Student Housing Business is the voice of the student housing industry.
Issue link: https://studenthousingbusiness.epubxp.com/i/488341
SHB EXCLUSIVE MARCH/APRIL 2015 STUDENT HOUSING BUSINESS .COM 22 The student housing industry is watching carefully as Campus Evolution Villages and The Clinton Group continue their proxy con- test seeking to gain control of the board of publicly-traded REIT Campus Crest. Student Housing Business sat down with Campus Evolution Villages' founders and principals Andrew Stark and Evan Denner to get the latest on the transaction and why they believe they are the right answer for Campus Crest. SHB: For those who might not know the story, can you take our readers from the start of Campus Evolution Villages (CEV) to where you are today? Andrew Stark: From our incep- tion, Campus Evolution Villages has been rooted in the philosophy that we would be change agents in the sector and have the opportu- nity to positively impact the lives of the future leaders of tomorrow, our residents. We each ran expe- riential businesses in the past, me in the homebuilding business and Evan in lending. We believe that the world has become very experi- ential and student residents, their parents and universities desire some level of experience. So with that idea, we went out and raised some capital, acquired a vertically integrated, student housing man- agement company and since have closed on 16 assets and manage seven third-party assets as well. SHB: You have raised $125 million of equity thus far? Who are your investors? Who is behind CEV? Evan Denner: Waterbridge Capital, a family offce based in London and New York, put us in business providing us with seed capital. They immediately understood that this demographic wanted more than a bed and pool and that there was a real oppor- tunity to create both real estate and brand value. We were fortu- nate to have been introduced to the Reichmann family in Toronto. They are global owners/develop- ers and have built marquis proj- ects such as Canary Wharf in London. Interestingly enough, they also have had great success in operating businesses such as healthcare so they too immedi- ately understood the high touch and management intensity of the student housing business. Most recently, we had a multi-strategy hedge fund join our partnership. SHB: Prior to launching Campus Evolution Villages what were you both doing? Denner: I was at Cantor Fitzgerald working closely with the CEO and senior management to buy compa- nies. It's an amazing place in that while a large company, it is very entrepreneurial. I had the oppor- tunity to go to London to buy a broker dealer then put together the acquisition of two of the leading real estate brokerage companies in the United States, Newmark Knight Frank and Grubb & Ellis. We spent a lot of time getting the right people in the right seats, working on retaining and moti- vating employees and integrating companies for future growth. Stark: Evan and I met at Cantor Fitzgerald where I spent a good amount of time working on platform real estate invest- ment vehicles including raising funds for rescuing failed banks through hard assets acquisitions. Immediately prior to launching Campus Evolution Villages, I was actively leading the recapitalizing and repositioning of a large land and development lending group. I was in the weeds every day with many different asset classes; on any given day there was a wide- spectrum of what needed to be accomplished, from corporate restructuring to ground-up devel- opment planning for assets across the country — long days were commonplace and tapped into the operational experience from my homebuilding days. SHB: Andrew, you are one of the early pioneers in the student hous- ing business. How did you get involved and how have you seen the business evolve over time? Stark: The student housing sector is a relatively young asset class. I like to say that we are still in the infancy years of the sector, but we are maturing and growing up quickly. I got involved in the very early 'gestation' years when I had the opportunity to meet the guys launching ACC. Bill Bayless had an incredible vision and he has certainly remained a guiding force. I was involved in the early years in capitalizing the company and building out the early team and developments as they went on to become the frst public com- pany in the sector. In coming back to the sector Evan and I grasped the opportunity to bring a higher level of customer experience and resident interaction, an evolution in the entire way we look at stu- dent housing, much like the trans- formation in the hospitality sector in the 1990s and homebuilding of the 2000s. SHB: Turning now to the proxy contest regarding Campus Crest, what do you believe you can pro- vide the equity holders of Campus Crest? Stark: A strong, knowledge- able management team that, we believe, has an unmatched pas- sion for student housing. We have done a good job building the brand and getting our systems and policies in place — and equal- ly as important — followed. We are entrepreneurial owners with investors and we manage day-to- day and dollar-to-dollar; 'pennies count' is a common mantra on our weekly calls. All of this is portable and would be brought to Campus Crest. SHB: Prior to getting involved in the Campus Crest proxy, what was your relationship with Clinton Group? Denner: We didn't know Clinton. We had reached out to the chair- man of Campus Crest and had multiple meetings with the com- pany and some of their board members. We believed our dia- logue was fruitful and provided alternatives attractive to their shareholders. At the same time, we were introduced to Clinton. At the end of the day, we decided to move forward with Clinton. SHB: Most REIT analysts and industry observers agree that Campus Crest had a rough start out of the gate when it went public in October 2010 and has under- performed compared to the rest of the industry and the other two REITs in the space. The company saw some executive departures in November 2014 with some indus- try analysts — and certainly the two of you — contending that the company now has little student housing expertise at the board and C-suite levels. What are your thoughts? Stark: We believe that is true. It is clear today that the company has no student housing expertise on the board or at the executive level. It's very hard to run a com- CEV ON PROXY BID FOR CAMPUS CREST Campus Evolution Villages tells readers more about its proxy bid for Campus Crest, and CEV's student housing operating philosophy. Interview by Richard Kelley and Randall Shearin Andrew Stark Evan Denner