Student Housing may not have the amount of product or gather the attention collected by other commercial real estate sectors, but that doesn’t mean that investors aren’t interested in this hot market. Julie Sorensen, a business development director at GRS Group, recently attended the InterFace Student Housing Conference, where she and other attendees learned about trends in financing, development and other factors impacting this sector. Sorensen recently took some time to speak about her thoughts on student housing.
What was the mood like at the InterFace conference?
The mood was very optimistic. Student housing is a very active, but specialized market. The participants were very upbeat about the future of this segment.
Did you get a sense of any new investors entering the market?
As far as ownership goes, there are three REITs and a large number of regional and smaller players. The REITs have been on the acquisition sidelines, and the slack has not been fully picked up by the other market participants. The performance of this property type is very management and operationally dependent. Unlike your traditional multifamily property, you have a turnover in tenancy every year.
What’s the new development picture like? Are we seeing any activity there?
There is still a lot of ground-up development. So much of the student housing is old, so there are opportunities for both new development and for upgrades.
Was there any discussion about off-campus development versus building on campus?
One of the key factors to success in development is the location of the property. It may be based on how close it is to campus or how close it is to the entertainment and social scene. Each university has its own peculiarity as far as what’s going to be successful and what’s not, in terms of location and amenities. The competitive landscape at each campus is also a little different in terms of what these properties are competing against for tenants. You have the older, non purpose-built houses, and high-end apartments with full amenity packages.
Did they discuss any changing trends in relationships between universities and developers?
The success of private housing is in many ways tied to the success of the university. However, there is a lot of Public Private Partnership activity. The University System of Georgia introduced their RFP acquisition and development of new housing on nine campuses across the state. It is looking for entities to assume operations of over 6,000 beds on current on campus housing and to develop 3,000 new beds. Those are expected to be delivered by the fall semester in 2016. It’s a pretty massive undertaking.
The student-housing market is very diverse, both in ownership and structure in pricing, but overall, the sector is 95 percent occupied, so the lenders are very bullish on it as well.
Where is financing coming from?
It’s coming from the GSEs, CMBS, banks and life companies. Each lender has its preferred profile. Housing associated with major universities is going to have more of a selection of lending vehicles.
What challenges does the sector face from a due diligence standpoint where GRS Group can assist?
We’re very active in the sector. We understand the specific requirements of the various lenders, and are recognized by the active lenders in this segment. We understand that the property can’t be evaluated in the same way as traditional multifamily. Other firms might not be in tune with those differences. There are different physical condition challenges. Additionally, our Global Services Connection can assist clients with all steps of the process, from Title Insurance, ALTA Surveys and Appraisals to Energy Management Services.
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