The tone of the conference was bolstered by Monday’s news that American Campus Communities (ACC), the industry’s largest owner, had purchased a 3,776-bed portfolio from Core Spaces and DRW Real Estate for $590.6 million, the largest transaction to date in 2017 in the sector.
Also setting a strong tone was attendance of this year’s conference; more than 850 industry professionals, according to NMHC. The conference kicked off its educational sessions Monday afternoon with a panel featuring five industry leaders — Randy Churchey, CEO of EdR; Bill Bayless, CEO of ACC; Donna Preiss, CEO of The Preiss Company; Brian Dinerstein, CEO of The Dinerstein Company; and Wes Rogers, CEO of Landmark Properties.
The panel, moderated by Peter Katz, executive managing director of Institutional Property Advisors, was very bullish on the sector as a whole. They emphasized that the increased sophistication of the sector is gaining the attention of the investment community. What’s more, the growth of the sector is enabling more investors to enter the field. When asked how the industry was different than it was five years ago, Bayless responded, “We aspired for this industry five years ago — the infux of international capital and increased interest has added to the maturation of the industry.”
The five owners all addressed their lease-up for fall 2017, which, while down for some in overall occupancy, was met with rental rate growth that helped to balance out income. Press also added that her firm is continuing to see increased income through ancillary sources, like passing through water charges to tenants.
Of the five owners on the panel, four reported fall occupancy as follows: ACC, 96.6 percent; EdR, 95.4 percent; Preiss, 96 percent; and Landmark, 95 percent. Several of the owners cited oversupply in several markets as the reason for numbers that are overall lower than fall 2016’s figures. Slowing development in the industry should help to alleviate that over time, said panelists, citing that 43,000 new student housing beds were delivered in fall 2017, down from previous years.
The second day of the conference kicked off with a general panel, “Is student housing resilient?” That question quickly turned into a conversation on “why student housing is resilient” among the panelists Peter Stelian, founder of Blue Vista Capital Management; William Talbot, executive vice president and chief investment officer of ACC; Marc Lifshin, founder and CEO of Core Spaces; Sean Spellman, chief development officer of CA Ventures; Doug Kligman, chief investment officer, Vesper Holdings; and David Selznick, chief investment officer, Kayne Anderson Capital Advisors. Tim Bradley, founder of TSB Capital Advisors, served as panel moderator.
Each of the panelists discussed why they thought student housing was — or, in some cases, was not — resilient to an economic recession.
“Student housing has better supply and demand than any other sector,” said Kligman.
Panelists cited the increase in enrollment of international students at many four-year public and private universities as one factor for increased development in the industry. Stelian cited that the Trump presidency has had a negative impact on that growth, with a slowdown in the enrollment of international students at some universities. Other challenges to the sector in weathering another recession include the availability of construction lending and the increase in the quality of assets.
Regarding capital availability, Talbot said that lending is tougher than it was several years ago, but many lenders are still providing capital to established developers while eliminating lesser deals by developers who are not as experienced in the sector. One panelist pointed out that the quality of the assets in the student housing sector is now much higher than it was heading into the last recession, which could cause an issue.
“Will students and parents be willing to pay $1,000 per month in the next recession versus $500 per month in the last recession?” Stelian questioned.
A few of the panelists said that their companies were diversifying their holdings, adding other sectors to their holdings. Among the most prominent examples are CA Ventures, which has entered seniors housing, and Kayne Anderson, who has recently sold student housing assets and invested in areas like medical office and seniors housing.
“There will be a correction so we need to modify to get ready for that,” said Selznick. “Kayne Anderson is diversifying into other sectors to make sure we are not caught holding a bag of hot potatoes.”
The conference continued throughout the day with several breakout sessions on development, design operations and management. The day ended with NMHC’s DealTank, which had developers pitch a number of shovel-ready developments to a team of established investors in the field.
Today, the conference ended with two concurrent sessions, one on developing in second- and third-tier university markets and another on cyber security, as well as two general sessions on data and a look at the international market.
— Randall Shearin