Student Housing Business

JUL-AUG 2018

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

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Page 62 of 104

PORTFOLIO STRATEGIES July/August 2018 62 Destination: Consolidation Large portfolios provide the performance space high-sum institutional capital demands. By Lynn Peisner A Appetite for large portfolios is increasing as institutional buyers, domestic and interna- tional, flow into student housing looking for scale on the arm of an experienced operator. According to FourPoint Multifamily Invest- ments, approximately half of all total trans- actions in both 2016 and 2017 were portfolio trades. Dorothy Jackman, executive managing director of Colliers Student Housing Group, says she and her team are seeing consistently high volumes of portfolio trades, a trend that should sustain. "Given that there have been several significant large portfolios change ownership over the past five years, one could assume those same portfo- lios could poten- tially come to mar- ket again within the next two to five years, depending on hold criteria," says Jackman. Each owner and operator has its own unique strat- egy for buying, holding and selling assets in bulk. Here, we look at three owner/operators' modi operandi with large portfolios. The Scion Group (SHB #3 Top 25 Owner) The Scion Group has amassed the lion's share of large acquisitions with its institu- tional partners. Over the past two years, Scion partnered with Canada Pension Plan Invest- ment Board (CPPIB) and Singapore's sover- eign wealth fund GIC under the name Scion Student Communities. That venture complet- ed more than $4 billion in acquisitions, execut- ed in four large portfolio transactions between June 2016 and December 2017. "Our ability to complete over $4 billion in student housing investments in an 18-month period is unprecedented," says Avi Lewittes, Scion's chief investment officer. "It under- scores the proliferation of private institution- al capital interest in student housing, both domestic and off-shore, that has driven so much of the sector's growth and development activity over the last few years, and in our case, the opportunity for sector consolidation." Founded in 1999, The Scion Group spent many years investing in and building its operating platform while gradually evolving its capital ventures with increasingly larger institutional partners. In 2012, Lewittes joined Scion and he and President Rob Bronstein began focusing on a higher growth and con- solidation strategy to leverage the increased and more sophisticated capital interest in the sector. "We felt that the student hous- ing industry had lagged behind other asset classes within commer- cial real estate," Lewittes says. "Those developers and operators who have most success- fully raised and deployed capital over the past few years are now driv- ing the consolida- tion of the sector." Similar to the traditional investment the- sis adopted by the public REITs and other selected industry participants, Scion's strategy has been to invest in markets anchored by the largest tier-one public state universities. These schools are typically characterized by sus- tained enrollment growth, international brand recognition and limited on-campus housing supply. An ideal university profile includes a flagship institution with 25,000-plus students, Division 1 athletic programs and a STEM academic focus — attributes that make a uni- versity as attractive to international and out- of-state students as to in-state students. "What's also distinctive about our invest- ment strategy is that we don't look for a single property presence in our leading target mar- kets," says Lewittes. "Our strategy is to own multiple properties within these markets that reflect different product types, price points and locations, thereby enabling us to offer different types of residential experiences to a diverse student demographic base. With ownership and operating expertise across all of the major product types — high and mid- rise luxury properties, destination-oriented cottage and townhome style properties as well as traditional garden style — we are able to cater to a broader mix of the student body because we have something for everyone. It's somewhat of a unique strategy and enables us to attract leading in-market property person- nel while also providing for leasing, market- ing and other operating synergies through a larger and enhanced market presence." American Campus Communities (SHB #1 Top 25 Owner) American Campus Communities' strategy regarding portfolio dispositions, on the other hand, targets uniform assets within the port- folio. In applying disposition as a source of capital for development, ACC has been active in pruning its value-add assets and swapping them out solely for core properties. According to William Talbot, executive vice president and chief investment officer, ACC is not focused on bulk acquisition today. But in 2017, ACC bought seven properties from Core Spaces for $590.6 million. "This portfolio was very rare in that every asset was core, pedestrian to campus at major universities," Talbot says. "You don't typically see that." Talbot says ACC also liked this portfolio because two of the assets were existing and operating; two were set to open around the close date of the transaction; and three assets were under a presale structuring. AVI LEWITTES Chief Investment Officer The Scion Group DOROTHY JACKMAN Executive Managing Director Colliers Student Housing Group The James in Madison, Wisconsin, was part of ACC's portfolio acquisition in 2017 from Core Spaces and DRW Real Estate Investments. This was one of two properties that were set to open around the close date of the transaction.

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