NEW YORK, Feb. 16, 2015 /PRNewswire/ -- Clinton Group,
Inc. ("Clinton" or "CGI"), a
stockholder of Campus Crest Communities, Inc. ("Campus Crest",
"CCG" or the "Company") (NYSE: CCG), announced today that it has
partnered with Campus Evolution Villages, LLC ("Campus Evolution
Villages" or "CEV"), a leading private owner and operator of
student housing assets, in its pursuit to maximize value for all
shareholders of Campus Crest. CEV currently owns and manages
22 assets at 20 distinct universities totaling approximately 10,000
beds.
"We are pleased to partner with such an exceptional management
team in our pursuit to improve Campus Crest for all shareholders,"
said Joseph A. De Perio, Senior
Portfolio Manager at Clinton Group. "I am disappointed the current
Board has elected not to engage with us in a constructive manner
since our nomination notice and, most recently, when we apprised
them of our current plan. We look forward to continuing to
articulate the case for change and our plans for the future prior
to the record date on February 26 and
the upcoming annual meeting."
"I am thrilled to be working with Clinton to improve Campus Crest," said
Andrew Stark, Chief Executive
Officer of Campus Evolution Villages. "We are a great
alternative for shareholders today and have the capabilities to
address all of the Company's issues and problems – instituting a
full executive team with our extensive hands-on student housing
expertise, turning around the operations immediately, and restoring
Campus Crest's growth opportunity and pipeline with our owned and
managed assets."
"Our vision is to make Campus Crest a dominant player in the
student housing industry," said Evan
Denner, Chief Investment Officer of Campus Evolution
Villages. "We plan to evolve the business under our
management principles and position the Company for future
growth. We have worked very hard to build a brand that
focuses on both the student-resident experience as well as
disciplined attention to driving value for all stakeholders."
A copy of a letter sent to the Board of Directors today is also
included in this release.
This communication is not a proxy solicitation, which may be
done only pursuant to a definitive written proxy statement.
About Clinton Group, Inc.
Clinton Group, Inc. is a diversified asset management firm that
is a Registered Investment Advisor. The firm has been investing in
global markets since its inception in 1991 with expertise that
spans a wide range of investment styles and asset classes.
About Campus Evolution Villages, LLC
Campus Evolution Villages is a singularly focused student
housing management company; a thought leader and change agent
setting a new standard in student living that goes beyond merely
heads in beds. Its senior management team has more than 25 years of
experience in serving the student demographic. Campus Evolution
Villages' specialized focus and customer-centric approach gives it
a unique perspective on the particular needs and challenges of
managing student housing. Campus Evolution Villages owns and/or
manages approximately 10,000 beds today at 20 universities from
San Diego, California to
Clemson, South Carolina.
CEV and its principals have a proven track-record in student
housing, commercial and residential real estate finance and
development, and in growing successful operating real estate
platforms, which gives it a unique insight into the nuances of
student housing. The principals of CEV are seasoned leaders with
turn-around and growth experience at both the corporate and asset
level and also with significant exposure to the capital markets,
including public company and shareholder know-how. CEV has
wide-ranging student housing management experience and strong
relationships with owners, universities and other institutions.
Top-down leadership and brand building, with culture immersion and
training, has separated CEV from its peers; CEV understands that
student housing is a management-intensive operating business
requiring a cohesive team at all touch-points focused on the
experiential nature of student housing.
CLINTON RELATIONAL OPPORTUNITY
MASTER FUND, L.P., CLINTON
RELATIONAL OPPORTUNITY, LLC, CLINTON GROUP, INC. AND GEORGE E. HALL (COLLECTIVELY, "CLINTON"), SCOTT R.
