Student Housing Business

JUL-AUG 2018

Student Housing Business is the voice of the student housing industry.

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THE SHB INTERVIE W July/August 2018 40 versity is going to hire a consultant who is going to drive your margins down and cherry pick the most advantageous terms from other on-campus deals. You're likely to be on a relatively short-term land lease. There's prob- ably going to be a cap on the rents you can charge as well as how much you can grow rents. You're also going to have to design a product that the university wants versus what the students really want. This, combined with all the restrictions of living on-campus, will ultimately make a property less desirable to most students than a comparable property located off-campus but within close proxim- ity. For those reasons, our returns on-campus would be dramatically lower than what they are off-campus while the cash flows aren't much riskier — if riskier at all. If the universi- ties would provide a master lease for the term of the ground lease it would be one thing, but universities cannot guarantee occupancy as it could have a negative impact on their credit ratings. In all, we feel that the benefits of being on-campus do not justify the lower returns. You're seeing this play out at some campuses now. The investors in some of these deals all thought they were taking virtually no risk because they were 'on campus,' but because there's no guarantee from the univer- sities, they are failing. SHB: What are your thoughts on EdR's merger with Greystar? Rogers: Late last year and earlier this year, it seemed pretty apparent that something was going to happen. We did an analysis and evalu- ated EdR ourselves — as I'm sure many people in the industry did. From Greystar's perspec- tive, they have instant scale and effectively get the EdR management team for free — which is extremely valuable. Their employees can add tremendous value for Greystar. Over the long term, I do have some concerns about only hav- ing one public company in the student housing sector, though. SHB: What advice or thoughts would you have for developers who are doing a project here and there, or someone who wants to grow the scale of their business? Rogers: Just sell your site to me! Seriously, I would say to focus on the people. Make sure you are building a team around highly competent people you can trust. Stay true to your organization's mission, vision and values. Also, focus on risk mitigation and make sure you have the capital to deal with whatever hic- cups arise. SHB: If you had to do it again, would you have sold as many properties? Rogers: I have no regrets. At the time, we really needed to sell all those properties to help build Landmark's balance sheet. We have certainly developed a few assets that I wish we still owned today. But, looking ahead, we have used that capital wisely and recycled it for our growth. We don't have any other investors in Landmark itself. We also don't have any cor- porate debt or preferred equity, and we own nearly all the GP positions in our projects. SHB: You started Landmark based on a thesis you wrote for your MBA. Did you ever think the company would become as big as it has? Rogers: No, but I've never really thought about it that much, and sheer size has never been our goal. Our growth is a testament to the hard work of all the talented, committed profes- sionals we have on the team. The original busi- ness plan was to concentrate on real estate in Georgia around universities and hospital sys- tems. We were going to do medical offices and student housing developments. We did one medical office deal, but it took forever to sta- bilize and we didn't make much money on it. Our early student deals really took off, though, and it has been our focus for the past 14 years. SHB: We know you're busy with your day job, but you have some outside investments that are also business pursuits, including a brewery. Are you over there on the weekends getting your hands dirty? Rogers: I don't think you want to drink the beer that I could personally make. We have made two investments in breweries over the years. Our first was Terrapin Beer Co. in the mid- 2000s. That was sold to Miller-Coors several years ago. In 2013, we helped launch another brewery in Athens called Creature Comforts. We're the lead investors in the business, but there are three guys running the company day- to-day. They do a great job and they make great beer. It's a fun business to be involved in, but I can't take much credit for its success. SHB: When you are not busy with Landmark and the breweries, what's going on in the Rogers household? Rogers: We have three little boys: a 7-year-old, 5-year-old and 2-year-old. During the warm months, we can be found on the lake pretty much every weekend. We've been trying to do a better job of taking vacations over the past year. For so many years, I hardly took any vacation time because we were so busy grow- ing the company. We're now fortunate enough to have a lot of great people at Landmark, and that allows me to take a little more time off than I used to. That said, even when I'm on vacation, I have to admit that I have a pretty hard time totally 'un-plugging.' SHB Landmark's The Standard at Gainesville has been 100 percent occupied since the project opened several years ago. The project contains 1,200 beds and has a Target store located at its base.

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