Ted rollins ceo of campus crest globe st.com 05-09-12
REALSHARE ADVANCEStudent Housing: Look for Continued GrowthLast Updated: May 9, 2012 06:21pm EThttp://www.globest.com/news/12_348/dallas/student_housing/Student-Housing-Look-for-Continued-Growth-321360.htmlBy Amy Wolff Sorter http://tedrollins.org – http://www.tedrollins.netIRVING, TX-A little more than five years ago, the first RealShare Student Housing conference tookplace in the midst of a strong recession and concerns about the economy. Even with growing alarm over theeconomy, speakers at the "back-then" event pointed out that student housing was a growing investmentand development sector, with demand based on steadily increasing higher education enrollment figures.With the next RealShare Student Housing conference to take place here less than a week away, the GreatRecession has ended, the economy is recovering – sort of – and experts tell GlobeSt.com that studenthousing is still a terrific sector in which to invest, build, own and operate."Student housing hasnt had the swings that the other sectors have had as a whole," says Hendricks &Partners national director of student housing Kevin Larimer. "If youre close to the campus of a majoruniversity, your tenant base will always be there," Larimer says."The fundamentals are compelling, the schools are growing, enrollment is up and people are staying inschool longer," says Brian Dinerstein, president of Sterling University Housing, which operates under theauspices of the Dinerstein Cos. "Its been a good business for us, and has been resilient through thedownturn, for the most part."The interesting factor is that according to the RealShare speakers in 2008, student housing was just startingto be considered a viable commercial real estate investment sector. Rob Dann, executive vice president ofCampus Crest Communities and president of Campus Crest Real Estate Management and CampusCrest Development, says that nowadays, money is starting to like student housing, though the industryitself remains fragmented. "I think youll see some consolidation and more money coming into this sector,"he says.
Kevin LarimerDinerstein also says whats helped give the sector some street cred is the solid performance of the "bigthree" publically traded student housing REITs: American Campus Communities, Educational RealtyTrust Inc. and Campus Crest Communities Inc. "Were not public ourselves, but were graded based onwhat those groups do," he comments. "Were fortunate theyve done pretty well; the overall sectorreputation is made or broken by what the public folks do."This is not to say the student housing sector is a commercial real estate nirvana. Rick Perdue, director ofacquisitions with Tonti Properties points out that, right now, developers have a window of time duringwhich supply can still be absorbed by demand in many regions. But in five years, that dynamic couldchange, and we could be seeing an oversupply of student housing, he predicts.Furthermore, dislocation of capital has been a large issue since 2008. Larimer points out that Fannie Maeand Freddie Mac, in particular, continue to be reluctant to lend to sponsors who arent qualified. Though agreat deal of capital is currently coming into the market, he points out, its through existing operators andproven investors.Not that this is a bad thing. "If youre new to the business, its hard to get in; its difficult, if not impossible,for someone with no experience to get approved for a Fannie or Freddie loan," Larimer says. "But that, initself, has kept groups out that dont have the experience or who must at least partner with a knowledgeableoperator."Perdue agrees that debt and equity, for that matter, are still tight. "Theres still a little caution there," hesays, "but its loosening up a little." Over time that could lead to more developers coming into markets anda lot more units coming on line. The problem here, however, is that those developers may, as Perdue putsit, "underappreciate" whats necessary with student housing. "Its capital intensive versus multifamily," henotes. "And the fact that youre starting over lease-up every year is very much different. Because of this, itsa higher risk profile for owning and operating student housing."
Rob DannIn other words, for those who know what theyre doing, student housings future continues to be positive.Dann, for example, says that Campus Crest has six new housing projects under construction that will openin August, and a "pipeline thats robust." In its existing operating properties, Campus Crest has experiencedan 8% to 9% growth over the entire portfolio.One trend noted by Dinerstein is a focus on building green and sustainable communities, as well as morecomplex developments. He explains that his company has projects going north near the University ofArkansas, the University of North Texas and San Diego State, all of which have retail components open towhat he calls "student-centric retail."Larimer, in the meantime, says that the sector will remain healthy in the near term, given the limiteddownside exposure especially when it comes to owning core student housing that is close to campus. "Wellcontinue to see capital flow into this segment of the industry, and I would expect that transaction volumewould be 15% to 20% higher than it was in 2011," Larimer predicts.Dann also says 2013 will continue strong, as will 2014. "With university enrollment continuing to grow,demand is there for sure, so long as its the right product and the right construction in the right market," hesays.