Brent Little, who led the student housing development division of Place Properties, has joined Buckingham Cos. as vice president of higher education.
During his four-plus years at Place, Little helped to transform the company into a national presence. And Little hopes to help Indianapolis-based Buckingham, a privately owned developer and property manager, to do the same.
Buckingham broke ground on its first two student housing developments in 2008, one near the University of Notre Dame, and another near the University of Kentucky in Lexington. And Little is already hard at work on the company’s next student housing developments.
Little recently sat down with Apartment Finance Today senior editor Jerry Ascierto to talk about the move, as well as the opportunities facing forward-thinking firms in the downturn.
AFT: What is Buckingham’s student housing portfolio like now, and where is it heading?
Little: Last year, they did two student-housing deals: One was called The Lex in Lexington Kentucky, and the other was the Foundry in Notre Dame, which is part of that Eddy Street redevelopment. And they both opened up early, they’re meeting pro-forma, and they’ve done very well. Obviously, there’s no appetite for condos right now. The appetite for large high-density urban deals has pretty much dried up as well, and conventional deals are tougher to get financed. So student housing is one of the safe havens essentially in the multifamily industry right now. So Brad Chambers (Buckingham’s president and CEO) has decided to start focusing more on student housing, and I’ve come over to join him and expand that part of the business line.
AFT: What’s the big opportunity right now in student housing?
Little: The Notre Dame deal was a public/private partnership on a land lease with the university, and that’s the kind of public partnership that we love and would like to do more of. And the universities seem to have a more favorable view of those deals these days. A lot of universities have seen their endowments go way down, and with their ability to issue bonds being constricted, the public/private partnerships are very much in favor.
Another thing that’s interesting is that universities and colleges across the board are continuing to see record enrollments. One of the University of Texas campuses, for example, had a 12 percent enrollment increase; they went from 25,000 to 28,000 kids. For the last six recessions, enrollments have continued to increase in major colleges and universities. It’s not recession-proof, but it’s certainly recession-resistant. As a friend of mine always says, there’s one thing that’s certain: 17-year-olds become 18-year-olds every year, regardless of what happens to the economy. Many people are staying in school longer, or going back to school, and the university’s ability to provide housing is severely hampered. All of these urban universities are pinned in on four sides, and they have to make better use of their capital and their real estate
AFT: It's interesting that Buckingham is expanding its student housing development, while Place Properties reduces its development activity. Why is that?
Little: Some capital sources are just not as interested in multifamily real estate development. I’ve spoken to a lot of capital sources recently, and a lot of them only want to be in acquisitions. You go to every venture capital Web site, and they’ve started a fund for acquisitions and distressed assets—that’s all anybody wants to talk about anymore. But there’s still money to be made in real estate. This is not unusual. I was with JPI when it was just Jefferson Properties, back in the late 1980s and early '90s, and that was the absolute bottom of that real estate cycle. At the time, Trammell Crow was not doing any multifamily, Lincoln Properties was not doing any multifamily, everybody was on the sidelines, and all that capital was on the sidelines. And JPI had equity partners that saw the bottom of the cycle and realized that it was the right time to invest. They invested heavily in 1990 and ’91, and by 1994, ’95, they were one of the largest multifamily builders in the country and created incredible wealth for the investors.
That’s the opportunity that’s out there today. This is the bottom of the market. The condo land prices are gone so you can get urbanized land at reasonable prices and good terms, and construction pricing is down 15 percent to 20 percent across the board. So if you were going to go out and build the exact same property today that you built two years ago, your cost structure is 20 percent less, but your rents are the same, so your yields are much higher. Now, you’ve got a different leverage point, because you’re now getting 70 percent debt instead of 80 percent or 90 percent, but the cost decrease of 20 percent more than covers the change in the leverage for your IRRs. So build into the down market and sell in the up market five years from now.
AFT: How many student housing deals is Buckingham working on right now?
Little: That’s hard to say. I put a list together the other day of 20 to 30 specific sites that I’m working on, but some sites I’ll be working on for five years before they come to fruition. We were just awarded an RFP for a site that’s right next to Indiana University—Purdue University of Indianapolis (IUPUI), and right next to the medical center. And IUPUI is one of the most underserved student markets in the country. They have approximately 1,100 beds of housing for about 30,000 students. It’s a land lease deal with the township. It was a YMCA that’s been closed, and it’s very proximate to downtown; it’s a great piece of real estate. Those are exactly the kinds of opportunities that we’re looking for.
AFT: Where does Buckingham concentrate geographically?
Little: Right now, it’s corporate headquarters-centric. But I’m looking at opportunities from New York all the way to California, down to Texas, and up through the Midwest, and everywhere in between. There are some sites out there that I’ve been chasing for five years or more that are just now starting to mature.
AFT: In your opinion, how far away are we from an upturn? Have we hit bottom, or will 2010 be another year of hunkering down for multifamily firms?
Little: I think it's very market-specific and submarket-specific. I was in a student market in Indiana earlier this week where the university and the comps have all raised their rent 6 percent across the board—6 percent rent growth in today’s economy is amazing. I’m blessed with the ability to go anywhere in the country. But if you’re a regional or local developer who only develops in a specific market, and your market is flailing, then you’re going to have a tough time of it. If you’re an organization that has the ability to go where the need is and assess that properly and respond to it, then you can be successful in 2010.