Student Housing Business

JUL-AUG 2018

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

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MANAGEMENT July/August 2018 StudentHousingBusiness.com 54 In House or Third-Party? Student housing success rests on capable, experienced management. Some investors need seasoned third-party pros while other owners embrace the DIY route. Interviews by Randall Shearin and Lynn Peisner T To self-manage or to outsource? There are many sides to this question. For some, such as merchant developers, it's a given that an experienced third-party student housing man- agement group is the best choice. For others, vertically integrating is essential. We spoke with three student housing owners, develop- ers and managers for their unique takes on the management question. Aaron Harden is vice president of asset management for Atlanta-based Student Quarters. The company was launched in 2013, then debuted its management business in May 2017. Today, the company owns 23 properties, 12 of which it self manages. Julie Bonnin is chief operating officer of Houston- based Asset Campus Housing, the largest third-party manager in student housing with a portfolio of more than 122,000 managed beds. Grant Collard is chief executive officer of Provo, Utah-based Redstone Residential, an investor and operator of more than 21,000 beds in several states but with a heavy pres- ence in the Utah cities of Provo, Rexburg, Orem and St. George. SHB: Why is Student Quarters transitioning to in-house management? Harden: We have been careful to slowly transi- tion our properties into our in-house manage- ment group to make sure our internal team is adequately sized and prepared to take on the new properties. The management group was developed not to grow a third-party business but to solely manage our own assets to maxi- mize financial performance and best serve our investors. Our ultimate goal is to maximize value for our investors, and we feel having perfect alignment among our management company, ownership and our investors is criti- cally important to achieving that goal. While third-party management would certainly aid in the profitability of the management com- pany, we think it would also be a distraction and create inherent conflicts along the way. As such, the plan is still to put 100 percent of our efforts into growing our core business. SHB: How has Redstone Residential created its third-party management business? Do you ever attract management clients because of your penetration in some of the Utah markets? Collard: Yes. A lot of people feel we have market power in a few of our markets. Certainly there are a hand- ful that we know extremely well. But sometimes people wonder if it's a conflict of interest. And our response is, 'not if we're full everywhere!' Additional market power should lift everybody rather than depress the market or create conflicts of interest. A lot of our investors in the owned properties that we've developed started off as third-party clients. SHB: How do the benefits of being a third- party manager compare with managing your own assets? Collard: The advantage of a third-party man- ager is that they are always on notice. If they underperform, they're going to get fired. It's as simple as that. When an owner calls and says something important needs to change, everyone jumps. Third-party managers take their jobs very seriously. You'd think it would be the opposite — that if it's your own asset, you're going to spend the most time on it. That's not always the case. SHB: What are the reasons Student Quarters decided to bring management in-house rather than use a third party? Harden: Alignment of goals and strategy is a big one. At the end of the day, third-party managers want to perform because it allows them to get more business, but they also have their own business to run, and that comes with a list of objectives that have nothing to do with the owners of the properties they man- age. As an owner/operator, it is much easier to have the same ultimate goals at every level of the organization. We get to define what is important. We can make decisions quickly and have a similar hierarchy for decision mak- ing at every property. SHB: With so much market penetration, what are some of the unique resources you offer to owners? How do you keep competition healthy? Student Quarters owns the 435-bed University Downs that serves the University of Alabama in Tuscaloosa, Alabama. GRANT COLLARD Chief Executive Officer Redstone Residential

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