UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

CAMPUS CREST COMMUNITIES, INC.

(Exact name of registrant as specified in its charter)

Maryland (State or other jurisdiction of incorporation or organization)		27-2481988 (I.R.S. Employer Identification No.)

2100 Rexford Road, Suite 414, Charlotte, NC (Address of principal executive offices)		28211 (Zip Code)

(704) 496-2500
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

     Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

     Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

     Yes o No þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at November 4, 2011
Common Stock, $0.01 par value per share		30,711,761 shares

 

 

FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2011

TABLE OF CONTENTS

		Page No.
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets of Campus Crest Communities, Inc. as of September 30, 2011 and December 31, 2010			1
Condensed Consolidated Statement of Operations of Campus Crest Communities, Inc. and Condensed Combined Statement of Operations of Campus Crest Communities Predecessor for the three and nine months ended September 30, 2011 and 2010			2
Condensed Consolidated Statement of Changes in Equity and Comprehensive Loss of Campus Crest Communities, Inc. for the nine months ended September 30, 2011			3
Condensed Consolidated Statement of Cash Flows of Campus Crest Communities, Inc. and Condensed Combined Statement of Cash Flows of Campus Crest Communities Predecessor for the nine months ended September 30, 2011 and 2010			4
Notes to Condensed Consolidated Financial Statements of Campus Crest Communities, Inc. and Condensed Combined Financial Statements of Campus Crest Communities Predecessor			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures about Market Risk			43
Item 4. Controls and Procedures			43
Part II. Other Information
Item 1. Legal Proceedings			44
Item 1A. Risk Factors			44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			44
Item 3. Defaults Upon Senior Securities			44
Item 4. [Removed and Reserved]			44
Item 5. Other Information			44
Item 6. Exhibits			44
SIGNATURES			46
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Item 1. Financial Statements

CAMPUS CREST COMMUNITIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

		September 30,				December 31,
		2011				2010
Assets
Investment in real estate, net:
Student housing properties		$	461,333				372,746
Accumulated depreciation			(71,417	)			(57,463	)
Development in process			32,808				24,232
Investment in real estate, net			422,724				339,515
Investment in unconsolidated entities			16,751				13,751
Cash and cash equivalents			9,457				2,327
Restricted cash and investments			2,352				3,305
Student receivables, net of allowance for doubtful accounts of $1,238 and $431 at September 30, 2011 and December 31, 2010, respectively			1,578				954
Cost and earnings in excess of construction billings			3,530				1,827
Other assets			10,452				9,578
Total assets		$	466,844				371,257
Liabilities and equity
Liabilities:
Mortgage and construction loans		$	149,178				60,840
Lines of credit and other debt			43,552				42,500
Accounts payable and accrued expenses			31,575				14,597
Other liabilities			11,056				6,530
Total liabilities			235,361				124,467
Equity:
Stockholders’ equity:
Common stock, $0.01 par value, 90,000,000 shares authorized, 30,706,527 and 30,682,215 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively			307				307
Additional paid-in capital			248,640				248,515
Accumulated deficit and distributions			(20,929	)			(5,491	)
Accumulated other comprehensive loss			(425	)			(172	)
Total Campus Crest Communities, Inc. stockholders’ equity			227,593				243,159
Noncontrolling interests			3,890				3,631
Total equity			231,483				246,790
Total liabilities and equity		$	466,844				371,257

See accompanying notes to condensed consolidated and combined financial statements.

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
		Campus Crest				Campus Crest				Campus Crest				Campus Crest
		Communities,				Communities				Communities,				Communities
		Inc.				Predecessor				Inc.				Predecessor
Revenues:
Student housing rental		$	14,883				12,247				41,054				36,690
Student housing services			686				376				1,662				1,521
Development, construction and management services			4,827				4,256				26,444				35,121
Total revenues			20,396				16,879				69,160				73,332
Operating expenses:
Student housing operations			7,262				6,485				20,086				19,786
Development, construction and management services			4,393				4,378				24,229				33,022
General and administrative			1,253				1,174				4,923				3,792
Ground leases			52				59				156				153
Depreciation and amortization			4,873				4,507				15,239				13,935
Total operating expenses			17,833				16,603				64,633				70,688
Equity in loss of unconsolidated entities			(309	)			(49	)			(944	)			(243	)
Operating income			2,254				227				3,583				2,401
Nonoperating income (expense):
Interest expense			(1,922	)			(6,708	)			(4,657	)			(17,395	)
Change in fair value of interest rate derivatives			(22	)			178				315				356
Other income			118				1				272				45
Total nonoperating expenses, net			(1,826	)			(6,529	)			(4,070	)			(16,994	)
Income (loss) before income taxes			428				(6,302	)			(487	)			(14,593	)
Income tax expense			(14	)			—				(214	)			—
Net income (loss)			414				(6,302	)			(701	)			(14,593	)
Net income (loss) attributable to noncontrolling interests			6				(2,264	)			1				(7,290	)
Net income (loss) attributable to Campus Crest Communities, Inc. and Predecessor		$	408				(4,038	)			(702	)			(7,303	)
Net income (loss) per share attributable to Campus Crest Communities, Inc. common stockholders:
Basic and diluted		$	0.01								(0.02	)
Weighted-average common shares outstanding:
Basic			30,724								30,717
Diluted			31,160								30,717
Distributions per common share		$	(0.16	)							(0.48	)

See accompanying notes to condensed consolidated and combined financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AND COMPREHENSIVE LOSS
(In thousands)
(Unaudited)

																						Total
																						Campus Crest
																		Accumulated				Communities,
		Number of								Additional				Accumulated				Other				Inc.
		Common				Common				Paid-In				Deficit and				Comprehensive				Stockholders’				Noncontrolling				Total
		Shares				Stock				Capital				Distributions				Loss				Equity				Interests				Equity
Balance, December 31, 2010			30,682			$	307				248,515				(5,491	)			(172	)			243,159				3,631				246,790
Distributions			—				—				—				(14,736	)			—				(14,736	)			(210	)			(14,946	)
Issuance of restricted stock			25				—				—				—				—				—				—				—
Amortization of restricted stock awards and OP units			—				—				259				—				—				259				468				727
Costs related to initial public offering			—				—				(134	)			—				—				(134	)			—				(134	)
Comprehensive loss:
Change in fair value of interest rate derivatives			—				—				—				—				(253	)			(253	)			—				(253	)
Net income (loss)			—				—				—				(702	)			—				(702	)			1				(701	)
Total comprehensive loss																															(954	)
Balance, September 30, 2011			30,707			$	307				248,640				(20,929	)			(425	)			227,593				3,890				231,483

See accompanying notes to condensed consolidated and combined financial statements.

