NEW YORK — Clinton Group has launched a proxy contest for the board of Campus Crest Group (NYSE:CCG), and has named Campus Evolution Villages as its proposed management partner for the REIT should it gain control. In a letter to Campus Crest’s board of directors sent Monday and made public shortly thereafter, Clinton announced its intentions to launch a takeover bid for the board of Campus Crest, enlisting support from other investors. Clinton is a fund management firm whose funds have a collective stake in Campus Crest Group.
Over the past few months, Clinton Group has actively encouraged the Campus Crest board to make changes at the company. Clinton outlines in its letter a plan for new management, with Campus Evolution Villages named in that role. Under Clinton’s plan, CEV would bring its entire management team to the table with CEV founders and principals, Evan Denner and Andrew Stark, being placed in executive management roles at Campus Crest. Clinton notes that since CCG’s IPO, the stock is down 43 percent. The letter is also critical of the fact that since the board effectively took management control of the REIT in November 2014, it has not put forth a management team with student housing expertise and relationships.
CEV has become quickly known in the industry as turnaround experts, acquiring more than 10,000 beds over the last three years. Reached by phone Tuesday, company principals Stark and Denner discussed the proposal with SHB.
“Campus Crest has a portfolio of assets that can benefit from our management philosophy. We have spent a lot of time building a student housing brand and can bring best practices to Campus Crest” says Stark. “The company is missing a key need: student housing experience at the helm. This is a hands-on, intensive management business where you truly have to manage by the day and where pennies count, as owners and singularly focused student-housing managers we do this every day.”
Denner and Stark both reiterated that, like Clinton Group, they see the need for change at Campus Crest.
Meanwhile, Campus Crest announced Monday that it has named Aaron Halfacre, the company’s chief investment officer, as president of the company, and the board has authorized the company to explore strategic, operational and financial alternatives. The company acknowledged on Tuesday that it had received a number of inquiries from qualified parties interested in a transaction. It has engaged financial adviser Moelis & Co. and law firm Kilpatrick, Townsend & Stockton to evaluate all potential transactions.
On Tuesday, the company acknowledged the action from Clinton Group, stating that it has held discussions with Clinton and CEV, and encouraged them to participate in the company’s process of exploring strategic alternatives.
Analysts from MLV and Wunderlich issued reports early Tuesday morning, with both pointing favorably at the Clinton proposal that contained established student housing management. In his report, in response to CCG’s announced plans to review strategic options, MLV analyst Ryan Meliker says “While normally we would view this type of news favorably, we question the sincerity of the plan given the timing of the announcement and our view that a buyer is unlikely to offer a price materially above where the stock is trading.” He continues, “Clinton Group announced a partnership with Campus Evolution Villages (CEV), providing an opportunity for CCG shareholders to have a management team with a clear focus on student housing operations and providing a built-in acquisition pipeline to grow CCG.”
Analyst Craig Kucera of Wunderlich Securities shared a similar opinion, “We believe CEV management’s focus on brand, processes, and procedures, as well as a portable team is what is needed for CCG at this point.”
Campus Crest is scheduled to hold its fourth quarter earnings call next week; with these events certainly to be at the forefront. One analyst has already raised his recommendation from hold to buy based on the Clinton Group proposal. Campus Crest stock was up 11 percent on Tuesday, to $7.83.
In the halls at the NAA Student Housing Conference, being held in Las Vegas, chatter and speculation could be heard all day about the proposal, as well as the fact that the proxy bid — the industry’s first — is another growth sign for the industry.