Q&A: Landmark’s Wes Rogers Talks About Student Housing’s Institutionalization Following Blackstone Deal

Athens, Ga. and New York City — Last week, Landmark Properties, a student housing developer and owner based in Athens, Georgia, announced a joint venture partnership with New York-based Blackstone Real Estate Income Trust Inc. The partnership will recapitalize and acquire eight student housing properties totaling 5,416 beds at the outset. The deal is valued at $784 million and brings Landmark’s portfolio to 79 student housing communities.

Wes Rogers, president and CEO of Landmark, says that Blackstone wasn’t the only institutional investor to inquire about teaming up with Landmark, nor is it the only similar arrangement the past couple weeks. Reportedly student housing owner The Scion Group and Brookfield Asset Management are in advanced talks to form a joint venture targeting $1 billion in student housing acquisitions.

Rogers says that many global firms began reaching out to Landmark in late fall once the student housing industry had shown a resilience to the COVID-19 pandemic.

“Everyone was saying the same thing: they were impressed at how well student housing held up during COVID-19,” says Rogers. “They were all surprised that we collected more than 98 percent of rents and how quickly everything was bouncing back. We were able to grow rents during COVID-19, and now we’re actually having our best preleasing year ever. We’re 97 percent preleased with rent growth on a 51,000-bed portfolio, which is about 2 percentage points ahead of where we hoped we were going to be.”

In addition to the Blackstone arrangement, Landmark is wrapping up a very busy development cycle for this school year. The firm has delivered eight projects representing $1.2 billion of construction in August alone, which Rogers says is a record for any student housing developer. 

“And everything was on time and on budget,” says Rogers. “It’s really a phenomenal feat. We are going to be bonusing a lot of people.”

Student Housing Business caught up recently with Rogers about the Blackstone partnership and its implications for the student housing sector moving forward. The following are his edited responses:

Student Housing Business: In the press release you stated that this deal “validates the strength of student housing.” How has student housing evolved over your time starting Landmark Properties in May 2004 to where you stand today?

Rogers: The student housing industry has certainly evolved dramatically. It was more of a mom-and-pop, fragmented, non-institutional business when we started. Then we started seeing more niche, private equity firms in the space like Harrison Street Real Estate Capital and Kayne Anderson. Those firms started to institutionalize the student housing world. And then in 2014 and 2015 Landmark started partnering with the larger sovereign wealth funds so now ADIA, CPPIB and GIC have been in the student housing space for probably six or seven years now. 

Blackstone did participate in the EdR take-private deal but it was a last-minute call. Blackstone was probably being somewhat cautious on the space. Student housing is not really seen from Blackstone’s perspective as a super high-growth segment. 

Now with Blackstone and Brookfield entering the space with The Scion Group, as well as KKR, TPG Real Estate Partners and Starwood Capital, we’ve seen a lot of the very large institutional investors take a real keen interest in student housing just given the resilience of its cash flow streams during the pandemic. 

SHB: Landmark started getting the inbound calls last fall from institutional investors. Why did Landmark choose Blackstone versus somebody else?

Rogers: I’m going to give a lot of credit to Tim Bradley at TSB Capital, he’s our go-to guy. We have some relationships at Blackstone and so there were some discussions in late fall. We knew some people at Starwood too so we had some discussions with them. Those were the first two groups that we really started to have a pronounced interest in, and Bradley was involved in those discussions. 

At first I wasn’t sure if it was going to make sense. I had historically thought of both Blackstone and Starwood as being more opportunity fund investors with closed-end funds, which is not really what we were looking for. Our business plan is to continue to grow and accumulate assets under management, so we don’t really want to sell anything. We want to develop our projects and enroll them into stable, perpetual life vehicles so that we never have to sell them. And then we can just collect cash flow, investment management fees, property management fees and own the assets for the long run. 

Blackstone invested in this through BREIT, which is an open-ended vehicle. The business plan is really to own these assets for forever, so that was what really attracted us to the Blackstone structure. 

SHB: What exactly does the Landmark-Blackstone joint venture entail, and what is the ownership structure? 

Rogers: The first wave of deals is eight properties, seven of which we already own, so it’s a recapitalization of those at a higher price. The other property is a third-party acquisition. We’re in discussions about doing both additional recapitalizations as well as acquisitions of third-party assets. I cannot disclose the specific percentage [of the ownership arrangement], but I can tell you that Blackstone is the majority owner.

SHB: What are some attributes of the types of properties that are attractive to the Landmark-Blackstone joint venture moving forward?

Rogers: We look at the markets first and foremost. There are over 7,000 colleges and universities in the United States, and only about 175 or so make sense to invest in, and we are generally focused on an even smaller subset of that. 

We focus generally on publicly chartered state institutions with enrollments of 15,000 or more and a select few number of private universities that have significant off-campus demand. We want universities that have very stable enrollment or demand for enrollment over a long period of time. We want to buy well-located, high-quality assets that we are confident will have stable income streams over long periods of time. 

SHB: Is there anything else about the Blackstone deal that isn’t out there in the media yet that you’d like our readers to know?

Rogers: Not only are we looking to invest significantly with Blackstone, Scion and Brookfield have a large venture, so they’re going to be highly acquisitive. American  Campus Communities is working on a joint venture where it will also be a minority owner and bring in a large institutional investor. Core Spaces has joint ventures with a couple sovereign wealth funds and it is going to be acquisitive. TPG with Cardinal Group Cos. is another partnership. 

There are a lot of groups out there that are actively looking to invest in student housing. In general, we’re all targeting similar-type schools and similar-type properties. We’ll see cap rates continue to compress for well-located, high-quality assets in the right markets.

— Interview by John Nelson and Rich Kelley