Student housing is simply not subject to the same macro-economics that
other sectors of real estate are, says Bill
Bayless, president and CEO of Austin,
TX-based American Campus
Communities, the nation’s largest and
first student housing REIT. Instead, he
says, it’s driven by supply and demand
in each market.
“Student housing is on investors’
radar screens because typically inves-
tors look for one of three things: a
growth play, a defensive play in down
times or a value play,” he says. “Student
housing is the only real estate invest-
ment I’m aware of where all three are
simultaneously taking place.”
Bayless says throughout the down-
turn, ACC continued to see rental rates
and same-store NOI growth when all
other real estate sectors faltered. “It has
the benefit of resiliency in down times
and it’s a value play, so it has become
very attractive to the institutional Wall Street investor,” he says.
Backed by strong demographics and trends, the sector is
anticipated to continue to grow and offer more opportunities at a
time when other real estate sectors are overinvested or over-
priced. “You haven’t had the overbuilding and fluctuation in
demand in student housing that you’ve had in a lot of other prop-
erty types,” says Jim Adams, managing director and market leader
for the Houston office of Grubb & Ellis. “So it’s a little more stable
and predictable.”
Adams adds, “You can take a snapshot right now of a university
and see how many dorms are on- and off-campus. It’s much easier
to define the market, so it’s easier to analyze.” He says complexes
that are closest to campus and have more amenities are perform-
ing best.
In 2010, 42 transactions closed totaling just under $1 billion in
assets, according to CBRE. While sales were up from 2008 and
2009, it’s still a drop from previous years. However, student-hous-ing investment sales are increasing in 2011, and as debt and
equity capital is more available to qualified investors, transaction
volume will continue to rise.
Most investors are looking for class A properties with high barriers to entry in prime locations. Buyers want close proximity to
campuses and newer properties providing stable cash flows are the
most attractive.
Tramuto says many institutions entering the sector want to be
affiliated with top schools in major metropolitan markets, such as the University of
Southern California in Los Angeles, the
University of Miami and North Carolina
State University in Raleigh, NC. Although
they’re drawn to student housing, the
institutions “don’t want to get too far away
from what they’ve done in the past, so they
want to be in major markets,” he
explains.
Most of the transaction activity is occur-
ring in the Sun Belt area, Reid says, and
that’s typically where much of the develop-
ment is also occurring. This area stretches
from the Mid-Atlantic down through
Florida, across Texas and Arizona into
California.
Typically investors look
for one of three things: a
growth play, a defensive play in
down times or a value play. In
student housing, all three are
simultaneously taking place.”
BILL BAYLESS
