Student Housing Business

JUL-AUG 2018

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

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PORTFOLIO STRATEGIES July/August 2018 70 you begin to see a decline in the high-net- worth and private syndication buyers," says Fitts. "They can buy an individual asset for $50 million or $60 million, no problem. But raising $100 million to $200 million becomes a little more difficult for these buyers. This is apparent when you study the decrease in private investor acquisition volume since 2015, prior to the recent portfolio transaction trend. In 2015, private investors accounted for 47.3 percent of transactions. In 2018 year-to- date, private investors only account for 31.8 percent." Buyers and sellers can differ in what they're looking for in a portfolio. Buyers tend to favor cohesive portfolios. Buyers may, for example, only want to be in the Southeast or at Power Five schools. ACC has a process in place to create portfoli- os for disposition, Talbot says: "We go through an in-depth analysis and we look at growth projections, product and rent position in the market and future supply-demand ratios, then come up with a pool of assets and determine, are they better sold in consolidation or are they better sold separately? When you sell a portfo- lio, one thing we believe to be very true: they have to be homogenous assets to maximize value." Ryan Lang, executive managing director of ARA Newmark Student Housing says value-add is just as popular as core. "We've seen a great variety of portfolios come to market throughout the first half of this year," Lang says. "The portfolios have been well balanced between core and value-add offer- ings. In fact, of the six portfolios we've taken to market this year, three have been core, and three have been value-add." While buyers want uniformity, sellers some- times find an advantage to adding a lesser- performing asset in with higher performers to achieve a better premium. "There's enough interest from buyers in the market to place capital that they'll take some of the good with the bad," says Fitts. "You could see pricing range from 25 to 30 basis points lower in cap rate because of the portfo- lio premium." Jackman sees Tier 2 market portfolios gain- ing interest and expects to see packages of such assets coming to market in the near future. Epp says that the main attribute that portfolio buyers are seeking is homog- eny across the portfolio — simi- lar sizes of the uni- versities, distances to campus, vintage of properties. Even if they're not the most popular or headline-grabbing metrics across the portfolio, there's a foot for every shoe, says Epp. "What we've found is that no matter what type of portfolio, it just needs homogeny," he says. "We're cur- rently selling a few portfolios of properties that are older and farther from campus, but they're all very, very similar in terms of markets, property condition, and distance to campus. In general, large portfolios have come into vogue, and from my vantage point, that doesn't show any signs of slowing down." SHB CHRIS EPP Principal and Co-Founder FourPoint Investments WHERE EXCELLENT STUDENT HOUSING POTENTIAL, MEETS ESI PERFORMANCE. | 208.362.3040 CHALLENGE ACCEPTED RYAN LANG Executive Managing Director ARA Newmark Student Housing

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