ARNOLD, RANDALL H. BROWN,
WILLIAM A. FINELLI AND RAYMOND MIKULICH (THE "NOMINEES") AND CAMPUS
EVOLUTION VILLAGES, LLC (TOGETHER WITH CLINTON AND THE NOMINEES, THE "PARTICIPANTS")
INTEND TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC") A DEFINITIVE PROXY STATEMENT AND ACCOMPANYING FORM OF PROXY
CARD TO BE USED IN CONNECTION WITH THE PARTICIPANTS' SOLICITATION
OF PROXIES FROM THE STOCKHOLDERS OF CAMPUS CREST COMMUNITIES, INC.
(THE "COMPANY") FOR USE AT THE COMPANY'S 2015 ANNUAL MEETING OF
STOCKHOLDERS (THE "PROXY SOLICITATION"). ALL STOCKHOLDERS OF THE
COMPANY ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND
OTHER DOCUMENTS RELATED TO THE PROXY SOLICITATION, WHEN THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION,
INCLUDING ADDITIONAL INFORMATION RELATED TO THE PARTICIPANTS. WHEN
COMPLETED, THE DEFINITIVE PROXY STATEMENT AND AN ACCOMPANYING PROXY
CARD WILL BE FURNISHED TO SOME OR ALL OF THE COMPANY'S STOCKHOLDERS
AND WILL BE, ALONG WITH OTHER RELEVANT DOCUMENTS, AVAILABLE AT NO
CHARGE ON THE SEC'S WEBSITE AT HTTP://WWW.SEC.GOV/.
INFORMATION ABOUT THE PARTICIPANTS AND A DESCRIPTION OF THEIR
DIRECT OR INDIRECT INTERESTS BY SECURITY HOLDINGS WILL BE CONTAINED
IN EXHIBIT 2 TO THE SCHEDULE 14A TO BE FILED BY CLINTON WITH THE SEC ON FEBRUARY 17, 2015. THIS DOCUMENT CAN BE OBTAINED
FREE OF CHARGE FROM THE SOURCE INDICATED ABOVE.
[Clinton Group Letterhead]
February 16,
2015
Campus Crest Communities, Inc.
2100 Rexford Road
Suite 414
Charlotte, NC 28211
Attention:
Board of Directors
Gentlemen:
I write on behalf of Clinton Group, Inc. ("Clinton Group"), the
investment manager of several funds and partnerships that
collectively own a stake in the common stock of Campus Crest
Communities, Inc. ("Campus Crest" or the "Company"). We have
continued to accumulate shares of Campus Crest, and maintain our
belief that under leadership of a qualified executive team and
focused Board of Directors, the Company's operations can be turned
around in short order, the Company can restore its growth
trajectory and pipeline, a cohesive and effective corporate
strategy can be implemented, and most importantly, shareholder
value can be enhanced.
Clinton Group filed a nomination notice on December 15, 2014 stating our intent, as
supplemented, to nominate four candidates to the Company's Board of
Directors ("Board"). Since then, we have had three
conversations with Mr. Kahlbaugh regarding our desire for change at
the Board, with no progress to an amicable solution.
Furthermore, since alerting the Board of our current plans last
week, we are disappointed the Board elected not to engage us in a
constructive manner. We believe that the Board is
responsible, and should be held accountable, for the years of what
we see as operating miscues, abuses of power and corporate waste
amongst the Company's executive team, failed operating strategy,
and, most importantly, value destruction that began almost
immediately since the Company's IPO.
I will not use this letter as an opportunity to detail the case
for significant change in the corporate leadership of the Company
(in fact, no permanent executive leadership exists as the Board
terminated the executives of the Company in November 2014 with apparently no plan in place
for day to day executive management), as I believe a cursory view
of the public information and empirical evidence on financial and
stock price performance would make obvious the facts that speak for
themselves. In forthcoming proxy materials, we will expound
in great detail on all the missteps of the Company overseen by the
Board of Directors. And we will expose what we see as a lack
of leadership and strategy both in the executive suite and at the
Board of Directors itself, severely lacking management and board
governance and approval processes (as evidenced by questionable
site selection and construction practices), weak operating
procedures, all of which (and much more) has led to operating
results that fall well behind the Company's peers. The Board of
Directors, the majority of which has been in place since the IPO in
October 2010 has overseen shareholder
value destruction of 43% since the IPO. All the while, the
Board has lavished the Company's executives with luxury sports cars
(the Maserati and the Tesla are the ones we know about) and
excessive use of private aircraft from a related party. In
addition, we will raise questions about the other related party
insurance transactions between Fortegra and CCG, the low stock
ownership of the Board, and lavish corporate spending.
