company believes that $4.6 million represents the fair value of the non-controlling interest. As a result, $4.6 million was used as the estimated amount of the non-controlling interest for these two properties which were consolidated as part of the First CB Closing. As a result, the Company does not expect any gain to be recognized during the second quarter of 2015 as part of this transaction. In addition, there were not significant costs incurred in connection with this transaction.

Changes in Management

On April 21, 2015, the Board authorized the appointment of David Coles as Interim Chief Executive Officer of the Company and John Makuch as Interim Chief Financial Officer of the Company, subject to the finalization of an engagement letter with Alvarez & Marsal North America, LLC (“Alvarez & Marsal”).

On April 29, 2015, the Company entered into an engagement letter with Alvarez & Marsal, effective as of April 21, 2015, providing for Mr. Coles’ services as the Company’s Interim Chief Executive Officer, Mr. Makuch’s services as the Company’s Interim Chief Financial Officer and the services of additional support personnel as needed (the “Engagement Letter”). Under the terms of the Engagement Letter, during their respective service at the Company, Messrs. Coles and Makuch will continue to be employed by Alvarez & Marsal and will not receive any compensation directly from the Company or participate in any of the Company’s employee benefit plans.

Changes in Board of Directors

On May 3, 2015, the Company entered into an agreement (the “Clinton Group Agreement”) with Clinton Group, Inc. and its affiliated funds (collectively, the “Clinton Group”). At the time the Clinton Group Agreement was entered into, the Clinton Group was the beneficial owner of approximately 1.6% of the Company’s outstanding shares of common stock. Pursuant to the Clinton Group Agreement, the Company agreed to increase the size of its Board of Directors from six to eight directors and to appoint two new directors proposed by the Clinton Group to the Board, including Raymond C. Mikulich and Randall H. Brown. In addition, the Company agreed to appoint Curtis B. McWilliams to the Board. The Board appointed Messrs. Mikulich, Brown and McWilliams to the Board effective May 6, 2015.

Notice of Sole Remedy under Indenture for 4.75% Exchangeable Senior Notes due 2018

On May 21, 2015, the Operating Partnership delivered a notice (the “Notice”) to the holders of its 4.75% Exchangeable Senior Notes due 2018 (the “Exchangeable Senior Notes”), with a copy of such Notice to the Trustee, pursuant to the Indenture dated as of October 9, 2013 (the “Indenture”), by and among the Operating Partnership, the Company, and U.S. Bank National Association (the “Trustee”), The Notice provided that the Company anticipated it would be unable to timely file this Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 by June 2, 2015, which would result in a reporting event of default under the Indenture. The Notice further provided that, pursuant to Section 6.01(b) of the Indenture, the Operating Partnership elected that the sole remedy for the reporting event of default would consist exclusively of the right to receive additional interest on the Exchangeable Senior Notes at a rate equal to (i) 0.25% per annum of the outstanding principal amount of the Exchangeable Senior Notes for the first 90 days of the 180-day period in which such reporting event of default is continuing, beginning on, and including, the date on which such reporting event of default first occurs and (ii) 0.50% per annum of the outstanding principal amount of the Exchangeable Senior Notes for the last 90 days of such 180-day period as long as such reporting event of default is continuing, payable subject to and in accordance with the terms and conditions of the Indenture.

Communications with Lenders Related to Certain Debt Obligations

Campus Crest at Pullman, LLC ("CC Pullman"), Campus Crest at Grand Forks, LLC ("CC Grand Forks") and Campus Crest at Laramie, LLC (“CC Laramie”) informed their lender (for purposes of this paragraph, the “Lender”) that the maximum leverage ratio and the minimum fixed charge coverage ratio tests contained in the loan agreements for the CC Pullman, CC Grand Forks and CC Laramie projects were not met for the test date of December 31, 2014 and that CC Pullman, CC Grand Forks and CC Laramie would not be in compliance with their obligations to provide a copy of the Company's consolidated quarterly financial statements and covenant compliance certificate within the applicable time period required under the respective loan agreements for the three months ended March 31, 2015. On March 24, 2015, the Company received written notice from the Lender that it would waive the deficiencies upon receipt of a modification fee of $0.1 million, and on March 31, 2015, the Company was in the process of negotiating the amount of such modification fee. These (i) financial covenant deficiencies and (ii) financial statement and covenant compliance certificate deficiencies (which could have entitled the Lender to declare the loans due and payable and exercise its remedies under the loan documents) have now been addressed in loan modification documents which waive any default related to such deficiencies. As part of these loan modifications, the loans for CC Pullman and CC Grand Forks have been cross-collateralized. At March 31, 2015, the deficiencies under the CC Pullman, CC Grand Forks and CC Laramie loans did not constitute an event of default under any of the Company’s outstanding indebtedness.

