Student Housing REITs: Need More Disney Magic by Brad Thomas
Summary
- For the student housing sector, growth has been harder to come by over the last half-decade. Enrollment growth, even at the highest-quality institutions, has been flat-to-down since 2012.
- Millennials - the largest cohort in American history - supported the maturity of the student housing industry over the last decade, but demographic trends are softer in the next decade.
- Institutional capital continues to flow into the sector, bidding up property values and prompting a wave of supply growth, which has pressured occupancy and rent growth.
- When the going gets tough, the tough get going. American Campus has emerged as an undisputed best-in-class operator over the last five years after a multi-phase portfolio transformation.
- ACC's massive campus housing deal with Disney reinforces that ACC's unique competitive advantage in the P3-style campus housing partnerships, the most attractive opportunity set within the sector.
- This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »
REIT Rankings: Student Housing
In our REIT Rankings series, we introduce and update readers to each of the residential and commercial real estate sectors. We focus on sector-level fundamentals, analyzing supply and demand conditions and macroeconomic factors driving underlying performance. We update these reports quarterly with a breakdown and analysis of the most recent earnings results.
(Hoya Capital, Co-Produced with Brad Thomas through iREIT on Alpha)
Student Housing Sector Overview
Down to just one public REIT after the acquisition of EDR by Greystar in 2018 and the Harrison Street acquisition of Campus Crest Communities in 2015, we track the lone student housing REIT, American Campus Communities (ACC) which accounts for $6.3 billion in market value. Preferred Apartment (APTS) also owns a relatively small portfolio of roughly 6,000 beds.
American Campus owns roughly 110,000 student housing beds of the more than 5 million purpose-built student housing beds across the country, housing many of the nearly 20 million individuals enrolled at four-year universities in the United States. ACC's portfolio primarily consists of high-value on-campus or near the campuses at major flagship 4-year public universities. The student housing sector comprises 1% of the broad-based REIT ETFs (VNQ and IYR) and 1.5% of the Hoya Capital Housing Index, which tracks the fundamental-weighted performance of the US housing industry.
Purpose-built student housing facilities hold unique investment and operational attributes compared with traditional multifamily properties. Purpose-built student housing facilities are generally cheaper and are equipped with more applicable amenities for students than typical off-campus housing facilities. Student housing facilities are generally rented "by-bed" rather than "by-unit" and there is generally a much shorter "leasing window," as beds that are unfilled at the start of the school year are likely to sit vacant until the next school year. Student housing assets, especially off-campus units that are not part of a university partnership, are also exposed to changes in university housing policies that can result in significant asset impairment.
...Originally Posted On Seeking Alpha
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