Instead, I will use this letter to build a framework for the path
forward.
In the course of our due diligence and meetings with various
management teams in the student housing sector, we have come across
an exciting company in the space, Campus Evolution Villages, LLC
("CEV") and come to know its two co-founders, Andrew Stark and Evan
Denner, Chief Executive Officer and Chief Investment
Officer, respectively. Campus Evolution Villages was founded
in late 2011 and, today, manages over $500
million in assets in student housing and owns and/or manages
approximately 10,000 beds today from San
Diego, California to Clemson,
South Carolina. The executive team is a change-agent in the
industry and has the proven track record, experience, relationships
and ability to innovate and succeed. They have deep
experience in managing operating businesses, both private and
public, during periods of major change including high growth,
movement to public company status and complete
reorganizations. Campus Evolution Villages is currently
funded by two very prominent and well-respected real estate
families in North America and a
leading multi-strategy hedge fund. We have studied their
operating strategy and their acquisition and development strategy,
and their ability to execute bears results in their strong
financial metrics at the property level, superior growth profile
and return on invested capital to their shareholders.
Campus Evolution Villages has had tremendous success turning
around sub-performing assets in markets with similar
characteristics to those of CCG. In December 2012, CEV acquired a 924 bed
asset. At the time of acquisition the property had an
approximate 82% economic occupancy rate, provided over $400,000 in resident concessions and had a very
poor market reputation. Subsequent to acquiring the property,
CEV replaced the entire on-site management team and began its
top-down leadership and brand building, with culture immersion and
training; a philosophy that has separated CEV from its peers.
CEV enhanced the resident composition, implemented a
multi-million dollar renovation program, and began building
relationships with the student population and university
officials. The asset achieved over 94% occupancy by the time
classes began for the 2014/15 school year and is now a leader in
the market.
In December 2012, CEV acquired a
432 bed asset. At the time of acquisition, the occupancy was
approximately 84%, the asset had an incredibly poor market
reputation, above market expenses, extremely high bad debt expense,
and the university it served would not work with them.
Subsequent to closing, the entire management team was replaced
(with employees trained in the CEV brand philosophy), expenses were
reduced, and after creating relationships with the university and
laying out and proving the CEV brand philosophy, the property is
now the go-to off-campus student housing community for the
university.
The cohesive CEV management team has years of experience in all
disciplines and aspects of student housing and strong industry
relationships, allowing them to successfully complete the most
challenging opportunities. We are confident we can deliver
this management team and the acquisition of their management
company to Campus Crest at market terms attractive to Campus Crest
shareholders. Let's look at the benefits.
Immediate Solution to Executive Management and Stabilization
of Operations
Upon the election of a reconstituted Board of Directors, we
would propose that Messrs. Stark and Denner immediately be hired to
occupy the executive suite of Campus Crest and bring with them
their cohesive, in-place team of operating executives. The
new management team of Campus Evolution Villages will adapt its
property level strategy to Campus Crest and work with existing
employees to ensure a seamless transition to Campus Evolution
Villages' best practices and proven operating processes and
procedures. Shareholders will see that Messrs. Stark and
Denner are not only operators but significant equity owners in
their own business, and this governs their approach to managing
discretionary expenses and preserving every dollar. We look
forward to further articulating our six-month plan upon transition,
with its stabilization of current operations, improvements in the
marketing of the Company, and proper positioning of the
Company in the critical current pre-leasing period. In
addition, Campus Crest would benefit from Campus Evolution
Villages' contributed stream of management income which is
accretive to shareholder value.