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

		Nine Months Ended September 30,
		2011				2010
		Campus Crest Communities, Inc.				Campus Crest Communities Predecessor
Operating activities:
Net loss		$	(701	)			(14,593	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			15,239				13,935
Amortization of deferred financing costs			898				637
Loss on disposal of assets			58				—
Accretion of interest expense			—				3,481
Bad debt expense			832				260
Change in fair value of interest rate derivatives			(337	)			(4,437	)
Equity in loss of unconsolidated entities			944				243
Compensation expense related to share based payments			195				—
Changes in operating assets and liabilities:
Restricted cash and investments			953				(638	)
Student receivables			(1,456	)			(1,001	)
Construction billings			(1,810	)			(371	)
Accounts payable and accrued expenses			3,322				8,330
Other			3,667				(3,325	)
Net cash provided by operating activities			21,804				2,521
Investing activities:
Investments in development in process			(85,917	)			(761	)
Investments in student housing properties			(2,945	)			(1,821	)
Investments in unconsolidated entities			(3,263	)			(251	)
Distributions from unconsolidated entities			6,175				—
Purchase of corporate fixed assets			(176	)			—
Net cash used in investing activities			(86,126	)			(2,833	)
Financing activities:
Payment of offering costs			(134	)			—
Proceeds from mortgage loans			48,518				—
Proceeds from construction loans			39,820				498
Proceeds from lines of credit and other debt			44,500				5,560
Principal payments on construction loans			—				(338	)
Payments on lines of credit and other debt			(46,000	)			(128	)
Debt issuance costs			(1,338	)			—
Contributions from owner of Predecessor			—				443
Contributions from noncontrolling interests of Predecessor			—				673
Distributions to owner of Predecessor			—				(1,714	)
Distributions to noncontrolling interests of Predecessor			—				(2,775	)
Distributions to stockholders			(13,719	)			—
Distributions to noncontrolling interests			(195	)			—
Net cash provided by financing activities			71,452				2,219
Net change in cash and cash equivalents			7,130				1,907
Cash and cash equivalents at beginning of period			2,327				2,902
Cash and cash equivalents at end of period		$	9,457				4,809
Supplemental disclosure of cash flow information:
Interest paid		$	4,707				11,370
Income taxes paid		$	2				—
Non-cash investing and financing activity:
Change in payables related to distributions to stockholders		$	1,017				—
Change in payables related to distributions to noncontrolling interests		$	15				—
Change in payables related to capital expenditures		$	12,624				627
Accrued costs related to investments in uncombined entities		$	—				225
Contribution of development in process to unconsolidated entity		$	7,666				—
Assumption of bonds related to land purchase		$	2,552				—

See accompanying notes to condensed consolidated and combined financial statements.

CAMPUS CREST COMMUNITIES, INC. AND
CAMPUS CREST COMMUNITIES PREDECESSOR

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

1. Organization and Description of Business

     Campus Crest Communities, Inc. (along with its subsidiaries, the “Company,” “we,” “us” or “our”) is engaged in the business of developing, constructing, owning and managing high-quality, purpose-built student housing properties in the United States. The Company was incorporated in the State of Maryland on March 1, 2010. Campus Crest Communities Predecessor (the “Predecessor”) is not a legal entity, but rather a combination of certain vertically integrated operating companies under common ownership. The Predecessor reflects the historical combination of all facets of the vertically integrated business operations of the student housing related entities of the Company prior to its ownership of these entities.

     On October 19, 2010, the Company completed an initial public offering (the “Offering”) of 28,333,333 shares of its common stock. On November 18, 2010, underwriters of the Offering closed on their option to purchase an additional 2,250,000 shares of common stock to cover the overallotment option granted by the Company to its underwriters. Total Offering-related proceeds to the Company as a result of both of these transactions totaled approximately $382.3 million. Total Offering-related expenses were approximately $31.9 million and consisted of the underwriting discount and other expenses payable by the Company.

     As a result of the Offering and certain formation transactions entered into in connection therewith (the “Formation Transactions”), the Company currently owns the sole general partner interest and limited partner interests in Campus Crest Communities Operating Partnership, LP (the “Operating Partnership”). As part of the Formation Transactions, the owner of the Predecessor and certain third-party investors were granted limited partnership interests in the Operating Partnership (“OP units”). The exchange of entities or interests therein for OP units was accounted for as a reorganization of entities under common control. As a result, the Company’s assets and liabilities are reflected at their historical cost basis.

     The Company elected and qualified to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2010. As a REIT, the Company generally is not subject to U.S. federal income tax on taxable income that it distributes currently to its stockholders.

     The following tables illustrate the number of properties in which the Company has interests, both operating and under construction, at September 30, 2011 and December 31, 2010:

		September 30, 2011
		Properties				Properties				Effective ownership
		in operation				under construction				percentage
Consolidated entities			25				6				100	%
Unconsolidated entities			8				—				20 — 49.9	%
Total			33				6
		December 31, 2010
		Properties				Properties				Effective ownership
		in operation				under construction(1)				percentage
Consolidated entities			21				6				100	%
Unconsolidated entities			6				—				49.9	%
Total			27				6

2. Summary of Significant Accounting Policies

Basis of Presentation

     The accompanying unaudited condensed consolidated and combined financial statements of the Company and the Predecessor, respectively, have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and instructions to Form 10-Q. They do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the condensed consolidated and combined financial statements for these interim periods have been included.

     The condensed consolidated financial statements of the Company include the financial position, results of operations and cash flows of the Company, the Operating Partnership and subsidiaries of the Operating Partnership. Third-party equity interests in the Operating Partnership are reflected as noncontrolling interests in the condensed consolidated financial statements. The condensed combined financial statements of the Predecessor reflect the Predecessor and its subsidiaries, including ventures in which the Predecessor had a controlling interest. Interests in combined entities held by an entity other than the Predecessor are reflected as noncontrolling interests in the condensed combined financial statements. The Company and Predecessor also have ownership interests in unconsolidated real estate ventures which have ownership in several property owning entities that are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation.

     The Company, which was incorporated on March 1, 2010, had no operations for the period from its formation through October 18, 2010, as its primary purpose upon formation was to facilitate completion of the Offering and, upon completion, continue the operations of the Predecessor. Since the Predecessor’s combined results of operations reflect the operations of the Company prior to its ownership of the entities which conduct these operations, the Predecessor’s condensed combined results of operations have been prepared and presented for the three and nine months ended September 30, 2010.

     The unaudited interim condensed consolidated and combined financial statements should be read in conjunction with the Company’s and the Predecessor’s audited consolidated and combined financial statements, respectively, and accompanying notes for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission (“SEC”). The results of operations and cash flows for any interim period are not necessarily indicative of results for other interim periods or the full year.

Use of Estimates

     The preparation of consolidated and combined financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant assumptions and estimates are used by management related to recognizing construction and development revenue under the percentage of completion method, useful lives of student housing properties, valuation of investment in real estate, allocation of purchase price to newly acquired student housing properties, fair value of financial assets and liabilities, including derivatives, and allowance for doubtful accounts. It is at least reasonably possible that these estimates could change in the near term.

Investment in Real Estate

     Investment in real estate is recorded at historical cost. Major improvements that extend the life of an asset are capitalized and depreciated over a period equal to the shorter of the life of the improvement or the remaining useful life of the asset. The cost of ordinary repairs and maintenance are charged to expense when incurred. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets as follows:

Buildings		40 years
Improvements		20 years
Furniture, fixtures and equipment		3-10 years

     The cost of buildings and improvements includes all pre-development, entitlement and project costs directly associated with the development and construction of a real estate project, which include interest, property taxes and the amortization of deferred financing costs recognized while the project is under construction. Additionally, the Company capitalizes certain internal costs related to the development and construction of its student housing properties. All costs are capitalized as development in process until the asset is ready for its intended use, which is typically upon receipt of a certificate of occupancy. Upon completion, costs are transferred into the applicable asset category and depreciation commences. Interest totaling approximately $0.4 million and $0 was capitalized during the three months ended September 30, 2011 and 2010, respectively, and approximately $1.1 million and $0.1 million was capitalized during the nine months ended September 30, 2011 and 2010, respectively.

