The annual InterFace Student Housing conference is under way, and StudentHousingBusiness.com is bringing you updates from the event.
STATE OF THE INDUSTRY
At the opening session of this morning’s InterFace Student Housing conference in Austin, CEOs from four of the nation’s largest student housing owners gave their “State of the Industry” view. On the panel, which was moderated by Dorothy Jackman, vice president of investments and senior director of Marcus & Millichap’s Student Housing Group, were: Bill Bayless, president and CEO of American Campus Communities; Randy Churchey, president and CEO of Education Realty Trust; Mike Mouron, president and chairman of Capstone Companies; and Jared Schenk, operating partner of Schenk Realty. Among the panel’s opening observations were that acquisition financing is back, enabling them to acquire properties easier, and that there will be little new product delivered in 2011 because of slow financing activity during the past two years.
“A word of caution,” said Mouron. “There is a lot of equity capital out there. While enrollment is going up, look at where it is going up – at secondary colleges and universities. Be careful where you deploy capital. The industry needs to discipline itself so we don’t overbuild.”
All the panelists reported with a smile that their preleasing activity for the 2011-12 academic year was up from this time last year.
Among other industry concerns making their way to the CEOs’ desks were Internet bandwidth affecting residents’ happiness and overbuilding in student housing. Bill Bayless noted that during the financing frenzy of the mid-2000s, many student housing developers placed developments too far from campus. Now, he said, every development is being placed within “pedestrian distance” from campus. The CEOs were pleased with how well the sector has done compared to others in the industry. “We have gone through the worst recession since the Great Depression,” said Churchey. “The industry came through fine. Business held up well.”
An audience member asked the panel if the CEOs were concerned about student housing supply versus the “end of the echo boom” in a few years. Bayless and Schenk replied saying that they were not; a higher percentage of high school graduates are going to college and their college careers are lasting more than four years.
When asked what their favorite aspect of the industry was, the answers all revolved around being in an industry that caters to college students. “Going to the campuses,” was Churchey’s reply, while Schenk said, “The youthful optimism of this industry.” Bayless had three points, “Young people, new energy, and constant evolution,” and Mouron concluded, “Every day is different.”
CAPITAL MARKETS UPDATE
The first of the morning’s concurrent panels included a capital markets update. The panel was moderated by Tim Bradley, founder of TSB Capital Advisors, and included: Brendan Coleman, vice president, multifamily finance, Walker & Dunlop; Frank Lutz, vice president of multifamily customer management, Fannie Mae; Rich Martinez, managing regional director, multifamily SE regional production and sales group, Freddie Mac; Christopher Martineau, senior vice president, Mutual of Omaha Bank; and Walt Templin, vice president, Blue Vista Capital Management.
Talk of compressed cap rates and recovering capital markets highlighted the panel, as more players come back to the market including life insurance companies and conduits. As new capital continues to become available, though, many construction lenders still look at a student housing property’s sponsorship and track record, the level of expertise involved, how many buildings will be built out, the proximity to campus, the barriers to entry and what kind of college or university the property is serving.
So what can multifamily players who haven’t been involved in student housing do to break into the market? Ideally, partner with another multifamily management firm that has student housing experience and work on a project close to home.
“A lot of multifamily guys think it’s easy,” Martineau said. But the panel reiterated a company’s experience and expertise in student housing weighs heavily.
Martinez added, “If you’re based in Austin, Texas, and your first student housing deal is at Minnesota-Duluth, what do you know about Duluth?” as he stressed the importance of staying within your region.
Finally, Lutz broke news by informing the audience that Fannie Mae will underwrite private deals at universities with enrollments of 10,000 students, down from a previous Fannie Mae enrollment minimum of 20,000 students.
20 MANAGEMENT IDEAS THAT WILL IMPROVE NOI
“Twenty Management Ideas That Will Improve NOI” was moderated by Andy Hogshead, CEO of The Collier Companies. Panelists were: Donna Preiss, founder and CEO of The Preiss Company; Julie Bonnin, COO of Asset Campus Housing; Kimberly Barkwell, president and COO of Ambling Student Housing; and David Neef, executive vice president of Innovative Student Housing. The discussion revolved heavily around marketing properties to students, with the conversation moving to mobile marketing.
The most famous quote of the session went to Barkwell, who said, “College students sleep with their smartphones so they don’t miss a text!” This comment lit up the conference’s Twitter posts
(you can follow happenings at the conference by monitoring #shb11 on Twitter).
WILL PENT-UP EQUITY CONTINUE TO DRIVE STUDENT HOUSING INVESTMENT SALES?
The “Pent-up Equity” panel was moderated by Pat Jones, managing partner of ARA Student Housing, and included: William Talbot, senior vice president of investments for American Campus Communities; Fred Pierce, president and CEO of Pierce Education Properties; Doug Sherman, CEO of Innovative Student Housing; Frank Duemmler, COO of Kayne Anderson; and Rajen Shastri, COO of Campus Acquisitions.
The title question of the panel was answered with a resounding “yes.” Equity raised during the past 2 years has trickled into the multifamily sector including the student housing side, as enrollment in U.S. universities and colleges has never been higher. Because investors have been burned by traditional commercial real estate markets like the office sector, they aren’t tying themselves to traditional measures like job growth as they seek other avenues for return on their investments.
“Investors are looking at core commercial real estate sectors and getting frustrated,” said Sherman. He added that America’s culture prioritizes higher education and there are no signs that will change.
Although the student housing market is seeing more equity than ever before, it is being selective, according to Pierce.
“The equity out there is still looking at company tract records,” he added.
REPORT FROM THE FRONTLINES
In the panel, “Report from the Frontlines,” operations executives delved further into an update on preleasing and marketing efforts. Moderated by Kirk Preiss, CFO and principal of The Preiss Company, the panel featured John Iannuzzo, vice president of marketing with Campus Living Villages; Frances Thompson, Grand Campus Living; and Ben Modleski, executive vice president for management and operations, Campus Acquisitions. All three reported that they were having good results on preleasing. While a year ago, many companies were offering students iPads and gift cards as incentives to sign leases, as well, many were only targeting certain markets for concessions.
“The concession war takes away from what we are offering at the properties,” said Thompson.
Many operators are also now targeting parents in their leasing process. CLV sent a targeted campaign to parents at Thanksgiving that encouraged them to talk about resigning with their children during the holiday break. Many of the operators on the panel offer a second-year same rent as first year discount for renewing early.
— Daniel Beaird and Randy Shearin