Charlotte-based Campus Crest’s CEO Ted Rollins and its chief investment officer Mike Hartnett have known each other since they were graduate students at Duke University. Though they went on to other careers after graduating (Rollins in investment banking and Harnett in engineering), housing brought them back together. In April 2004, they started Campus Crest and grew at a rate of 93 percent compound annual growth per year. The company builds off- and on-campus with a lifestyle-focused operation, providing students with ample recreational and community service activities.
On Oct. 15th, Campus Crest became the first multifamily/student IPO to make it through to Wall Street in this cycle. That’s no small feat, since a lot of companies have explored the possibility of going public. Campus Crest CEO Ted Rollins took some time to talk with Multifamily Executive senior editor Les Shaver about this latest venture.
MFE: What prompted your IPO?
ROLLINS: We had a plan early on in the company lifecycle that it would make sense to access public markets given the scale of the operation. It was important for us to get the scale that was necessary in order to make it an alternative. As we got into the 2008 timeframe, it became apparent, going forward in the new economy, that you had to basically have a lot lower leverage and more equity. Our focus was to put our balance sheet in a lower leverage position with continued access to capital. The public offering was the natural next step to do that.
MFE: Why not bring in more private equity?
ROLLINS: Private equity likes to be higher leveraged. The public equity is more suited for lower leverage. Right now, we’re just a tick under 26 percent debt-to-enterprise value. We want to operate in the 40 percent to 45 percent range. I think private equity wants to be above that. Our vision for the lower leverage precluded going forward in the private market.
MFE: How has being public changed your operations and internal systems?
ROLLINS: We hired a chief financial officer in 2008 who had public market and public accounting experience. When we decided to make the switch back in 2008 from an individual high-net worth investor to institutional investors, we put a lot of those systems in place. Quite frankly, that’s how we ran our business from the beginning. Mike and I are very focused on managing to metrics. It’s pretty straight down the fairway stuff.
MFE: Are you planning to grow into new markets?
ROLLINS: We’ve always had pretty good growth plan. The company started off in the Southeast, but quickly grew out to Texas, the Pacific Northwest, the Mountain States, and the Central States. We’ve finally broken into New England. And we have a robust development plan to be active in all of those areas. We have started seven new projects for this cycle. We plan on delivering another seven next year.
MFE: Are the projects in new places?
ROLLINS: We added two new states—Iowa and Missouri. The others are in states where we currently have projects. They’re all within our management clusters. We evaluate our pipeline and overlay its existing projects and try to expand the management clusters.
MFE: Are there new markets you want to go into down the road?
ROLLINS: I think you’ll see us go into California. You’ll see us into Florida. You’ll see us go into the Northeast. We’ve always grown organically versus through acquisitions. We’ll continue to grow but at a smaller clip given to context of the public markets in managing risk. We still have our joint venture partners, Harrison Street, with which we continue to do joint ventures. It’s business as usual, except that we have more continual access to capital and substantially lower leverage.
MFE: How do you distinguish yourself from the other student housing companies out there?
ROLLINS: We are vertically integrated in that we own the delivery model to build the product and we own the prototype. We own the general contractor, we own the supply company, and we own the developer. Those three things enable us to build a better product at a better cost, and over time, to build a better yield on return on those assets.
MFE: Would you expand beyond student?
ROLLINS: We’re always looking opportunities. However, the student opportunity is the one we’re focused on at this time.