     Pre-development costs are capitalized until such time that management believes it is no longer probable that a contract will be executed for the acquisition of property and/or construction will commence. Because we frequently incur pre-development expenditures before a financing commitment and/or required permits and authorizations have been obtained, we bear the risk of loss of these pre-development expenditures if financing cannot ultimately be arranged on acceptable terms or we are unable to successfully obtain the required permits and authorizations. As such, management evaluates the status of projects where we have not yet acquired the target property or where we have not yet commenced construction on a periodic basis and writes off any pre-development costs related to projects whose current status indicates the acquisition or commencement of construction is not probable. Such write-offs are included within operating expenses in the consolidated and combined statements of operations. As of September 30, 2011 and December 31, 2010, we deferred approximately $2.3 million and $0.9 million, respectively, in pre-development costs related to development projects that have not yet been acquired or for which construction has not commenced. Such costs are included in development in process on the accompanying condensed consolidated balance sheets. Also included in development in process on the accompanying condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010 are approximately $30.5 million and $23.3 million, respectively, of costs related to projects for which construction is in process or land has been acquired.

     Management assesses whether there has been impairment in the value of our investment in real estate whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of investment in real estate is measured by a comparison of the carrying amount of a student housing property to the estimated future undiscounted cash flows expected to be generated by the property. Impairment is recognized when estimated future undiscounted cash flows, including proceeds from disposition, are less than the carrying value of the property. The estimation of future undiscounted cash flows is inherently uncertain and relies on assumptions regarding current and future economics and market conditions. If such conditions change, then an adjustment reducing the carrying value of our long-lived assets could occur in the future period in which conditions change. To the extent that a property is impaired, the excess of the carrying amount of the property over its estimated fair value is charged to operating earnings. Fair value is determined based upon the discounted cash flows of the property, quoted market prices or independent appraisals, as considered necessary.

Property Acquisitions

     The Company allocates the purchase price of acquired properties to net tangible and identified intangible assets based on relative fair values. Fair value estimates are based on information obtained from independent appraisals, other market data, information obtained during due diligence, and information related to the marketing and leasing at the specific property. The value of in-place leases is based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued “as-if” vacant. As lease terms are typically one year or less, rates on in-place leases generally approximate market rental rates. Factors considered in the valuation of in-place leases include an estimate of the carrying costs during the expected lease-up period considering current market conditions, nature of the tenancy and costs to execute similar leases. Carrying costs include estimates of lost rentals at market rates during the expected lease-up period, net of variable operating expenses. The value of in-place leases is amortized on a straight-line basis over the remaining initial term of the respective leases, generally less than one year. Amortization expense was approximately $0.1 million and $0 for the three months ended September 30, 2011 and 2010, respectively, and approximately $0.9 million and $0 for the nine months ended September 30, 2011 and 2010, respectively. The amortization of in-place leases is included in

depreciation and amortization expense in the accompanying condensed consolidated statements of operations. The purchase price of property acquisitions is not expected to be allocated to tenant relationships, considering the terms of the leases and the expected levels of lease renewals.

Deferred Financing Costs

     We defer costs incurred in obtaining financing and amortize the costs over the terms of the related loans using the effective interest method. Upon repayment of or in conjunction with a material change in the terms of the underlying debt agreement, any unamortized costs are charged to earnings. Deferred financing costs, net of amortization, are included in other assets on the accompanying condensed consolidated balance sheets. Amortization of deferred financing costs, which is included in interest expense in the accompanying condensed consolidated and combined statements of operations, approximated $0.3 million and $0.3 million for the three months ended September 30, 2011 and 2010, respectively, and approximated $0.9 million and $0.6 million for the nine months ended September 30, 2011 and 2010, respectively.

Noncontrolling Interests

     Noncontrolling interests represent the portion of equity in the Company’s consolidated subsidiaries which are not attributable to our stockholders. Accordingly, noncontrolling interests are reported as a component of equity in the accompanying condensed consolidated balance sheets but separate from stockholders’ equity. On the condensed consolidated and combined statements of operations, operating results are reported at their consolidated and combined amounts, including both the amount attributable to us and to noncontrolling interests. See note 5.

Real Estate Ventures

     We hold interests in all properties, both under development and in operation, through interests in both consolidated and unconsolidated real estate ventures. The Company assesses its investments in real estate ventures in accordance with applicable guidance under U.S. GAAP to determine if a venture is a Variable Interest Entity (“VIE”). We consolidate entities that are defined as VIEs and for which we are determined to be the primary beneficiary. In instances where we are not the primary beneficiary, we do not consolidate the entity for financial reporting purposes. For entities that are not defined as VIEs, management first considers whether we are the general partner or a limited partner (or the equivalent in such investments which are not structured as partnerships). We consolidate entities where: (i) we are the general partner (or the equivalent); and (ii) the limited partners (or the equivalent) in such investments do not have rights which would preclude control and, therefore, consolidation for financial reporting purposes.

     For entities where we are the general partner (or the equivalent) but do not control the real estate venture, as the other partners (or the equivalent) hold substantive participating rights, we use the equity method of accounting. For entities where we are a limited partner (or the equivalent), management considers factors such as ownership interest, voting control, authority to make decisions, and contractual and substantive participating rights of the partners (or the equivalent) to determine if the presumption that the general partner controls the entity is overcome. In instances where these factors indicate we control the entity, we consolidate the entity; otherwise, we record our investment using the equity method of accounting.

     Under the equity method, investments are initially recognized on the balance sheet at cost and are subsequently adjusted to reflect our proportionate share of net earnings or losses of the entity, distributions received, contributions, and certain other adjustments, as appropriate. When circumstances indicate there may have been a loss in value of an equity method investment, we evaluate the investment for impairment by estimating our ability to recover the investment from future expected discounted cash flows. If we determine the loss in value is other than temporary, we recognize an impairment charge to reflect the investment at fair value.

Student Housing Revenue

     Students are required to execute lease contracts with payment schedules that vary from annual to monthly payments. We recognize revenues on a straight-line basis over the term of the lease contracts. Generally, each executed contract is required to be accompanied by a signed parental guaranty. Amounts received in advance of the

occupancy period are recorded as deferred revenues and included in other liabilities on the accompanying condensed consolidated balance sheets. Service revenue is recognized when earned.

Development, Construction and Management Services

     Development and construction service revenue is recognized using the percentage of completion method, as determined by construction costs incurred relative to total estimated construction costs. Any changes in significant judgments and/or estimates used in determining construction and development revenue could significantly change the timing or amount of construction and development service revenue recognized.

     Development and construction service revenue is recognized for contracts with entities we do not consolidate. For projects where the revenue is based on a fixed price, any cost overruns incurred during construction, as compared to the original budget, will reduce the net profit ultimately recognized on those projects. Profit derived from these projects is eliminated to the extent of the Company’s ownership interest in the unconsolidated entity. Any incentive fees, net of the impact of our ownership interest if the entity is unconsolidated, are recognized when the project is complete and performance has been agreed upon by all parties, or when performance has been verified by an independent third party. If total development or construction costs at completion exceed the fixed price set forth within the related contract, such cost overruns are recorded as additional investment in the unconsolidated entity.

     Management fees, net of elimination to the extent of our ownership interest in an unconsolidated entity, are recognized when earned in accordance with each management contract for entities we do not consolidate. Incentive management fees are recognized when the incentive criteria are met.

Allowance for Doubtful Accounts

     Allowances for student receivables are established when management determines that collections of such receivables are doubtful. Balances are considered past due when payment is not received on the contractual due date. When management has determined that receivables are uncollectible, they are written off against the allowance for doubtful accounts.

