January 9, 2015

How Canadian Olympians are Changing
The Student Housing Game

Purpose-built student housing is a proven asset class in the US, but it's been slower to take hold north of the border. A pair of Canadian Olympians is working to change that. We take an inside look at their strategy.

Podium Development Corp's Oskar Johansson and Bernard Luttmer—former Olympic sailing team members who competed in Athens in '04 (Oskar's pictured left at the closing ceremonies, with sailing silver medalist Mike Wolfs and Bernard)—have launched University Suites, a 399-unit student housing condo project that's 500 meters from Queen's University and downtown Kingston. The complex is aimed at attracting students and local professionals.

With a competitive job market leading more people to return to school in pursuit of additional degrees, there's an opportunity to target mature students and faculty members with higher-quality, investment-grade housing options, Oskar tells us. The project is by PRK Developments, a JV between Podium and Reichmann International Development (Brookfield Multiplex is the construction manager; Kingston-based Varsity Properties will manage the property). University Suites will have a gym, study areas and 17k SF of ground-floor retail. (Suites come with an option for a three-year leaseback, making the condo units a turnkey investment.)

Podium has been in the development game for the past 10 years, with projects across Ontario, most of them student housing focused. Now the firm is looking to expand into the greater Toronto area. It's secured several properties here, notes Bernard (snapped with Oskar at the University Suites sales center in Toronto), and will soon have product coming down the pipeline. Privately developed student housing may be an emerging asset class in Canada, but Oskar predicts “we'll see a lot more purpose-built investments around universities and college in the years to come.”

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Uncertainty and a lack of perm financing didn't bother Nimes Capital as it purchased The Ballpark, a student housing apartment complex serving the University of Texas. Walker & Dunlop managing director of multifamily finance Will Baker (here with his wife Susannah and six-month-old daughter Annie on a trip to Turks and Caicos last week) arranged the acquisition loan and tells us it was a unique and challenging deal—Nimes purchased the asset out of foreclosure in a stalking horse auction. It was awarded the deal after a full sales and marketing process by FourPoint Investments, but because it could've gotten outbid on the courthouse steps, it couldn't secure permanent financing.

Walker & Dunlop provided a short-term bridge loan on its balance sheet so Nimes could secure the deal, and simultaneously worked on a perm loan from Freddie Mac. Once the auction was closed, Nimes was able to lock in that $23M, non-recourse 10-year loan. The Ballpark was built in 2000 and has 768 beds. Will believes 2015 will be a good student housing year overall, and both agencies are increasing student housing allotments and reducing pricing for the sector to be more like conventional multifamily.


How Dr Dre is Educating Steinberg

Architectural juggernaut Steinberg has recently finished up two LA projects in a field you may not expect: educational real estate. Associate principal Joe Sion tells us the firm designed a reno of a UCLA student housing project originally built to accommodate members of the 1984 Olympics. The $17M project by contractor Icon West included what Joe calls a complete re-skinning of the 79k SF structure with a modern design, including new bathroom fixtures and flooring, new windows and a whole new exterior look in the classic UCLA colors.

The four-building, 81-unit complex is set up into a series of two-bedroom suites, which can house four or five students with a shared bathroom. Also as part of the project, Joe tells us the firm designed a new 5k SF commons building, which replaced an old adjacent structure that was torn down. The new room is designed around student collaboration, with meeting areas and a kitchen. Don't worry about academics; it's got a quiet room too.

Also for the new fall semester, Steinberg oversaw the completion of The Garage, an innovation lab on the fourth floor of the Ronald Tutor Campus Center at USC. The project stems from the massive $70M donation made to the school by music industry icons Jimmy Iovine and Andre Young (you may know him better as Dr. Dre). Director of client development John Wirfs tells us the 9k SF space is geared toward collaboration, with classrooms and what he calls maker spaces, where students might create a graphic prototype on a computer. John says chic educational product like this is growing in the market.

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Student Housing's Influence on Multifamily Design

Student housing is changing the way multifamily projects are doing business, says Allen Matkins partner Matt Fogt (here, moderating a Bisnow event in Orange County, CA). The drive to include better amenities is something of an arms race; large communities have everything, while smaller ones have trouble keeping up. Developers have to provide a level of amenities at or better than their competitors in the same submarket, and it isn't just pools and gyms and other features--it's about creating a lifestyle. Today's renters expect it. Student housing is actually leading the way, since expectations are set when residents are students. When those graduates come to the rental market, properties have to offer similar sorts of amenities to compete, he says.

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