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Campus Crest Attracts Investors But Performs Poorly Because of Inexperience On Its Management Team

Posted on the 24 October 2012 by Rogershuler @RogerShuler

Campus Crest Attracts Investors But Performs Poorly Because of Inexperience On Its Management Team

Paula Poskon

Campus Crest Communities, which has four student-housing properties here in Alabama, stumbled out of the gate as a publicly traded company because of inexperience in its executive ranks, a Wall Street analyst tells Legal Schnauzer.
Paula Poskon, of Robert W. Baird and Company, expressed confidence that new blood on the management team will help Campus Crest right the ship. But she said the company's emergence as one of the country's three publicly traded student-housing REITs (Real Estate Investment Trust) has not been without growing pains.
We have reported extensively on Campus Crest Communities, mainly because of CEO Ted Rollins' central role in an Alabama divorce case that we have deemed the worst civil cheat job in our experience. Poskon said the investment community generally is aware of, and somewhat concerned about, the nasty nature of Rollins' divorce. But that has not kept Wall Street from supporting his company to the tune of more than $400 million, including a $380-million IPO that was completed in late 2010.
Our conversation with Poskon touched heavily on the ugliness in Ted Rollins' background, and the interview went in some extremely interesting directions when that subject came up. We will provide details in a series of upcoming posts. But first we asked Poskon about Campus Crest's performance as a business entity, its place in the student-housing sector, and Robert W. Baird's role as one of about a half dozen underwriters on the IPO.
Baird is an investment bank, and Poskon is a research analyst covering Campus Crest. "I like to call investment bankers the dating service of the financial world," Poskon said. "They essentially do one of two things. When companies are in a growth mode and need capital . . . [the bankers] go find capital partners. . . . The other thing the bankers do is when companies want to buy and sell divisions or entire companies they go to the M and A departments, mergers and acquisitions. So I think of the bankers as matchmakers." (See first video below.)
Campus Crest joins two other publicly traded REITs that specialize in student housing. American Campus Communites, based in Austin, Texas, is the "best in class" player in the market, followed by Memphis-based Education Realty Trust. Campus Crest is the new presence in a market that has been in the public sector for only about a decade, with many private companies jockeying for position.
How has Campus Crest performed since going public? Well, not so great. (See second video below.) From Paula Poskon:
They had a very big series of missteps, post-IPO. They were optimistic in their projections, in their forecasting. They closed in October 2010, and their first earnings call was in March 2011--and it was a complete disaster. They missed on every line item . . . and the stock was off 25 percent. It gets back to [Mr. Rollins] not having been a public CEO before, and it's a small company . . . No matter how much advice you get, you are always amazed how consuming the IPO process is. . . . It's grueling, and if don't have lot of excess corporate bandwith on your team . . . it's easy to take your eye off running the company, and I think that's a good part of what happened.

Poskon does see hopeful signs for Campus Crest:
What they learned from that is that they needed more senior-level talent and made some key hires and revamped some processes, learned lessons about what is important to the Street, how to communicate with investors and analysts like myself. . . . I think they are in midst of turning it around. I've spent a lot of time with those guys, been out on the road. I think they are going to turn it around, but there is a lot of investor skepticism in this environment.

How does the ugliness in Ted Rollins' background sit with investors? "I am aware of the unpleasant nature of his divorce," Poskon says. "I would say he is challenged from a personal-reputation perspective. Does that matter? Sure. Perception is reality for most investors."
Poskon said she asked Rollins about his divorce and received an answer that calmed her nerves. "It's not a big concern for me at the moment," she said.
Her tone changed when I shared details that Ted Rollins has not made part of the story he shares with Wall Street.
More on that coming soon.
Note: A condensed version of this article appeared yesterday at Seeking Alpha, one of the country's top Web sites for business news.

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