Derivative Instruments and Hedging Activities

     In certain instances, interest rate cap agreements and interest rate swap agreements are used to manage floating interest rate exposure with respect to amounts borrowed, or forecasted to be borrowed, under credit facilities or other debt obligations. These contracts effectively exchange existing or forecasted obligations to pay interest based on floating rates for obligations to pay interest based on fixed rates.

     All derivative instruments are recognized as either assets or liabilities on the condensed consolidated balance sheets at their respective fair values. Changes in fair value are recognized either in earnings or as accumulated other comprehensive income (loss), depending on whether the derivative has been designated as a fair value or cash flow hedge and whether it qualifies as part of a hedging relationship, the nature of the exposure being hedged, and how effective the derivative is at offsetting movements in underlying exposure. The Company discontinues hedge accounting when: (i) it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur; or (iv) management determines that designating the derivative as a hedging instrument is no longer appropriate. In situations in which hedge accounting is not initially designated, or is discontinued and a derivative remains outstanding, gains and losses related to changes in the fair value of the derivative instrument are recorded in current period earnings as a component of the change in fair value of interest rate derivatives line item on the accompanying condensed consolidated and combined statements of operations. Also included within this line item are any required monthly settlements on interest rate swaps, as well as all cash settlements paid. The Company’s counterparties are major financial institutions.

Fair Value of Financial Instruments

     Financial instruments consist primarily of cash, cash equivalents, student receivables, interest rate caps, interest rate swaps, accounts payable, mortgages, construction loans and lines of credit. The carrying value of cash, cash equivalents, student receivables and accounts payable are representative of their respective fair values due to the short-term nature of these instruments. The estimated fair values of mortgages, construction loans and lines of credit are determined by comparing current borrowing rates and risk spreads offered in the market to the stated interest rates and spreads on our current mortgages, construction loans and lines of credit. The fair values of mortgages, construction loans and lines of credit are disclosed in note 9.

     The estimated fair values of interest rate caps and swaps are determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves, implied volatilities and the creditworthiness of counterparties.

     Fair value guidance for financial assets and liabilities which are recognized and disclosed in the consolidated financial statements on a recurring basis and nonfinancial assets on a nonrecurring basis establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

     Level 1—Observable inputs, such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

     Level 2—Other inputs that are observable directly or indirectly, such as quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

     Level 3—Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the asset or liability.

     Fair value is defined as the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

     Interest rate caps and interest rate swaps measured at fair value at September 30, 2011 and December 31, 2010 are as follows (amounts in thousands):

		Quoted Prices in
		Active Markets for				Significant Other				Significant
		Identical Assets and				Observable Inputs				Unobservable				Balance at
		Liabilities (Level 1)				(Level 2)				Inputs (Level 3)				End of Period
Other assets:
September 30, 2011 — Interest rate caps		$	—				6				—				6
December 31, 2010 — Interest rate caps		$	—				103				—				103
Other liabilities:
September 30, 2011 — Interest rate swaps		$	—				(271	)			—				(271	)
December 31, 2010 — Interest rate swaps		$	—				(452	)			—				(452	)

Commitments and Contingencies

     Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources, are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Income Taxes

     The Company elected to be treated as a REIT under Sections 856 through 859 of the Internal Revenue Code commencing with the Company’s taxable year ended on December 31, 2010. The Company’s qualification as a REIT depends upon its ability to meet on a continuing basis, through actual investment and operating results, various complex requirements under the Internal Revenue Code relating to, among other things, the sources of the Company’s gross income, the composition and values of its assets, its distribution levels and the diversity of ownership of its stock. The Company believes that it is organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code and that the Company’s intended manner of operation will enable it to meet the requirements for qualification and taxation as a REIT.

     As a REIT, the Company generally will not be subject to U.S. federal and state income tax on taxable income that it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal income tax at regular corporate rates and generally will be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which it lost its REIT qualification. Accordingly, our failure to qualify as a REIT could materially and adversely affect us, including our ability to make distributions to our stockholders in the future. Even if the Company qualifies as a REIT, we will be subject to some U.S. federal, state and local taxes on our income or property and the income of our taxable REIT subsidiaries will be subject to taxation at normal corporate rates.

     The Company wholly owns four taxable REIT subsidiary (“TRS”) entities that manage the Company’s non-REIT activities and each is subject to federal, state and local income and franchise taxes. Deferred tax assets and liabilities of the TRS entities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse. For the three and nine months ended September 30, 2011, we recorded a federal and state income tax provision related to our TRS subsidiaries of approximately $0 and $0.2 million, respectively.

     The combined entities of the Predecessor were all limited liability companies or limited partnerships and elected to be taxed as partnerships for federal income tax purposes. As a result, no provision for income taxes was recorded in the accompanying condensed combined financial statements of the Predecessor as all income and losses of the Predecessor were allocated to the owners for inclusion in their respective tax returns.

Comprehensive Loss

     Comprehensive loss includes net income (loss) and other comprehensive income (loss), which consists of unrealized gains (losses) on derivative instruments. Comprehensive loss is presented in the accompanying condensed consolidated statement of changes in equity and comprehensive loss, and accumulated other comprehensive income (loss) is displayed as a separate component of stockholders’ equity.

Share-Based Compensation

     The Company awards restricted stock and OP unit awards that vest in equal annual installments over either a three or five year period. A restricted stock or restricted OP unit award is an award of the Company’s common stock or OP units that are subject to restrictions on transferability and other restrictions determined by the Company’s compensation committee at the date of grant. A grant date is established for a restricted stock award or restricted OP unit awards upon approval from the Company’s compensation committee and board of directors. The restrictions may lapse over a specified period of employment or the satisfaction of pre-established criteria as the Company’s compensation committee may determine. Except to the extent restricted under the award agreement, a participant awarded restricted shares or restricted OP units has all the rights of a stockholder or OP unit holder as to these shares or units, including the right to vote the shares and the right to receive dividends or distributions on the shares or units. The

fair value of the award is determined based on the market value of the Company’s common stock on the grant date and is recognized on a straight-line basis over the applicable vesting period for the entire award with cost recognized at the end of any period being at least equal to the shares that were then vested. During the three and nine months ended September 30, 2011, approximately $0.3 million and $0.8 million, respectively, of compensation expense was recognized in the accompanying condensed consolidated financial statements related to the vesting of restricted stock and restricted OP units. See note 10.

Recent Accounting Pronouncements

     In June 2011, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance which eliminates the option to report other comprehensive income (loss) and its components in the statement of changes in equity. Entities will have the option to present the components of net income (loss) and other comprehensive income (loss) in either a single continuous statement or two separate but consecutive statements. This guidance requires retrospective application and is effective for annual periods, and interim periods contained within those annual periods, beginning after December 31, 2011. We have not yet decided on the format that will be used in future periods. The standard will not change the recognition or measurement of net income (loss) or comprehensive income (loss).

     In May 2011, the FASB issued new accounting guidance which provides clarification about how fair value should be applied where it is used or permitted to be used under U.S. GAAP. This guidance requires prospective application and is effective for interim and annual periods beginning after December 15, 2011. We are currently evaluating what impact, if any, its adoption will have on our consolidated financial statements.

     In July 2010, the FASB issued new accounting guidance requiring additional disclosure related to the credit quality of certain receivables and the allowance for losses. It is effective for our annual reporting period ending December 31, 2011. We are currently evaluating what impact, if any, its adoption will have on our consolidated financial statements.

     In January 2010, the FASB issued new accounting guidance requiring additional disclosure related to the fair value of financial instruments. Transfers between the three levels within the fair value hierarchy, as well as changes in an entity’s Level 3 fair value instruments, require additional disclosure. This guidance was effective for us beginning on January 1, 2011. The adoption did not have a material impact on our consolidated financial statements.