Although the Company no longer has an equity interest in the Kalamazoo Phase 1 property owned by Copper Beech Townhome Communities Twenty Three, LLC ("CBTC 23"), the Company and the Operating Partnership has a non-recourse carve-out guaranty and a 10% principal repayment guaranty (the “CBTC 23 Guaranty”) and the Operating Partnership was required to deliver a $1.0 million irrevocable standby letter of credit on behalf of CBTC 23 for the benefit of the lender (the “CBTC 23 Letter of Credit”). The Company has received a copy of a notice of default addressed to CBTC 23 dated June 26, 2015, from the special servicer of the CBTC 23 loan, and although the special servicer has not made a demand under the CBTC 23 Guaranty or the CBTC 23 Letter of Credit, the Company believes that such a demand may be forthcoming. The default on the CBTC 23 loan does not create a default by the Company under any of its outstanding indebtedness. The purchase and sale agreement with the Copper Beech sellers requires the Copper Beech sellers to indemnify the Company and the Operating Partnership for all indemnifiable losses related to the CBTC 23 Guaranty and the CBTC 23 Letter of Credit, with a maximum indemnity amount of $4.0 million for the 10% principal repayment portion of the CBTC 23 Guaranty (expected to result in a payment obligation of less than $3.0 million) and the CBTC 23 Letter of Credit and with no maximum indemnity amount for the non-recourse carve-out portion of the CBTC 23 Guaranty. The Company intends to enforce the indemnity in the Copper Beech purchase and sale agreement if the CBTC 23 Guaranty and/or the CBTC 23 Letter of Credit is called by the servicers for the CBTC 23 loan. As of March 31, 2015, the Company has recorded a liability of $4.0 million included in other liabilities in the accompanying consolidated balance sheet for the estimated fair value of these guarantees and a receivable for the indemnification assets of $4.0 million included in other assets in the accompanying consolidated balance sheet.

Campus Crest Communities, Inc. and Campus Crest Operating Partnership, LP are guarantors under a credit agreement dated January 14, 2014, related to the CSH Montreal Debt (the “Montreal Credit Agreement”). Section 10.4(2) of the Montreal Credit Agreement requires CSH Montreal to provide monthly reports within 45 days of each month end. On April 15, 2015, the parties to the Montreal Credit Agreement executed a Fourth Amendment to the Montreal Credit Agreement, which waived compliance with the provisions of Section 10.4(2) until April 15, 2015. The Fourth Amendment also deleted some of the monthly reporting requirements in Section 10.4(2) of the Montreal Credit Agreement. The failure to deliver the monthly reports under Section 10.4(2) did not constitute an event of default under the Montreal Credit Agreement because the Fourth Amendment was executed before the applicable notice and cure period lapsed. Section 10.4(3) of the Montreal Credit Agreement requires CSH Montreal to provide quarterly reports within 45 days of each fiscal quarter end. On June 22, 2015, the parties to the Montreal Credit Agreement executed a Fifth Amendment to the Montreal Credit Agreement, which waived compliance with the provisions of Section 10.4(3) until July 31, 2015. The Fifth Amendment also modified Section 10.4(3) of the Montreal Credit Agreement as it relates to the 45-day reporting requirement for the fiscal quarter ended June 30, 2015 to extend that period from 45 days to 60 days. As a consequence of executing the Fourth Amendment and Fifth Amendment, the Company believes it is in compliance with the Montreal Credit Agreement.

As described in Note 9, in January 2013, the Company (the “Borrower”) 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”). On May 15, 2015, the parties to this Amended Credit Facility executed a waiver of the reporting requirements, specifically the waiver states: “(a) for purposes of the calendar quarter ending in March 2015, (1) the Borrower shall deliver quarterly financials in accordance with Section 5.03(c) of the Credit Agreement on or before July 31, 2015, and (2) the Borrower shall deliver the quarterly Borrowing Base Certificate in accordance with clause (i) of Section 5.03(d) of the Credit Agreement on or before July 31, 2015; and (b) for purposes of the calendar quarter ending in June 2015, (1) the Borrower shall deliver quarterly financials in accordance with Section 5.03(c) of the Credit Agreement within sixty (60) days after the end of such quarter, and (2) the Borrower shall deliver the quarterly Borrowing Base Certificate in accordance with clause (i) of Section 5.03(d) of the Credit Agreement within sixty (60) days after the end of such quarter.” As a consequence of executing this waiver the Company believes it is in compliance with the Amended Credit Facility.

HSRE Portfolio Changes

On May 1, 2015, the Company entered into a nonbinding membership interest purchase and sale agreement with HSRE which will result in (i) HSRE acquiring all of the ownership interests in the entities which own The Grove at Norman, Oklahoma and The Grove at Louisville, Kentucky, and (ii) the Company acquiring all of the ownership interests in the entities which own The Grove at Fayetteville, Arkansas, The Grove at Indiana, Pennsylvania and The Grove at Greensboro, North Carolina. This membership interest purchase and sale agreement is based upon the book value of each of the properties. The Company has placed $5.0 million in a restricted cash account related to the closing of this transaction, an amount in excess of the net proceeds needed for the closing of this transaction. As of the date of this filing, the Company cannot estimate the financial statement effects of this transaction. The closing of these ownership interest transfers is expected to occur no later than September 30, 2015.

CSH Montreal Agreement Buyout

In June of 2015, the Company entered into an agreement with Beaumont, CSH Montreal and certain other entities related to a potential buyout of the Company's ownership interests in CSH Montreal and the termination of all service agreements with affiliates of the Company related to the two evo Montreal properties. As part of the closing, the current credit facility will be paid in full, thereby releasing the Company from all guaranty and indemnity obligations associated with the credit facility currently in place for the two evo Montreal properties. As of the date of this filing, the Company cannot estimate the financial statement effects of this transaction. The closing is expected to occur during the third quarter of 2015 and is subject to financing and other customary closing conditions.

San Angelo Sale

On June 15, 2015, the Company entered into a purchase and sale agreement with a third party that would result in the sale of 100% of the Company’s ownership interest in The Grove at San Angelo, Texas. As of the date of this filing, the Company cannot estimate the financial statement effects of this transaction. The closing of this transaction is expected to occur no later than September 30, 2015 and is subject to financing and other customary closing conditions.