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Investcorp Pays $90M For Student Housing Complex Near Kennesaw State

A Middle Eastern global investor has targeted student housing in Kennesaw, Georgia, for its latest U.S. acquisition. 

West 22 student housing campus near Kennesaw State University

Bahrain-based Investcorp paid $89.7M for West 22, a 245-unit, 850-bed student housing complex near Kennesaw State University, the Atlanta Business Chronicle reports

New York-based Vesper Holdings sold the complex on Cherokee Street 2 miles west of the KSU campus, which was home to more than 45,000 students as of this fall.

Vesper had acquired the 10-year-old complex seven years ago in a $250M purchase of a portfolio of eight student housing complexes across the U.S. from Heitman.

Investcorp is financing its purchase of West 22 in part with a $61.7M MetLife Investment Management mortgage, which matures in November 2026, the ABC reported. It had previously focused on acquiring industrial properties, amassing a portfolio of dozens of Atlanta-area warehouses in recent years, according to the ABC.

The Bahraini private equity firm is among the major institutional investors who have been turning to student housing to deploy capital, drawn by higher rent growth and demand than traditional apartments, especially properties located in the Sun Belt.

More than 90% of beds tracked by Yardi Matrix were pre-leased for the fall term as of July, up 4.6% from the previous month. Rents are projected to grow 7.1% this year as occupancy is projected to reach around 96%, according to Yardi Matrix. Both figures are ahead of traditional multifamily, where rents have flattened amid record levels of construction. 

“The sector is in prime position to weather a potential recession, with solid occupancy and rent growth for the 2023-2024 school year and counter-cyclical demand,” Director of Research Tyson Huebner wrote in a Yardi Matrix report. 

Investcorp's purchase shows investor demand for the property type is still present despite a slowdown in all types of commercial real estate sales.

There were more student housing properties sold in 2022 than any previous year, according to CBRE, and the total investment surpassed $10B for the second straight year. Last year, Blackstone Real Estate Income Trust acquired American Campus Communities for $13B, and then it announced in August that it plans to redeploy $3B more into student housing development and acquisitions. 

Although investment sales for student housing projects were down 73% nationally in the first half of 2023 compared to the same period in 2022, the overall fundamentals for student housing remain strong, according to Yardi Matrix

Strong demand among students, expected to exceed 19 million in the U.S. this year, has prompted developers to continue to build new student housing projects, with 40,000 new beds scheduled to deliver this fall at Yardi’s 200 tracked universities, up from 27,000 last year. 

“Solid preleasing and rent growth suggests much of the supply has already been absorbed,” Huebner wrote in the report.