3. Earnings per Share

     Basic earnings per share is computed by dividing net income (loss) attributable to the Company’s common stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. All unvested share based payment awards are included in the computation of basic earnings per share. The computation of diluted earnings per share reflects common shares issuable from the assumed conversion of OP units and restricted OP units and other potentially dilutive securities in the weighted average shares. Net income attributable to noncontrolling interests is added back to net income (loss) available to common stockholders in the computation of diluted earnings per share. Computations of basic and diluted earnings per share are as follows (in thousands, except share data):

		Three months ended				Nine months ended
		September 30, 2011				September 30, 2011
Basic earnings per share:
Net income (loss) attributable to common stockholders		$	408				(702	)
Diluted earnings per share:
Net income (loss) attributable to common stockholders		$	408				(702	)
Add: net income attributable to noncontrolling interests			6				—	(1)
Net income (loss) attributable to common shareholders and participating securities		$	414				(702	)

		Three months ended				Nine months ended
		September 30, 2011				September 30, 2011
Weighted average common shares outstanding:
Basic			30,724,000				30,716,828
Incremental shares from assumed conversion — OP units			435,593				—	(1)
Diluted			31,159,593				30,716,828
Basic and diluted earnings per share:		$	0.01				(0.02	)

     At September 30, 2011 and December 31, 2010, accrued dividends and OP unit distributions of approximately $5.0 million and $4.0 million, respectively, are recorded as a component of the accounts payable and accrued expenses line item on the Company’s condensed consolidated balance sheets.

4. Student Housing Properties

     Student housing properties, net, consisted of the following (amounts in thousands):

		September 30,				December 31,
		2011				2010
Land		$	33,847				26,369
Buildings and improvements			384,356				304,447
Furniture, fixtures and equipment			43,130				41,930
			461,333				372,746
Accumulated depreciation			(71,417	)			(57,463	)
		$	389,916				315,283

5. Noncontrolling Interests

Company Noncontrolling Interests — Operating Partnership Units

     Certain limited partners in the Operating Partnership, which total approximately 1.5% of the limited partnership interest in the Operating Partnership, hold their ownership units through entities which are not affiliates or subsidiaries of the Company. OP units are exchangeable into cash or, at the Company’s election, an equal number of shares of the Company’s common stock. OP units have the same economic characteristics as shares of the Company’s common stock, as they effectively participate equally in the net income and distributions of the Operating Partnership.

     The holders of OP Units have the right to require the Operating Partnership to redeem part or all of the OP Units for cash based upon the fair market value of an equivalent number of shares of the Company’s common stock at the time of redemption. However, the Company may, in its sole discretion, elect to redeem the OP Units in exchange for common stock. Based on this assessment, which includes the evaluation of terms in the agreements related to redemption provisions, the Company has classified these noncontrolling interests as a component of permanent equity on the accompanying condensed consolidated balance sheets. The share of net income (loss) allocated to these OP units is reported on the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2011 as net income (loss) attributable to noncontrolling interests. For the three and nine months ended September 30, 2011, no OP units were redeemed.

Predecessor Noncontrolling Interests — Third-Party Venture Partners

     Prior to completion of the Offering, the Predecessor combined real estate ventures which wholly owned 20 operating student housing properties. Each of these real estate ventures had third-party partners other than the Predecessor or its affiliates. The third-party owners’ share of the income or loss of the entities is reported on the accompanying condensed combined statements of operations for the three and nine months ended September 30, 2010 as net loss attributable to noncontrolling interests.

6. Property Acquisition

     On October 19, 2010, we acquired from Harrison Street Real Estate, a real estate private equity firm (“HSRE”), the remaining interest in Campus Crest at San Marcos, LLC, which owns The Grove at San Marcos. Prior to this transaction, The Grove at San Marcos was wholly owned by a real estate venture, HSRE-Campus Crest I, LLC, in which the Company and HSRE are members and had 10% and 90% member interests, respectively (see note 8). Prior to the acquisition of this interest, the Company accounted for its ownership interest in The Grove at San Marcos under the equity method of accounting. Subsequent to its acquisition of this interest, the Company consolidated the results of operations of The Grove at San Marcos. In connection with the accounting for its purchase of the remaining interest in the property, the Company recorded a gain of approximately $0.6 million during the period from October 19, 2010 through December 31, 2010 related to the remeasurement of its previously held equity interest in The Grove at San Marcos at the acquisition date.

7. Sales of Interests in Properties and Real Estate Ventures

     In November 2009, we sold 90% of our interest in The Grove at Milledgeville to an affiliate of HSRE. We received proceeds from the sale of approximately $3.9 million. Concurrent with the Offering and Formation Transactions, the Company repurchased the 90% interest in The Grove at Milledgeville, with the result that the Company owned 100% of The Grove at Milledgeville on October 19, 2010. Because of our continuing involvement in this asset and because this transaction had financing elements, we did not record this transaction as a sale for financial reporting purposes. The proceeds were recorded as a loan and the Predecessor continued to combine the balance sheet and results of operations of Campus Crest at Milledgeville, LLC, the entity which owns the property, through October 18, 2010. The difference between the sale proceeds and contracted repurchase price was accreted and recorded as interest expense in the Predecessor’s condensed combined statement of operations. For the three and nine months ended September 30, 2010, interest expense related to this transaction totaled approximately $0.5 million and $1.5 million, respectively.

     In March 2010, we sold 99% of our interest in HSRE-Campus Crest I, LLC, which represented a 9.9% interest in the underlying venture, to an affiliate of HSRE. Total proceeds received were approximately $2.25 million. Concurrent with the Offering and Formation Transactions, the Company repurchased the 9.9% interest in HSRE-Campus Crest I, LLC. As a result, the transaction was accounted for as a financing. The difference between the proceeds received and the contracted repurchase amount was accreted and recorded as interest expense in the Predecessor’s condensed combined statement of operations. For the three and nine months ended September 30, 2010, interest expense related to this transaction totaled approximately $0.4 million and $0.8 million, respectively.

     In September 2010, we sold 99.9% of our interest in The Grove at Carrollton to an affiliate of HSRE. We received proceeds from the sale of approximately $0.8 million. Concurrent with the Offering and Formation Transactions, the Company repurchased the 99.9% interest in The Grove at Carrollton, with the result that the Company owned 100% of The Grove at Carrollton on October 19, 2010. Because of our continuing involvement in this asset and because the transaction had financing elements, we did not record this transaction as a sale for financial reporting purposes. The proceeds were recorded as a loan and the Predecessor continued to combine the balance sheet and results of operations of Campus Crest at Carrollton, LLC, the entity which owns the property, through October 18, 2010. The difference between the sale proceeds and contracted repurchase price was accreted and recorded as interest expense in the Predecessor’s condensed combined statement of operations. For the three and nine months ended September 30, 2010, interest expense related to this transaction totaled approximately $0.2 million.

8. Investment in Unconsolidated Entities

     At September 30, 2011, we have investments in two real estate venture entities with HSRE. The first real estate venture, HSRE-Campus Crest I, LLC (“HSRE I”), is not consolidated by the Company. At September 30, 2011 and December 31, 2010, this entity, in which our investment is accounted for under the equity method, owned six student housing properties. Three of these properties, The Grove at Lawrence, The Grove at Moscow and The Grove at San Angelo, opened in 2009. The remaining three properties, The Grove at Huntsville, The Grove at Conway and The Grove at Statesboro opened in 2010. We held a 49.9% noncontrolling interest in this unconsolidated entity at September 30, 2011 and December 31, 2010. Prior to the Offering and Formation Transactions, we held a 10% noncontrolling interest in this venture. As discussed in note 6, also prior to the Offering, the HSRE I venture owned an additional student housing property, The Grove at San Marcos. The Company acquired the remaining ownership interest in this property, which opened in 2009, concurrent with the Offering and Formation Transactions.

