With the downturn in the economy precipitated by the housing slump, real estate developers and investors are beginning to pay more attention to the student living industry.
Student housing has generally been viewed as a very stable niche market within the multifamily sector. The main element that has deterred developers from dipping their toes in the waters is the constant ebb and flow. It requires more effort and staff to stay on top of the high volume of move-ins and moveouts and the daily tasks of managing student requests and concerns and organizing events for residents at the development. Now the water doesn’t seem so cold and dark.
Trickin’ it out
“The increase in college enrollment across the country presents great opportunities for multifamily owners, operators, and managers,” said Stacey Lecocke, senior vice president of student living for Irving, Texas-based developer JPI.
JPI is in the midst of developing Jefferson 26, located roughly three blocks from the University of Texas, Austin. It is slated to be ready for students to move in this August. The development, which consists of 1,026 beds, was already 40 percent leased as of mid-March.
“We surveyed college students in Austin, as we do in each market we operate in, to find out what they need,” said Lecocke. Wireless Internet is available in each bedroom (“Internet is now more of a utility instead of an amenity,” she noted). Each apartment also features a full-size washer and dryer, walkin closets, ceiling fans, and wood floors. Community amenities include stand-up tanning booths, a rooftop garden, a pool, and a parking garage with a parking space for each of the 1,026 residents.
Rents at Jefferson 26 are $916 per month for a two-bedroom unit—that’s $916 per student. Average rents at two luxury apartment complexes being built in Austin by GE Real Estate and Trammell Crow Residential are $975 and $1,115 per unit respectively, according to the Real Estate Center at Texas A&M University.
JPI is known for going the extra mile with amenities that most wouldn’t think to include—like a clubhouse sofa with subwoofers custom-built underneath it at one of the firm’s student living projects in Minnesota so residents can watch TV in true surround sound.
Unlike in its previous projects, JPI left the units at Jefferson 26 unfurnished to keep the costs down and to let the students move in their own furniture and make the rooms their own.
As universities shy away from building their own housing, their absence from the market creates new opportunities for private developers.
Liking the fundamentals
“Universities don’t want to put more money into residential housing for students. They are relying on private developers to do it,” said Tim Bradley, senior associate at BlueStone Real Estate Capital, a Philadelphia-based investment bank. “There’s definitely a fear of oversupply with development. But knowing that there is an increased demand, combine that with proximity to campus and competitive amenities. That’s very appealing to lenders.”
BlueStone secured a $17 million non-recourse, first mortgage loan for a private investor who recently acquired The Registry near Western Kentucky University, a student housing complex in Bowling Green, Ky. The project is located directly across the street from campus and consists of 558 beds in 145 units. NewStar Financial was the lender in the transaction.
What made the deal particularly attractive to the lender was the relationship the new owner forged with the university, which happens to have no vacancy at its on-campus housing facilities. The Registry is the only approved off-campus housing for students receiving athletic scholarships and international students receiving housing assistance, meaning that the university will pay those students’ rents. If they were to live elsewhere off-campus, they would have to pay out-of-pocket for housing.
“The university is literally walking these students over to The Registry,” said Bradley. “No other off-campus student housing project has this kind of relationship with the school.”
The name of the new owner was not disclosed, but Bradley said the new owner was originally an equity investor in The Registry, which was completed in 2006. The original owner ran into some financial trouble with the project.
Technology makes it less scary
Technological innovation is also helping student housing operators better manage their properties and stay competitive in the market. Residents at student housing properties will soon be able to choose roommates online thanks to software available through RealPage, Inc., a Carrollton, Texas-based software provider for the multifamily industry.
In February, RealPage acquired WebRoomz, an on-demand leasing system for students as well as military personnel. Not only does the software work to find compatible roommates, it also automates the entire leasing and move-in process.
“The assignment of units can also be done at this time, which saves so much time for staff,” said Leslie Turner, vice president of product development for RealPage. “So what you have is property management functions integrated with roommate matching and online leasing. That means no duplicate data entry. No need to spend time going back between two products.”
The roommate matching function is not a one-size-fits-all system: Operators can customize it to fit their needs.
“The property manager can define the types of questions they think they should present to prospects,” said Turner. RealPage will debut the new capabilities on its OneSite Leasing & Rents Student Living product in the third quarter of this year, said Turner. JPI will be using the product across its portfolio, said Jill Brink, JPI’s supervisor of property application services.
Another technological enhancement JPI will begin to use this August is the budget planning function on handheld mobile PCs. The firm and other student housing operators have been using mobile PCs for awhile when teams do walk-throughs at move-out time, but budget planning had not been part of the technology.
“We’ll be able to process security deposit dispositions in a timely manner for residents, as well as see what work needs to be done on units,” said Brink. “When you can see what variances you’ll have in your budget during this time, it can keep you on top of your strategic planning.”