Can CHC Student Housing rise from the ashes to become one of Canada’s premier student housing owners?
Founded in 2012 by Craig Smith, CHC Student Housing is one of Canada’s early purpose-built student housing firms. Through two investment vehicles, CHC acquisitions included stakes in eight, high-quality student housing assets in major university markets throughout Ontario. In November 2013, CHC became the first student housing public company listed on the TSXV.
Unfortunately, sometimes being ahead of the curve has its consequences. In 2014 and 2016, two separate public offerings to raise additional capital failed, which threw CHC into a period of turmoil. In early 2018, Simon Nyilassy of Marigold and Associates was hired by CHC to stabilize the company and evaluate future options. To date, CHC has been able to refinance debt obligations and dispose of smaller assets, which has helped to stabilize the portfolio’s cash flow.
Nyilassy, who now serves as CHC’s President & CEO, attributes the company’s growing pains to a persistent view that student housing in Canada remains an emerging real estate sector.
Today, CHC is beginning to explore new opportunities which may include raising additional capital and/or teaming with a strategic partner who shares the company’s vision of becoming Canada’s preeminent purpose-built student housing owner and developer.
To further explore CHC’s experience and goals moving forward, Simon Nyilassy agreed to answer the following questions:
SL: What’s behind CHC’s desire to build a student housing platform?
SN: Canada lacks a market leader in purpose-built student housing. This is in stark contrast to other international markets such as the United States and United Kingdom, where an explosion of development has taken place over the past few years. Our board member Craig Smith saw the potential of this nascent sector in Canada. He laid the groundwork to capitalize on it through the creation of two investment vehicles, which have invested in high-quality assets in Southern Ontario.
SL: Can you provide a brief history of CHC’s ups and downs?
SN: CHC got off to a strong start in the early part of this decade. Of the two entities mentioned, CHC LP, a private limited partnership, was formed in April 2012 and acquired a 50% interest in four high-quality purpose-built student housing assets in three markets in Southern Ontario. Subsequently, CHC Student Housing Corp, the other entity, was incorporated In April 2013, and by early October, it had acquired four assets in major university markets. On November 23, 2013, CHC became the first public company in the student housing sector by listing their shares on the TSXV.
To further its expansion strategy, CHC filed a follow-on Public Offering in 2014 to raise $92.5 million for the purchase of several properties in Southern Ontario and Quebec. These properties included the 50% ownership of the CHC LP assets. However, this transaction proved to be too ambitious for the Canadian capital markets at that time and the offering was pulled when the underwriters failed to raise sufficient funds to complete the acquisitions.
In spite of these initial setbacks, CHC and others continued to have confidence in the sector. In 2016, Dundee Special Purpose Acquisition Vehicle created a new public company, called Canadian Student Living, to buy the assets of CHC LP, CHC Student Housing Corp and various other assets. They filed an Initial Public Offering to raise $112.3 million to fund this purchase. When Dundee was unable to convince the principals and investors to convert their ownership stake into shares of Canadian Student Living, the transaction fell through after a year.
SL: Where does CHC stand today?
SN: In early 2018, CHC hired Marigold and Associates to implement a strategy to stabilize the company and evaluate future options. To date, Marigold has helped CHC to refinance all of its debt obligations and complete a disposition of a smaller property. These moves have allowed the company to stabilize cash flows and provide a base from which to implement future options for CHC Student Housing Corp.
SL: Are rumors true that you’re planning an upcoming roadshow to raise funds for CHC?
SN: Raising additional capital and/or finding new partners are definitely options. The exact nature and timing of any capital raise will be subject to many factors and any details will need to be announced in the appropriate manner for a public company.
SL: Is the timing right now?
SN: CHC owns high-quality assets and also enjoys a strong operating team. Also, the interest in the sector appears to have intensified in the last few months
SL: Who is your ideal partner to grow CHC?
SN: To fully capitalize on the potential for the sector requires a well-capitalized investor who shares our vision for the opportunity to create the market leader in Canadian purpose-built student housing and who has the longer-term time horizon necessary to achieve that goal.