Commercial Mortgage. “Student housing
can often provide higher returns than
conventional multifamily investments.”
Student housing offers a spectrum of
risk-return profiles, such as university
enrollment size, distance to campus, low- to
high-cost provider, core versus value-add
versus new development. Campus
Evolution seeks a mix of these asset types,
all with value-added components.
“Anyone can look to execute upon a
physical improvement program but the rubber really meets the road through seizing
upon turning around under-managed
properties,” Stark says. “It is hand-to-hand,
day-in-day-out, and through that we can
yield strong returns in a relatively risk-averse
What’s Coming Down the Pike?
The student housing sector is benefiting
from some of the same factors as traditional
multifamily housing: low interest rates and
investors with plenty of capital to spend. As
long as interest rates remain stable, most
industry watchers don’t expect any major
disruptions in student housing—
notwithstanding any black swan events.
“One area we’re watching is the ongoing
increase in online classes, which many pub-
lic companies compare to the old corre-
spondent school phenomena in the 1950s,”
Bobilin says. “Many schools are adding
online programs but it is more of an addi-
tional revenue generator than a business
plan shift. However, we don’t want to dis-
count the long-term effects of this on the
marketplace as it could prove similar to how
Internet-based businesses have disrupted
longstanding bricks-and-mortar businesses.”
Benedetto expects the student hous-
ing space to remain relatively stable.
From a financing standpoint, he predicts
CMBS lenders will continue providing a
greater portion of the financing. “Before
the recession, CMBS lenders were
responsible for the vast majority of stu-
dent housing financing,” he says. “The
GSEs and life companies will likely con-
tinue to lend in the space, but we’ll prob-
ably see the most aggressive financing
come from CMBS.”
Stark has watched as public student
housing companies pulled back on the
acquisition spree—but he sees the public
players coming back to the student housing
market even if it’s at a more restrained pace
and curbed appetite.
“The latter part of 2013 and 2014 has
seen some slowing in activity and perhaps
even some price expectations,” Stark says.
“We were very active in 2013 in all-priced
acquisitions and as the bid/ask tightens
later this year, perhaps after summer closes
out, we expect to be active. The changes
coming, and already being seen, will be in
strike pricing. We also anticipate new development starts to slow a bit.” ◆
*Source: MBA 2012
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