Austin, Texas — Over 1,200 leaders from across all facets of the student housing industry descended on Austin this week for the 9th annual InterFace Student Housing conference, held at the J.W. Marriott.
The conference concludes today after two and a half days of networking and educational sessions on topics ranging from the state of the industry, to leasing and marketing, development and design.
While the industry is evolving, sunny skies continue to be the forecast for years to come. Rising rental rates are coupled with record-breaking levels of asset sales, and an increase in institutional and foreign investment, further legitimizing the sector.
The conference kicked off Wednesday, April 5, with the 6th annual SHB Open Golf Outing at Barton Creek Resort & Spa, and then moved to the third floor of the J.W. Marriott Austin, where a record-breaking number of attendees met to network and dine over a range of industry topics.
The afternoon began with a round of Speed Networking, where over 100 industry experts participated in short, four-minute conversations designed to spur discussion and foster new relationships.
The group then moved into 25 InterFace+ Info Roundtables on topics ranging from the possible obsolescence of interior amenities, to international student housing opportunities and online reputation.
A cocktail reception followed the roundtable sessions, where attendees were able to build further on budding new relationships and explore a variety of booths from exhibitors.
A networking breakfast and workshop on safeguarding NOI through active expense management was followed by the conference’s first general session titled “The Power Panel.” The session brought together a consortium of CEOs from the industry’s top companies to discuss their perspectives on industry trends and capital market shifts, among other topics.
“For the past three to five years, compressed cap rates and yields in asset classes elsewhere in real estate, and risk adjusted yields in the sector have garnered significantly greater degrees of institutional, domestic and foreign capital,” began moderator Peter Katz, executive director of Institutional Property Advisors. “The timing happens to have coincided with a large number of core deliveries, as well as a number of seasoned players disposing value-add assets and portfolio-pruned opportunities for those that were seeking opportunistic yields.”
“When you couple this with strong pre-leasing, solid year-over-year rent growth and a declining pipeline — welcome to the single most active transactional year in student housing history,” he said.
“It is so exciting to see this many people here, “said Bill Bayless, CEO of American Campus Communities. “It just speaks to the maturation of the space and how attractive it is. If you go back 10 to 12 years ago and you look at where we are today, I would say that it is solely related to the transparency that you now see and the consistency of cash flows, including through the Great Recession. You couple that with the fact that we’re still in the early stages of modernization and the level of opportunity that exists — it just makes for a fantastic investment.”
Randy Churchey, CEO and chairman of EdR, notes that the emergence of third-party management companies has been a significant factor in the increase in institutional investment in the sector, as it allows companies to de-risk their investment.
Katz continued the conversation by noting 2016 as a record year with close to $10 billion in sales, including two of the largest, billion-dollar entity sales of Campus Crest to Harrison Street and University House Communities to Scion, GIC and CPPIB, beckoning the question of whether or not further consolidation can be expected for the sector.
“I definitely see continued consolidation,” says Rob Bronstein, president and co-founder of The Scion Group. “It is the natural, expected next step as any sector matures. More long-term, less expensive capital will move in, replacing the more opportunistic money that sort of got the industry started, and those who have invested along the way are understandably going to want to take advantage of that disposition environment and the opportunities that buyers like the people on this stage can present them.”
“These large portfolio transactions are showing the challenges of entering the space,” says Christopher Merrill, co-founder, president and CEO of Harrison Street. “There’s a real demand for cash flow, and a real demand for yield and it is very hard to create portfolios in the space because of how difficult it is to get sites and how fragmented the business is. We’re at a very interesting point in the industry.”
The conversation then turned to the positive and negative impacts of the increase of liquidity in the market. “Increased liquidity benefits everyone,” says Wes Rogers, president and CEO of Landmark Properties. “With all of this new capital coming in, we’ll take a property to the market and we’ll see probably 20 or 22 bids. Two or three years ago, you probably would’ve seen half the number of bidders. I think that all of this additional capital in the space should provide a continued downward pressure on cap rates.”
Each CEO noted heavy pre-leasing for the 2017 to 2018 academic year across their student housing portfolios. These levels were attributed to everything from great retention, to successful marketing efforts and the lay of the land in terms of what’s on the market.
The industry has undoubtedly evolved over the last five years. Rogers of Landmark noted that the main change he has noticed is the move towards urban infill development. “Today, most of the developments that are being done are pedestrian, urban infill sites and those are the types of deals that tend to perform better,” he said. “These developments take a lot more time to digest, to title and they’re a lot more expensive. The average deal size now is probably $90 million — they’re getting bigger and better located on top of campus, and we think they will stand the test of time.”
For the years ahead, Bayless warns against building exclusively luxury product. “The greatest risk in our sector is overbuilding at the highest price point,” he said. “When you look at your typical university and the socio-economic demographics of the population of students, it is very diverse. As we get into more of the urban infill development, more and more folks focus on capturing that top 2 percent. We always focus on building for the masses not the classes — find ways to differentiate your product where your price points are accessible to the broader student population.”
After a brief break for networking, the conference picked back up with concurrent sessions on a range of topics. From “How Long is the Runway for the Development Boom? Finding Sites, Getting Financing and Deciding What to Build in Today’s Development Market,” to “Arranging the Pieces to Make Mixed-Use Work On- and Off-Campus,” and an investment market update, sessions offered a spectrum of topics to appeal to members of every facet of the industry.
After a networking luncheon, attendees gathered in the main ballroom for a session titled “State of the Industry Report: Will the Forecast Continue to be Sunny and Bright? What, if any, Storm Clouds could be Lurking.”
The panelists carried on a lively discussion on the state of the country as a whole, and the effects that the shifting political environment may have on the student housing sector.
Industry experts who joined in the discussion included moderator Joe Coyle, president of University Student Living; Michael Orsak, senior vice president of investments for Campus Advantage; Peter Stelian, CEO and founder of Blue Vista Capital Management; Isaac Sitt, co-founder and principal of Vesper Holdings; Craig Zogby, managing director of Kayne Anderson Real Estate Advisors; and Donna Preiss, founder and CEO of The Preiss Company.
Sessions continued through the afternoon on topics including the ABC’s of urban infill development, maximizing NOI while providing a great resident experience and the design of live/learn communities.
Later on, Student Housing Business presented its Innovator Awards to companies for excellence in student housing development. Voted on by a panel of over 100 industry experts, 25 awards were presented for everything from best off-campus development to best implementation of mixed-use and best renovation of existing university housing.
Big winners of the evening included EdR, American Campus Communities, Aspen Heights and others, large and small. EdR took home four awards throughout the evening, including best renovation of existing university housing and best implementation of mixed-use or live-learn for its Bowles Hall Renovation at UC Berkeley, and Holmes and Boyd Hall at the University of Kentucky.
American Campus Communities also took home four awards throughout the evening, including best public-private development for its Fairview House development, built in conjunction with Butler University.
The winner of the coveted off-campus award for Best New Development of more than 400 beds was University House Communities and Scion for its University House Austin development in Austin, Texas.
The conference continued Friday morning with more panel sessions and networking, with topics including Generation Z, leveraging interior design and getting technology “right.” The morning sessions also included a development showcase of hot projects opening off- and on-campus.
The 9th annual InterFace Student Housing Conference concluded at noon, bringing together student housing developers, contractors, managers, operators, industry suppliers and more, and gave them a platform to discuss the robust nature of the industry, and how to best deal with the shifting nature of the space.
Student Housing Business and InterFace Conference Group would like to thank our attendees, sponsors, speakers and moderators for making InterFace Student Housing 2017 a resounding success.
— Katie Sloan