Today we are highlighting two Real Estate Investment Trusts (“REITs”) as examples of investment funds that have been publicly involved in the student housing industry for more than a decade. These funds have experienced sustained success with continued growth by investing solely in student housing communities.
American Campus Communities (NYSE: ACC) went public in 2004 with a portfolio of 16 properties valued at $350 million, this real estate investment fund finished its first year with 18 properties, a total portfolio value of approximately $368 million, and a 29 percent increase of its stock price. This fund currently owns 206 properties and has an enterprise value of $9.6 billion. The fund’s current stock price has risen nearly 178 percent over stock prices at the beginning of 2010.
Bill Bayless, ACC’s CEO, stated in the company’s 2016 third quarter report, “The [student housing] sector continues to experience tailwinds with industry participants reporting another successful lease-up, especially with regard to core pedestrian assets, at the recent National Multifamily Housing Council Student Housing Conference, and Axiometrics is forecasting limited new supply in the coming year. With these robust underlying fundamentals, we are currently targeting rental revenue growth for the 2017-2018 academic year in the range of 2.7 to 4.2 percent through a combination of occupancy and rental rate growth.”
As ACC experiences growth through rental increases within their student housing portfolio, they are also actively growing their portfolio through development. During the first three quarters of 2016, ACC completed construction and delivered $314.9 million of owned development assets into service. Furthermore, ACC has an additional $737.7 million in owned development expected to be completed in Fall 2017 and Fall 2018.
In May 2016, ACC announced a fourth consecutive annual dividend increase to shareholders.
Education Realty Trust (NYSE:EDR) went public in 2005. After a year of operations, the portfolio consisted of 26 properties valued at $620 million. Today the company owns 86 properties valued at $2.1 billion with additional properties under development. The fund’s current stock price is more than 250 percent higher than the fund’s stock price at the beginning of 2010.
In June 2016, Randy Churchey, CEO of EDR, told REIT.com that rent growth has been “very robust over the last six years.” Claiming, “modernization has really been the tailwind that has supplied our ability to increase pricing.” In the interview, Churchey forecasted rent increases of 3.4 percent for the 2016-2017 academic year.
In the September 2016 edition of Multi-Housing News, Churchy discuss the amenities that draw students and make desirable student housing communities. “First, they want privacy. Second, they want Internet. Third, they want proximity to campus. All of the assets that we build or that we buy always meet those three student needs.”
Churchey also made comments on competing with on-campus housing. “On campus, you actually have the best real estate and the best location, so the number of amenities you need to have in order to be competitive diminishes. What they do have and what is critical are the common areas inside and outside the building, where students can congregate. When you get to off-campus assets, the location is not quite as good, so you need to have a higher level of amenities. That’s typically where you have pools, sand volleyball courts and so forth. What we try to have in all our communities, both on and off campus, are these gathering areas where people can study together, have coffee together. Students want privacy but also a quick ability to connect with fellow students.”
We, at 1031 Crowdfunding, are encouraged by the success of these public REITs. While they have much to offer investors, we remain excited about our most recent DST offering, Vie Marietta, DST. As we have discussed in the past, there are many reasons real estate investors choose DSTs over REITs. So, while DSTs and REITs don’t have to compete for investors who have different investment goals, DSTs and REITs will continue to compete for high-quality student housing assets that offer beneficial opportunities of income and value growth for investors of either type of investment vehicle.