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1. SPECIAL REPORT
Satellite Campuses Offer Opportunities for Student Housing
Ownership, Development
By Amy Wolff Sorter
Last Updated: April 18, 2012 05:59pm ET
http://tedrollins.org – http://www.tedrollins.net
DALLAS-Mention the words “student housing investments” and what might come to mind are
multihousing projects on or near the large campuses – University of Michigan/Ann Arbor,
University of Texas at Austin, University of Indiana/Bloomington. But some commercial real
estate investors and builders tell GlobeSt.com that satellite or secondary campuses can bring
some nice benefits to their portfolios as well.
“People are starting to look at that strategy and see it makes sense. Though the schools might be
considered secondary, they’re in the same school system; many have a great many programs.,”
comments Ted W. Rollins, co-chairman of the board and CEO with Charlotte, NC-based
Campus Crest Communities Inc., a developer, owner and manager of student housing projects
nationwide. The potential opportunity in such markets, he goes on to say, is why Campus Crest
is active in them.
One state that’s seeing a healthy student housing market among the so-called “secondary”
campuses is Texas. With large state schools University of Texas at Austin and Texas A&M
University in College Station capping enrollment, students need somewhere else to go. Those
who can afford it will go out of state, but others would rather take advantage of in-state tuitions.

2. Ted Rollins
“The vast majority of those kids are staying in-state, and going to the secondary schools; the Sam
Houston States, the Texas State Universities, the University of Texas at Arlington,” comments
Isaac J. Sitt, co-founder and co-CEO of Vesper Holdings in New York City, which is ramping
up its student housing investments in both flagship and secondary markets. “All of those schools
are experiencing growth.” Some, such as Texas State University in San Marcos, are moving up
the ranks to Division I sports as well, which means more growth – and more student housing
demand. Another positive for universities and colleges in the secondary and tertiary markets is
that tuition can be less for students, making these institutions more desirable.
And, according to J. Ryan Lang, commercial sales executive with New Orleans-based Stirling
Properties, competition for student housing on or near main campuses is huge, and it can be
difficult for smaller buyers to enter the market. As a result, “we’ve seen them get into second-tier
markets with a lot of success,” says Lang, who has brokered disposition and acquisition of
student housing in Louisiana.
Kevin White
He goes on to explain that the University of Louisiana at Lafayette, is the state’s so-called
“secondary “ school with enrollment of about 17,000 students versus the 30,000 or so students
attending Louisiana State University in Baton Rouge. “There was a ton of student housing
activity in Lafayette last year,” Lang comments.

3. None of the Louisiana schools have enrollment caps; nor do other state schools. But even
without the caps, the demographics are such that many satellite and secondary schools are seeing
nice enrollment as well. Kevin White, director of business development with Austin-based
Virtus Real Estate Capital comments that, given the growth in the college age population, the
demographics are outpacing the amount of enrollment growth, even at schools that don’t have
capped enrollment.
Barbara Gaffen
Many of those involved in the secondary and tertiary student markets also like the cap rates that
come with the student housing. Virtus, for example, targets student housing properties in urban
areas and secondary university markets. “There are higher cap rates, the returns tend to be a little
juicer, we feel as though there’s meaningful enrollment growth and a limited amount of new
supply coming online,” White says.
But the satellite markets aren’t for everyone. Barbara Gaffen, co-CEO of Northbrook, IL-based
Prime Property Investors says, that higher odds are with student housing on or near flagship
campuses. “If there’s a drop in enrollment, the secondary schools are the ones that feel it,” says
Gaffen, whose company owns a portfolio of student housing properties on campuses in
Nebraska, Illinois, Iowa, Tennessee, Florida and Indiana. The result of dropping enrollment is
higher vacancy and a lack of rent growth in the student housing properties. Adds Sitt: “From a
safety standpoint, you’re likely to be more comfortable near a University of Michigan in Ann
Arbor. There’s more security there that the school won’t drop enrollment dramatically.”
Furthermore, Gaffen goes on to say, not all investors are hyped with the secondary markets. The
exit strategy from such markets can be difficult. “It’s not to say these secondary markets can’t be
successful, but from our perspective, it’s risky,” she notes.

4. Isaac Sitt
Nor is it a good idea just to walk into a secondary market and start buying or building. “The
return expectations need to be different,” White says. “Going into those markets is riskier,
barriers to entry aren’t what they are at a tier-one school.”
The other caveat is to understand the difference between “secondary school” and “commuter
school.” The former offers some opportunity for successful student housing projects; the latter,
not so much. The University of Illinois/Chicago is a satellite school for the main campus in
Urbana, IL. It’s also located in a very urban area. “Those who attend UIC can go live in River
North. Or Lakeview,” Gaffen notes. “People attending those schools don’t want to live close to
campus; they don’t feel the need, and they have a life other than school.”
Sitt agrees, adding that while student housing should be as close to campuses as possible; those
campuses need to be as far away from urban infill areas – the urban colleges are going to appeal
more to commuter students. And those commuter students, he goes on to say, aren’t necessarily
going to want or need student housing.
Mike Hartnett
There is, however, one caveat when it comes to making any kind of student housing investment
or building decision: “Whether it’s on a flagship or second-tier campus, always look for
properties in close proximity to the campus,” comments Campus Crest Communities co-

5. chairman and chief investment officer Mike Hartnett. “Those can be difficult sites to find and get
approved.”
Nor does, “tier two” doesn’t translate into “easy money.” There is opportunity to be found near
many satellite or secondary campuses, but that opportunity may not be available near all school
properties. Gaffen tells the story of a call she received about a student housing opportunity near
University of Illinois-Chicago, but she wasn’t interested. “It’s a fragmented market in Chicago,”
she says.
The moral here, therefore, is to conduct due diligence, be realistic and have a good understanding
of the market. “Just because a property is in a tier two market doesn’t mean that’s a great market
in which to invest,” White remarks. “What it really comes down to is digging in and
understanding each specific market you’re in.”