     The second real estate venture, HSRE-Campus Crest IV, LLC (“HSRE IV”), was entered into in January 2011. HSRE will contribute up to $50 million to the venture, which develops and operates additional purpose-built student housing properties. The Company’s investment in this real estate venture is accounted for under the equity method. We own a 20% noncontrolling interest in this unconsolidated entity at September 30, 2011. HSRE IV opened two student housing properties in August 2011, The Grove at Denton and The Grove at Valdosta. The Company made contributions to HSRE IV of approximately $3.0 million during the nine months ended September 30, 2011, consisting of cash and assigned interests in Campus Crest at Denton, LP and Campus Crest at Valdosta, LLC.

     We recorded equity in loss from these ventures of approximately $0.3 million and $0.1 million for the three months ended September 30, 2011 and 2010, respectively, and approximately $0.9 million and $0.2 million for the nine months ended September 30, 2011 and 2010, respectively. In addition to acting as the operating member for these ventures, the Company and its Predecessor are entitled to receive fees for providing development and construction services (as applicable) and management services to the ventures. The Company earned approximately $4.8 million and $4.3 million in fees for the three months ended September 30, 2011 and 2010, respectively, and approximately $26.4 million and $35.1 million in fees for the nine months ended September 30, 2011 and 2010, respectively, for services provided to the ventures. The development, construction and management service fees from these unconsolidated entities are reflected in the development, construction and management services line item in the accompanying condensed consolidated and combined statements of operations.

     The Company is the guarantor of the construction debt of these ventures, which totaled approximately $110.8 million and $83.2 million at September 30, 2011 and December 31, 2010, respectively. The ventures’ construction debt matures at various dates during 2012 and 2013.

     Condensed combined financial information for unconsolidated entities as of September 30, 2011 and December 31, 2010 and for the three and nine month periods ended September 30, 2011 and 2010 are as follows (amounts in thousands):

Balance Sheets

		September 30,				December 31,
		2011				2010
Assets:
Student housing properties, net		$	154,292				112,224
Other assets			6,394				5,444
Total assets		$	160,686				117,668
Liabilities and owners’ equity:
Construction debt		$	110,844				83,222
Other liabilities			10,514				5,117
Owners’ equity			39,328				29,329
Total liabilities and owners’ equity		$	160,686				117,668

		September 30,				December 31,
		2011				2010
Share of historical owners’ equity		$	13,424				12,479
Preferred investment (1, 2)			6,839				4,781
Net difference in carrying value of investment versus net book value of underlying net assets (3)			(3,512	)			(3,509	)
Carrying value of investment in unconsolidated entities		$	16,751				13,751

Statements of Operations

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Revenues		$	5,038				3,716				12,547				7,827
Expenses:
Operating expenses			2,541				1,729				6,662				4,401
Interest expense			1,867				1,201				4,811				3,094
Depreciation and amortization			1,348				1,122				3,586				2,711
Total expenses			5,756				4,052				15,059				10,206
Net loss		$	(718	)			(336	)			(2,512	)			(2,379	)
Company’s and Predecessor’s share of net loss (1)		$	(309	)			(49	)			(944	)			(243	)

9. Debt

     A detail of our mortgage loans, construction loans and lines of credit is presented below (amounts in thousands):

		September 30,				December 31,
		2011				2010
Fixed-rate mortgage loans		$	109,358				60,840
Construction loans			39,820				—
Lines of credit and other debt			43,552				42,500
		$	192,730				103,340

     During the nine months ended September 30, 2011 and 2010, the following transactions occurred (amounts in thousands):

		Nine Months Ended
		September 30,
		2011				2010
Balance at beginning of period		$	103,340				343,172
Additions:
Draws on lines of credit			44,500				2,540
Draws under construction loans			39,820				498
Proceeds from mortgage loans			48,518				—
Proceeds from related party loan (1)			—				3,020
Accretion of interest expense (1)			—				3,481
Assumption of bonds			2,552				—
Deductions:
Payments on lines of credit			(46,000	)			(48	)
Payments on construction loans			—				(338	)
Payments on related party loan			—				(80	)
Balance at end of period		$	192,730				352,245

     The estimated fair value of our mortgage and construction loans at September 30, 2011 and December 31, 2010 was approximately $154.9 million and approximately $62.9 million, respectively. Estimated fair values are determined by comparing current borrowing rates and risk spreads to the stated interest rates and risk spreads (Level 2 fair value measurement). The estimated fair value of our revolving line of credit approximates the outstanding balance due to the frequent market based repricing of the underlying variable rate index.

     Mortgage and construction loans are collateralized by properties and their related revenue streams. Mortgage and construction loans at September 30, 2011 and December 31, 2010 consisted of the following (dollar amounts in thousands):

						Principal				Principal								Interest				Interest
						Outstanding				Outstanding				Stated				Rate at				Rate at
		Face				at September				December				Interest				September				December				Maturity				Amor-
		Amount				30, 2011				31, 2010				Rate				30, 2011				31, 2010				Date				tization
Mortgage loans
The Grove at Nacogdoches		$	17,160				17,160				—				5.01	%			5.01	%			N/A				9/1/18			30 years
The Grove at Ellensburg			16,125				16,125				—				5.10	%			5.10	%			N/A				9/1/18			30 years
The Grove at Greeley			15,233				15,233				—				4.29	%			4.29	%			N/A				10/1/18			30 years
The Grove at Asheville			14,800				14,800				14,800				5.77	%			5.77	%			5.77	%			4/11/17			30 years
The Grove at Carrollton			14,650				14,650				14,650				6.13	%			6.13	%			6.13	%			10/11/16			30 years
The Grove at Las Cruces			15,140				15,140				15,140				6.13	%			6.13	%			6.13	%			10/11/16			30 years
The Grove at Milledgeville			16,250				16,250				16,250				6.12	%			6.12	%			6.12	%			10/1/16			30 years
Construction loans
Construction loan (three properties) (1)			37,523				26,414				—			LIBOR + 4.75%					4.97	%			N/A				11/19/13				Interest only through 11/2012
The Grove at Columbia			17,046				13,406				—			Greater of LIBOR + 3.00% or 4.50%					4.50	%			N/A				3/4/14				Interest only through 4/2013
The Grove at Auburn			16,294				—				—			LIBOR + 2.95%					N/A				N/A				7/22/14			Interest only
The Grove at Orono			15,206				—				—			LIBOR + 2.75%					N/A				N/A				6/30/14			Interest only
Total		$	195,427				149,178				60,840

Mortgage Loans

     The mortgage loans for The Grove at Ellensburg and The Grove at Nacogdoches closed in August 2011. The mortgage loan for The Grove at Greeley closed in September 2011. These three loans require interest only payments, plus certain reserves and escrows, that are payable monthly through September 2013. Monthly payments of principal and interest, plus certain reserve and escrows, are due thereafter until maturity when all principal is due. Each of these loans has a 30-year amortization and is a non-recourse obligation subject to customary exceptions. None of these loans are cross-defaulted or cross-collateralized with any other indebtedness. These loans generally may not be prepaid prior to maturity; in certain cases, prepayment is allowed subject to prepayment penalties.

