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The Merits of Student Housing Assets

Universities have long since realized that providing housing for students is essential if students are going to be educated at the highest level. With an ever-increasing rate of enrollment, universities have a need to increase their student housing offerings.

Because, in many cases, universities have not been able to keep up with this demand, an opportunity has arisen for real estate investors to take advantage of student housing as an alternative asset class.

Here are some of the many merits of investing in student housing:

Continuous enrollment growth causes strong demand even during economic downturns.

According to the National Center for Education Statistics, “In fall 2014, total undergraduate enrollment in degree-granting postsecondary institutions was 17.3 million students, an increase of 31 percent from 2000, when enrollment was 13.2 million students. While total undergraduate enrollment increased by 37 percent between 2000 and 2010, enrollment decreased by 4 percent between 2010 and 2014. Undergraduate enrollment is projected to increase 14 percent from 17.3 million to 19.8 million students between 2014 and 2025.”

Constrained university budgets limit supply.

Over-crowded resident halls are not a new phenomenon experienced in the 21st century. For decades prior, universities have been remodeling, building, and increasing the occupancy limits per unit in order to try to meet demand. However, with limited resources that are prioritized for improving educational services, universities have little ability to meet the rising demand for student housing.

Opportunity exists for private off-campus housing.

Students have always taken advantage of less expensive, less regulated, available, private, off-campus living. As enrollment continues to increase faster than the rate of creation of on-campus beds, universities will remain unable to provide beds for all eligible students, and these students will be forced to find beds elsewhere. Thus an opportunity for an increased demand for private, off-campus housing.

Modernization is underway.

Traditional apartment complexes located near colleges and universities have a depth of experience with the annual wave of student tenants moving-in in August and moving-out in May. There is, however, a new trend of off-campus housing that has emerged, benefiting students and investors alike.

Today’s students are flocking to a modern off-campus option of student-purposed, private housing complexes. In such complexes, students get to live in off-campus, apartment-like settings where they can use kitchens to cook their own meals, relax in common area lounges, and socialize with their neighbors – who are all students.

Some of these modern student housing complexes charge each student individually for their room (rather than a group of roommates for the unit they share), have furnishing options, and offer amenities specifically desired by students. In many cases, developers designed the modern student housing complexes in partnership with retail centers to include adjacent fitness centers, spas, restaurants, and entertainment venues.

Student housing is experiencing significant growth from pension funds and large institutional capital groups. The modern, off-campus, student housing complexes with consistent year-over-year cash flows have attracted many large institutional investors both foreign and domestic. With the right proximity to the right college or university, off-campus student housing complexes maintain high occupancy rates even when the markets adjust, enrollment fluctuates, or new developments or campus housing policies increases the supply of available beds. When the student housing complex caters directly to students, meeting their preferences and needs, such complexes will offer a greater value to occupants and secure high occupancy rates before other local housing options.

This material does not constitute an offer to sell or a solicitation of an offer to buy any security. An offer can only be made by a prospectus that contains more complete information on risks, management fees and other expenses. This literature must be accompanied by, and read in conjunction with, a prospectus or private placement memorandum to fully understand the implications and risks of the offering of securities to which it relates. As with all investing, investing in private placements are speculative in nature and involve a degree of risk, including loss of your principal. Past performance is not necessarily indicative of future results and forward-looking statements and projections are not guaranteed to achieve the results described and your actual returns may vary significantly. Investments in private placements are illiquid in nature and there may be no secondary market or ability to sell the investment should the need for liquidity arise. This material should not be construed as tax advice and you should consult with your tax advisor as individual tax situations will vary. Securities offered through Capulent, LLC, member FINRA, SIPC.