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 56 Pinnacle Campus Living IS SWEEPING THE NATION! Pinnacle Campus Living is the brand for Pinnacle's student portfolio of more than 17,000 beds. Headquartered in Dallas, the platform is driven by student-focused operators who draw upon Pinnacle's robust nationwide platform of 165,000 units and 4,100 employees. Let us show you how Pinnacle Campus Living can exceed your investment expectations. 35 COMMUNITIES 17,000 BEDS 26 UNIVERSITIES 75 YEARS/EXPERIENCE PinnacleCampusLiving.com Rick Graf | Chief Executive Officer Ph. (214) 891-7846 rgraf@pinnacleliving.com Ted Broadfoot | Executive Vice President Ph. (214) 891-7802 tbroadfoot@pinnaclecampusliving.com Andrew Stark | President Ph. (212) 257-4841 astark@pinnaclecampusliving.com Bonnin: We help our clients feel comfortable in a number of differ- ent ways. We have a national platform, so our resources are numerous. At times, this can force us to have multiple regional managers in a certain market, just to mitigate any conflicts of interest or to keep that com- petitive spirit alive. Some of our clients would prefer not to have the same regional on their asset. Others, however, see the benefits of having the same regional working in the same market because it gives you an individual who is very familiar with the market. They also see the benefit of shared travel expenses and oper- ational expense savings by operating multiple properties in the same market. SHB: As an owner, what's the ROI on the deci- sion to outsource management? Collard: I've done the math, and on average a group will make 13 times as much money per hour on acquisitions or on a development than we do on management over the life of an investment. So it's a question you have to ask yourself: Is this where you want to spend your time? What's the best use of your time as some- one who's placing capital? Do you want to be worrying about landscaping? Tiering your rents? Staffing issues? There's a reason people hire third-party managers because it allows them to do what they do best. SHB: In your opinion, how large does a port- folio need to be before a company should con- sider bringing management in-house? Collard: I wouldn't even think about starting an in-house management group until I had about 12,000 to 15,000 owned beds. You see people doing it [at lower bed-count numbers], but you're not going to have the critical mass. It just depends on how vertically integrated you want to go. Bonnin: If you are not close to having 15,000 beds, it can be very difficult to make the num- bers work in justifying in-house management. We've worked with a few different clients who we knew were going to eventually take their management in-house once they reached a certain size. They'll engage us, we'll work for them for a few years and then they vertically integrate the operations. SHB: How large did you feel Student Quar- ters needed to be before you brought man- agement in-house? What was your bed-count benchmark? Harden: Property management is a scale busi- ness, and it is extremely costly to manage in-house until your portfolio hits a certain scale as there are back-of-the-house costs and resources that need to be spread out to make financial sense. We estimate that breakeven occurs around 7,500 beds, but we were willing to enter into the business once we hit the 5,000- bed level as it was our belief that the increase in asset value realized by managing in-house far outweighed the capital required to support the management business along the way. We have continually added new properties each quarter over the past year. The goal is to grow slowly and ensure that we are dedicating the proper resources within the management company JULIE BONNIN Chief Operating Officer Asset Campus Housing

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