Foreign Capital Floods Into Student Housing
Foreign dollars are flowing into student housing like never before. For example, Campus Apartments’ just closed a $400M fund with one-third of the dollars coming from new foreign investors. Come hear all about it at BASH—Bisnow’s Annual Student Housing Summit—in Philadelphia on June 1 and 2. And read on for a sneak peek from three of our executive speakers.
Campus Apartments CEO David Adelman tells us his $400M fund has $1.2B of buying power. The team has already started acquisitions, focusing on well-located Class-B product that Campus Apartments can rebrand and renovate. David says the student housing industry has done a great job of promoting itself, showing its steadiness through the recession and making the case as its own institutional asset class. That’s driving the huge influx of new investors to student housing. And that goes beyond the traditional entry from the multifamily market; David tells us a lot of his investors had never participated in real estate at all.
Many of Campus Apartments’ foreign investors (especially from Korea and Hong Kong) were double whammies—they’d never financed in student housing or in the US. Asia and the Middle East were a big chunk of David’s $400M fund—he’s been to Asia twice in the last eight months to target capital there and build relationships. (He snapped the photo above in Hong Kong.) He believes Korean and Japanese investment will continue to grow as a source of capital and gain market share. They see US student housing as a flight to quality and safety. It’s great news for the industry, David says.
The three- to five-year horizon is lining up well for student housing, says EdR CEO/chairman Randy Churchey. His 2015 pre-leasing is 150 bps ahead of leasing velocity, and he’s seeing 3% average same-store rent increases (every property in his portfolio got a bump this year). EdR’s markets are enjoying 1.5% enrollment growth coupled with constrained supply growth of the same or lower rate. From conversations at Interface last week, he believes that’s pretty typical in the industry right now.
The modernization of student housing (students moving to newer product) is a big tailwind for the industry, Randy says. Right now, 25% of beds are owned by universities, 25% are purpose-built high-quality product, and 50% are single-family or older/lower-quality “student ghettos.” Randy (pictured left with ACC CIO William Talbot) believes modernization is equally important on- and off-campus because both contribute to the ambiance of the university, which plays a role in where students decide to go to school. (Modernized campuses have been seeing elevated enrollment growth.) There’s been a great deal of talk about the benefit of PPPs between universities and private developers on-campus (lower costs for the school and lower risk for developers), but Randy tells us universities aren’t embracing off-campus housing relationships as much as they should.
The Collier Cos plans to build in all three big Florida college towns this year, founder Nathan S. Collier (not to be confused with his son) tells us. The firm is in the ground now with an urban project at the University of South Florida in Tampa; it’s about to deliver a 160-bed property expansion in Gainesville (a 15-minute walk from the University of Florida) and is designing an urban project in Downtown Gainesville; is in for permits to build 300 units in College Park just north of UF; and is looking at a HUD deal in Jacksonville. While most developers in those markets are doing huge four-bedroom, four-bathroom units, he’s looking to include a significant number of one- and two-bedroom apartments, a very underserved market segment of late. Above, Nathan teaches a case study module at The Nathan S. Collier Master's of Real Estate Program at the University of Florida.
Three of those projects are urban. The USF property (rendered here) has 656 bedrooms in a five-story building. It’s right by the Tampa medical center and Jay hospital on Bruce B. Downs Boulevard, an area that hasn’t seen much new student housing development lately. (Collier tore down a 40-year-old community to make room.) It’ll be a quiet property, Nathan tells us, because he expects to primarily house nursing and doctoral students and medical staff. The Downtown Gainesville project is another one that’ll target an older resident base—graduate students and young professionals. It’ll be by Innovation Square (UF's answer to Silicon Valley) on the site of an old nightclub, and Nathan says no one’s building anything like it nearby.
David, Randy and Nathan are three of more than 20 speakers at BASH. To join them and hundreds of student housing professionals in Philadelphia on June 1 and 2, register now!