How many properties does it take to create a student housing portfolio? Eighteen, if you use the Lynd Co. rule of thumb. The San Antonio- and Miami-based multifamily firm announced last week the branding of its student housing division as Lynd Student Living, which will operate 18 properties purchased in 2012 for an aggregate portfolio price of $100 million.
“Honestly, I don’t know that we ever looked at how big the portfolio was getting and picked a particular moment when we might be on a list or otherwise have market relevance as a student housing firm,” says Lynd president A. David Lynd. “But we were just kind of operating a lot of student housing with no concerted effort towards the brand, and we just keep continuing to buy—we have four or five deals in the works right now—so we needed to put a brand behind this thing. We detest operating without a plan.”
Lynd’s timing into the student housing sector couldn’t be better. According to operators who attended the National Multi Housing Council's annual Student Housing Conference in October, rent growth expectations for 2012 range between 3 percent and 4 percent, with cap rates showing a 150-250 basis point spread between core apartments and student housing.
“In general, student housing landlords are anticipating fewer concessions this year and a continued focus on expense control, which all should help drive NOI growth,” noted New York City-based sector analysts Sandler O'Neill + Partners in a recent research note. “With supply still limited and landlords retaining pricing power, student housing should continue to do well.”
The Lynd Student Living division will include 3,718 units (7,900 beds) at 15 colleges and universities in seven states—Florida, Kentucky, Louisiana, Missouri, North Carolina, South Carolina, and Texas. “For the short term, if every state is broke, than every state school is going to be looking for housing partners in the private sector to solve their facilities issue,” says Lynd, noting that Lynd Student Living has landed at mostly public school campuses. “There is a real need for the private sector to fill that void. But just as important is simply the power of education: You have got to have a college degree in order to compete in the world today, and every major university is going to continue to expand and grow and add students.”
Again, NMHC research supports Lynd’s prognosis. According to “Enrollment Trends in the Recession,” a white paper released in June from the NMHC-affiliated National Student Housing Council, freshman applications were up 20 percent from the fall of 2008 to the fall of 2010. Furthermore, 23 of the 56 schools included in the study reported a gain in the number of freshman applications of 25 percent or more, and only four showed a drop in freshman applications.
Lynd also hopes his company can crack the code in transitioning Gen Y renters from student housing to market-rate apartments by creating identifiable brands. “There are not a lot of student to market-rate transition or hybrid models; you are typically either in one market or the other,” Lynd says. “We'd like to create a good solid reputable brand in the student housing space that might allow us to transition residents out of college who will want to lease their first apartments with us.”