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Core Spaces Aligns with Goldman Sachs in $600M Student Housing Deal

The portfolio includes Hub Orlando, which opened in 2018 and has 745 beds. [Photo credit: Kevin Kamisky photography ©2018]

CHICAGO AND NEW YORK CITY — Student housing developer Core Spaces has entered into a partnership with Goldman Sachs (NYSE: GS) to recapitalize nine of its properties in a deal valued at $600 million. The national portfolio consists of seven operating student housing properties and two projects under development, totaling 4,358 beds.

The Wall Street Journal reports that Goldman Sachs will likely utilize its newly launched, $2.5 billion real estate investment fund for the Core student housing portfolio. The newspaper reports that the New York-based financial giant has purchased more than $30 billion in real estate since 2012 mostly using its own capital.

Core will keep a small ownership percentage in the portfolio and keep the assets under its management. The deal is a strategic decision by the Chicago-based firm to aggregate its portfolio with an institutional investor and retain an interest in its developed properties for the long haul, says Core’s founder and CEO, Marc Lifshin.

“We believe in the long-term performance of our assets,” he says. “Our assets have proven to perform over time. We would rather be involved for the growth period. It creates a much more sustainable model for us going forward.”

The operating properties that are part of the deal include three communities that opened in fall 2018: Hub Orlando (745 beds); Hub Tuscaloosa (486 beds); and State Tuscaloosa (174 beds).

The portfolio also includes four properties that opened for occupancy for the fall 2019 semester: Hub Tuscon III (186 beds); Hub West Lafayette (608 beds); Hub Lexington Upper (492 beds); and Hub East Lansing (577 beds).

The two properties under development are situated near the University of Arizona campus: OLIV Tucson Main Gate (605 beds) and Hub Tucson Park Avenue (485 beds).

TSB Capital Advisors assisted both Core and Goldman Sachs in the deal.

Core Spaces has previously sold portfolios of its urban infill properties post-development, including the sale of a 3,776-bed portfolio to American Campus Communities for $590.6 million in 2017.

Lifshin hinted that his company’s deal with Goldman Sachs will likely be the beginning of a long relationship between the two companies.

“We are looking at some different opportunities with Goldman for the future, this is not just a one-off transaction,” he says. “In terms of how this deal is structured, it is a big-picture relationship.”

For Goldman, the strategic relationship with Core allows the investor an increased presence in the student housing sector, as well as a pipeline of core product. For the student housing industry, the deal reflects the growing presence of institutional investors in the sector.

“We continue to see strong fundamentals for student housing investment in select university markets across the United States,” says Peter Weidman, a partner in the Real Estate Principal Investment Area within the Goldman Sachs Merchant Banking Division. “We are excited about our partnership with Core Spaces as we look to continue the growth of our student housing platform with a best-in-class partner.”

Core Spaces is based in Chicago with an executive management division in Austin. The company’s branded projects include Hub, State and The Collective, as well as The James near the University of Wisconsin.

Goldman Sachs’ stock price closed on Monday, July 29 at $218.19 per share, down from $238.95 a year ago.

— Staff reports

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