     The mortgage loans for The Grove at Asheville, The Grove at Carrollton, The Grove at Las Cruces and The Grove at Milledgeville generally require interest only payments, plus certain reserves and escrows, that are payable monthly for a period of five years. Monthly payments of principal and interest, plus certain reserve and escrow amounts, are due thereafter until maturity when all principal is due. Each of these loans has a 30-year amortization and is a non-recourse obligation subject to customary exceptions. None of these loans are cross-defaulted or cross-collateralized with any other indebtedness. The loans generally may not be prepaid prior to maturity; in certain cases, prepayment is allowed, subject to prepayment penalties.

     During the three and nine months ended September 30, 2010, the Predecessor was party to an additional mortgage loan which was outstanding. This loan had a principal amount of approximately $104.0 million, was secured by six properties, had a fixed interest rate of 6.40% and had interest only payments with a balloon maturity date of February 28, 2013. This mortgage loan was repaid in full on October 19, 2010, upon completion of the Offering.

Construction Loans

     On July 22, 2011, Campus Crest at Auburn, LLC, a subsidiary of the Company, entered into a Construction Loan Agreement with Compass Bank pursuant to which Compass Bank agreed to provide Campus Crest at Auburn, LLC a construction loan with a total borrowing capacity of approximately $16.3 million. The construction loan will be used to finance the development of a student housing property in Auburn, Alabama. The construction loan matures on July 22, 2014, but can be extended until October 22, 2015, subject to certain conditions. The interest rate on the construction loan is LIBOR plus 2.95%. The construction loan agreement contains representations, warranties, covenants (including financial covenants upon commencement of operations) and other terms that are customary for construction financing. At September 30, 2011, no amounts were outstanding under this loan.

     On June 30, 2011, Campus Crest at Orono, LLC, a subsidiary of the Company, entered into a Construction Loan Agreement with TD Bank, N.A. pursuant to which TD Bank agreed to provide Campus Crest at Orono, LLC a construction loan with a total borrowing capacity of approximately $15.2 million. The construction loan will be used to finance the development of a student housing property in Orono, Maine. The construction loan matures on June 30, 2014, but can be extended until December 31, 2015, subject to certain conditions. The interest rate on the construction loan is LIBOR plus 2.75%. The construction loan agreement contains representations, warranties,

covenants (including financial covenants upon commencement of operations) and other terms that are customary for construction financing. At September 30, 2011, no amounts were outstanding under this loan.

     On March 4, 2011, Campus Crest at Columbia, LLC, a subsidiary of the Company, entered into a Construction Loan Agreement with BOKF, NA (d/b/a Bank of Oklahoma), pursuant to which Bank of Oklahoma agreed to provide Campus Crest at Columbia, LLC a construction loan with a total borrowing capacity of approximately $17.0 million. The construction loan was used to finance the development of a student housing property in Columbia, Missouri. The construction loan matures on March 4, 2014, but can be extended until March 4, 2015, subject to certain conditions. The interest rate on the construction loan is the greater of (i) LIBOR plus 3.0%, or (ii) 4.5%. Loan payments are interest only through April 2013. The construction loan agreement contains representations, warranties, covenants (including financial covenants upon commencement of operations) and other terms that are customary for construction financing. At September 30, 2011, approximately $13.4 million was outstanding under this loan.

     On November 19, 2010, the Company entered into a construction loan with The PrivateBank and Trust Company to finance the development of student housing properties in each of Ames, Iowa, Clarksville, Tennessee and Fort Wayne, Indiana. The construction loan initially matures on November 19, 2013, but can be extended until November 19, 2014, subject to certain conditions. The interest rate is LIBOR plus 4.75% and the construction loan agreement contains representations, warranties, covenants (including financial covenants upon commencement of operations) and other terms that are customary for construction financing. Loan payments are interest only through November 2012. The amount available under the construction loan totals approximately $37.5 million. At September 30, 2011 and December 31, 2010, approximately $26.4 million and $0 were outstanding under this loan, respectively.

     During the three and nine months ended September 30, 2010, the Predecessor was a party to two construction loans which were outstanding. The first construction loan had an outstanding principal amount of approximately $148.9 million, was secured by nine properties, had an interest rate of LIBOR plus 1.80% (when taken together with an interest rate swap, fixed the loan’s rate at 6.0%) and had interest only payments with a balloon maturity date of October 31, 2010. The second construction loan had an outstanding principal amount of approximately $15.8 million, was secured by one property, had an interest rate equal to the greater of LIBOR plus 3.0% or 5.5% and had a maturity date of October 31, 2010. Both construction loans were repaid in full on October 19, 2010 upon completion of the Offering.

Lines of Credit

     On October 19, 2010, the Company closed a credit agreement (our “revolving credit facility”) with Citibank, N.A. and certain other parties thereto relating to a three-year, $125 million senior secured revolving credit facility. This facility was secured by 13 of our wholly owned properties.

     On August 17, 2011, the Company and its lenders amended the revolving credit facility. As a result of the amendment, the credit facility was increased to $150 million and its interest rate was adjusted, the result of which decreased the spread over the elected floating interest rate. Additionally, the revolving credit facility, which was formerly secured, became unsecured and now matures on August 17, 2014, subject to a one-year extension option the Company may exercise at its option, pursuant to certain terms and conditions.

     As of September 30, 2011 and December 31, 2010, approximately $41.0 million and $42.5 million was outstanding under our revolving credit facility, respectively. At September 30, 2011, the Company had approximately $71.8 million of borrowing capacity under this facility. Borrowings under our revolving credit facility were used to repay indebtedness which existed prior to the Offering or were used to finance our required equity contribution for projects built and opened for the 2011-2012 academic year or for projects expected to be built and open for future academic years. The amount available for us to borrow under this credit facility is based on the lesser of (i) 60.0% of the “as is” appraised value of our properties that form the borrowing base of the facility, and (ii) the amount that would create a debt service coverage ratio of not less than 1.50 : 1.00.

     Our revolving credit facility has an accordion feature that allows us to request an increase in the total commitments of an additional $175 million up to a total commitment of $325 million. Amounts outstanding under our revolving credit facility bear interest at a floating rate equal to, at our election, the Eurodollar Rate or the Base Rate (each as defined in the revolving credit facility) plus a spread. The spread depends upon our leverage ratio and

ranges from 1.75% to 2.50% for Eurodollar Rate based borrowings and from 0.75% to 1.50% for Base Rate based borrowings. At September 30, 2011, the interest rate on the revolving credit facility was 1.97%.

     Our ability to borrow under our revolving credit facility is subject to our ongoing compliance with a number of customary financial covenants, including:

	•		a maximum leverage ratio of 0.60 : 1.00;
	•		a minimum fixed charge coverage ratio of 1.50 : 1.00;
	•		a minimum ratio of fixed rate debt and debt subject to hedge agreements to total debt of 66.67%;
	•		a maximum secured recourse debt ratio of 20%;
	•		a minimum tangible net worth of not less than the sum of approximately $227.1 million 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 50% through February 17, 2013, and not greater than 45% on any date thereafter.

     Under our revolving credit facility, our distributions may not exceed the greater of (i) 95.0% of our Funds From Operations (“FFO”) or (ii) the amount required for us to qualify and maintain our status as a REIT. If a default or event of default occurs and is continuing, we may be precluded from making certain distributions (other than those required to allow us to qualify and maintain our status as a REIT).

     We and certain of our subsidiaries guarantee the obligations under our revolving credit facility and we and certain of our subsidiaries have provided a negative pledge against specified assets (including real property), stock and other interests. At September 30, 2011, we were in compliance with the above financial covenants with respect to our revolving credit facility.

