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Preferred Apartment Communities Exits Student Housing With $478M Sale To Private Equity Giant

Preferred Apartment Communities has inked a deal to sell its student housing portfolio of more than 6,000 beds to TPG Real Estate Partners for $478.7M. The buyer is part of the real estate arm of private equity investor TPG, which has about $83B of assets under management.

The 679-bed NxNW in Tallahassee, Florida, one of Preferred's student housing properties.

The portfolio includes eight student housing properties in Arizona, Florida, Georgia, North Carolina and Texas. The largest of the properties is Knightshade, an 894-bed student housing community in Orlando, while the smallest is The Bloc, a 556-bed property in Lubbock, Texas.

The health of the student housing market during the coronavirus pandemic is a mixed picture. Some major owners report reasonably high levels of leasing, especially for off-campus properties.

“Leasing has gone really well, we’re actually ahead on a year-over-year basis,” CA Ventures Executive Vice President Sean Zasche told Bisnow in August. The company owns about 22,000 units nationwide.

On the other hand, some major student housing markets are reporting higher than usual vacancy rates as fewer students see the need to live near campuses they will not be visiting that much.

In Boston, about 13,000 of the market’s roughly 250,000 rental units were still available as of Sept. 1, according to data compiled by the Boston Globe, an unusually high number that reflects a lower influx of students than is usual at this time of year. Rents are also down.

The delinquency rate for CMBS loans associated with student housing reached a record high of 13.66% in July, much higher than the 2.19% rate for all other multifamily, Trepp reports (delinquent in this case meaning more than 30 days past due). In August, student housing delinquencies slipped to a still-elevated level of 13.06%.

In any case, Preferred asserts that the deal is more about refocusing its attention on standard multifamily properties, rather than the current state of the student housing market. 

"This is consistent with our previously stated objectives to exit the student housing space, simplify our focus to our core Sunbelt multifamily business, and improve our balance sheet," Preferred CEO Joel Murphy said in a statement.

Atlanta-based Preferred's total holdings include about 100 properties, mostly multifamily, though it also owns office buildings and grocery-anchored shopping centers.

TPG Real Estate Partners is the equity investment platform of TPG Real Estate, the real estate arm of TPG. Its real estate debt platform is TPG Real Estate Finance Trust. An investor consortium led by TPG owns a majority interest in real estate services giant Cushman & Wakefield, which it took public in 2018.