Restoration of a Path to Growth
As important to a stabilization and rehabilitation of the
Company's operations is our group's ability to deliver a path to
growth and development to Campus Crest. Should our nominees
be elected to the Board, we are confident in the ability to
negotiate a right of first offer or call option on the managed
assets of Campus Evolution Villages owned by its affiliates,
effectively putting in place a pipeline to Campus Crest for future
growth. This block of student housing assets represents a one
of a kind proprietary opportunity. Shareholders of Campus
Crest should not only benefit from the accretion from the addition
of these properties, but also achieve equity returns from a
restoration of a growth-oriented valuation multiple to the
Company's stock.
Equity Capital for Development and Acquisitions
The equity investors of Campus Evolution Villages are keen to
follow their team and invest in Campus Crest at mutually agreeable
terms. An investment could take multiple forms, such as a
holding company equity investment in common stock to shore up the
balance sheet and position the Company for growth. We are
confident we can put together an equity or JV financing in excess
of $100 million, and would offer
existing shareholders the ability to participate in such an
attractive opportunity for their new capital and existing capital
invested. Such a JV would fund the acquisition of properties
allowing for additional current management income for Campus Crest
and further add to the pipeline of assets to be acquired at a later
date. Rather than the current Board's recent liquidation
of development parcels at distressed prices, Clinton Group and the
investors of Campus Evolution Villages would have been interested
to fund a joint venture as noted above with Campus Crest to develop
these parcels of land off-balance sheet and at no liability to
Campus Crest coupled with a right of first offer or call option to
Campus Crest upon completion and stabilization. However,
without focus on the quality of each location, each market or
potential profitability to its shareholders, the Company sold
all of the land assets; in our opinion an inferior
and misguided decision, stripping shareholders of future pipeline
and revenue streams. We urge that Company not to take
such rash decisions with respect to any of its other current
assets, including, the assets owned with Harrison Street so that shareholder value may be
preserved.
A Refocused Board of Directors
Our slate of nominees is complementary to our proposed
reconstituted leadership of Campus Crest. Our nominees
possess the requisite student housing executive leadership skills,
real estate operations expertise, private equity expertise and
financial market expertise to assist a reconstituted executive team
in executing its strategy.
The aforementioned benefits are central to the overall vision of
what our group is seeking to implement immediately – to
make Campus Crest a dominant player in the student housing
industry, not a laggard. This requires operating
expertise and a path to growth, both of which require an executive
management team and a Board of Directors that is qualified and has
the requisite expertise. Simply put, our plan addresses
all the issues of Campus Crest today.
We are sending this letter to the incumbent Board of Directors
now as we believe a costly and distracting proxy contest should be
avoided for the benefit of Campus Crest's shareholders. In
our last two proxy contests in which we sought and prevailed in
replacing a majority of directors, Stillwater Mining, Inc. and
EVINE Live, Inc. (fka ValueVision Media, Inc.), management and
incumbent directors spent $4.3
million and $3.5 million,
respectively, on defensive and entrenchment endeavors. Our
expenditures were a fraction of those amounts, as we were spending
our own money and not the shareholders', and the proxy contests
ended in decisive votes in favor of Clinton Group's
nominees.
We are available if the incumbent Board of Directors would like
to have a meaningful discussion, but we continue to ready our proxy
materials and shareholder communications. We plan to
encourage other shareholders to contact us to find out more about
the details of our plans and the expertise of the players involved
and will further encourage them to speak their minds to the
Company's existing leadership.
We ask that you examine carefully the facts and circumstances of
the current situation, and we hope that you recognize that the
failures of the incumbent and previous leadership cannot continue,
and it is now time for change for the benefit of all of your
shareholders.
Sincerely yours,
//ss//
Joseph A. De Perio
Senior Portfolio
Manager
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SOURCE Clinton Group, Inc.