10. Incentive Plans

     The Company has adopted the 2010 Equity Incentive Compensation Plan (the “Plan”). The Plan permits the grant of incentive awards to executive officers, employees, consultants and non-employee directors of the Company. The aggregate number of awards approved under the Plan is 2,500,000. As of September 30, 2011 and December 31, 2010, 1,953,612 shares and 2,002,236 shares, respectively, were available for issuance under the plan.

Restricted Stock Awards

     Awards to executive officers and employees of the Company vest over a three year period and are subject to restriction based upon employment in good standing with the Company. Awards to non-employee directors of the Company vest over a five year period and are subject to restriction based upon continued service on the Board of Directors of the Company.

     At September 30, 2011, unearned compensation totaled approximately $1.0 million, and will be recorded as expense over the applicable vesting period of three to five years. During the three and nine months ended September 30, 2011, stock compensation expense of approximately $0.1 million and $0.3 million, respectively, was recognized as general and administrative expense in the accompanying condensed consolidated financial statements related to the vesting of restricted stock.

Restricted OP Units

     At September 30, 2011, unearned compensation totaled approximately $1.3 million, and will be recorded over the applicable vesting period of three years. During the three and nine months ended September 30, 2011, approximately $0.2 million and $0.5 million, respectively, of compensation cost was recognized in the accompanying condensed consolidated financial statements relating to the vesting of restricted OP units.

     A summary of incentive plan activity as of and for the nine months ended September 30, 2011 is as follows:

						Number of
		Number of				Restricted								Weighted Average
		Restricted OP				Common								Grant Date Fair
		Units				Shares				Total				Value
Nonvested balances at December 31, 2010			150,000				98,882				248,882			$	12.50
Granted			—				25,725				25,725			$	11.32
Forfeited			—				(1,413	)			(1,413	)		$	12.50
Nonvested balances at September 30, 2011			150,000				123,194				273,194			$	12.39

11. Derivative Instruments and Hedging Activities

     We use, and expect to continue to use, significant variable rate debt to finance our construction of student housing properties. These debt obligations expose us to variability in cash flows due to fluctuations in interest rates. Management enters into derivative contracts to limit variability for a portion of our interest payments and to manage exposure to interest rate risk. We use derivative financial instruments, specifically interest rate caps and interest rate swaps, for non-trading purposes.

     As of September 30, 2011 and December 31, 2010, the fair value of derivative contracts is recorded within other assets and other liabilities in the accompanying condensed consolidated balance sheets. The effective portion of changes in fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified to earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of changes in fair value of derivatives designated and that qualify as cash flow hedges is recorded in earnings. If a derivative is either not designated as a hedge or if hedge accounting is discontinued, all changes in fair value of the derivative are recorded in earnings.

     The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. We incorporate credit valuation adjustments to appropriately reflect our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds and guarantees. We consider such nonperformance risk insignificant to the overall determination of fair value.

     The following table is a summary of the terms, estimated fair values and classification on the condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010 of the interest rate derivative contracts we were a party to at September 30, 2011 and December 31, 2010 (dollar amounts in thousands):

Interest Rate																		Estimated Fair
Derivative																		Value at September				Estimated Fair Value at
Instrument		Hedged Item				Notional Amount				Fixed Interest Rate				Maturity Date				30, 2011				December 31, 2010
Cap (1)		30-day LIBOR				$	44,000				2.50	%		January 2011				$	N/A				—
Swap (2)		30-day LIBOR				$	25,488				3.44	%		May 2011					N/A				(337	)
Cap (2)		30-day LIBOR				$	56,000				2.50	%		June 2012					—				N/A
Cap (1)		30-day LIBOR				$	17,198	(3)			1.25	%		April 2013					6				103
Swap (1)		30-day LIBOR				$	17,198	(3)			1.39	%		April 2013					(271	)			(115	)
																		$	(265	)			(349	)

     The table below reflects the effect of interest rate derivative instruments on the condensed consolidated and combined statements of operations for the three and nine months ended September 30, 2011 and 2010 (amounts in thousands):

		Location of Gain (Loss)				Three Months Ended								Nine Months Ended
		Recognized on Statements				September 30,								September 30,
		of Operations				2011				2010				2011				2010
Interest rate swaps (receive float/pay fixed):
Monthly net settlements — cash settled		Change in fair value of interest rate derivatives				$	(22	)			(1,367	)			(22	)			(4,081	)
Mark to market adjustments — non-cash		Change in fair value of interest rate derivatives					—				1,545				337				4,437
Total effect of derivative instruments on the combined statements of operations						$	(22	)			178				315				356

     For the three and nine months ended September 30, 2011, approximately $0.1 million and $0.3 million, respectively, was recognized as other comprehensive loss related to the effective portion of the change in fair value of interest rate derivatives designated as cash flow hedges.

12. Segments

     The operating segments in which management assesses performance and allocates resources are student housing operations and development, construction and management services. Our segments reflect management’s resource allocation and performance assessment in making decisions regarding the Company. Our student housing rental and student housing services revenues are aggregated within the student housing operations segment and our third-party services of development, construction and management are aggregated within the development, construction and management services segment.

     The following tables set forth our segment information as of and for the three and nine months ended September 30, 2011 and 2010 (amounts in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Student Housing Operations:
Revenues from external customers		$	15,569				12,623				42,716				38,211
Operating expenses			12,323				11,609				35,497				35,347
Operating income			3,246				1,014				7,219				2,864
Nonoperating expenses			(1,503	)			(3,973	)			(3,043	)			(11,691	)
Net income (loss)			1,743				(2,959	)			4,176				(8,827	)
Net income (loss) attributable to noncontrolling interests			18				(2,264	)			42				(7,290	)
Net income (loss) attributable to stockholders and owner		$	1,725				(695	)			4,134				(1,537	)
Depreciation and amortization		$	4,809				4,442				15,054				13,722
Total segment assets at end of period		$	436,280								436,280
Development, Construction and Management Services:
Revenues from external customers		$	4,827			$	4,256			$	26,444			$	35,121
Intersegment revenues			28,330				1,075				80,245				5,722
Total revenues			33,157				5,331				106,689				40,843
Operating expenses			31,055				4,818				99,133				36,907
Operating income			2,102				513				7,556				3,936

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Nonoperating expenses			(15	)			17				(250	)			(14	)
Net income			2,087				530				7,306				3,922
Net income attributable to noncontrolling interests			21				—				73				—
Net income attributable to stockholders and owner		$	2,066				530				7,233				3,922
Depreciation and amortization		$	21				98				67				67
Total segment assets at end of period		$	13,954								13,954
Reconciliations:
Total segment revenues		$	48,726			$	17,954				149,405			$	79,054
Elimination of intersegment revenues			(28,330	)			(1,075	)			(80,245	)			(5,722	)
Total combined revenues		$	20,396			$	16,879				69,160			$	73,332
Segment operating income		$	5,348				1,527				14,775				6,800
Interest expense			(1,922	)			(6,708	)			(4,657	)			(17,395	)
Change in fair value of interest rate derivatives			(22	)			178				315				356
Net unallocated expenses and eliminations			(2,785	)			(1,251	)			(10,248	)			(4,156	)
Equity in loss of unconsolidated entities			(309	)			(49	)			(944	)			(243	)
Other income			118				1				272				45
Income tax provision			(14	)			—				(214	)			—
Net loss		$	414				(6,302	)			(701	)			(14,593	)
Total segment assets		$	450,234								450,234
Unallocated corporate assets and eliminations			16,610								16,610
Total assets		$	466,844								466,844