Student Housing appears on the surface to be nothing more than an apartment targeted to a niche population. However, from both an investment and operations perspective, the nuances are critical. The investment thesis is a strong one from the perspective of a growing demographic, an education intensive economy, which provides solid defensive fundamentals—with consistent rent growth in the 4-6% range. Limitations on state budgets, once a boon to off-campus housing development, has now become the driver of public-private partnerships to revitalize on-campus housing facilities. Debt financing from the GSE’s at +250bp over the 10 yr US Treasuries at ~60-65% leverage, provide equity investors with prospects for attractive current yield and capital growth. At the same time, Student housing (whether on or off campus) is operationally intensive, with a critical focus on the living experience which directly influences pre-leasing pace, and the pre-leasing curve’s pace determines whether the investment potential is realized.
Our experience in this sector covers operations (revenue management, marketing, human resources, and cost reduction), university relations, development, and management of the debt/equity capital stack. Execution of a EBITDA enhancement program for a client enabled coverage of fixed charges, return of cash distributions to investors, growth of third party management contracts to cover off-site management infrastructure, and ability to pursue public-private new development partnerships.