Student Housing Business is the voice of the student housing industry.
Issue link: https://studenthousingbusiness.epubxp.com/i/488341
MARKET LEADER 76 MARCH/APRIL 2015 STUDENT HOUSING BUSINESS .COM acquiring land early on, we seem to have created a barrier to entry for many developers. With a busi- ness plan in mind, I went about planning development within a mile of the Virginia Tech campus core boundary. I determined that there was safety in housing rent- als that are well located near any large educational institution. All sorts of economic things could occur locally or nationally and the occupancy levels would be unaf- fected. We have done very lit- tle outside of those boundaries. I am a believer that, as long as you have the location, maintain your property, and understand spe- cialized management, there is no better investment. We go beyond what is required on general main- tenance. I pride myself on being able to drive by any of our proper- ties and they do not not look like "student housing" may appear in some markets. One of our goals is to keep the assets in better than good condition. You can look at our 20-year-old properties and they look great. As for operations, we have developed and refned a Property Management Playbook, leasing program, move-in/move- out policies as well as a handbook for students. We wrote our own policy manual in the mid-1990s and have rewritten and updated it over the years to accommodate market and legal changes. SHB: You mentioned that stu- dent housing is just one part of your business. What else are you involved with today? Stosser: We have done less and less single family development since 2008. We had some devel- opment going on in 2007 — 180 lots — that we are selling now. Because of our income stream in multifamily, we were able to hold that property during the banking crisis. We have been concentrating on The Edge and the rest of our multifamily portfolio. SHB: Does The Edge give you an edge in the market? Stosser: We believe it does. We have a wider range of offerings in the market now. We have both student housing and conventional apartments. Within that, we have different price points and styles that residents can choose from. We have a great relationship with Virginia Tech. Their focus has been on building a great research insti- tution. They have not been increas- ing enrollment by large numbers for a long time. The location of The Edge to campus is in itself an edge. We are closer to the class- rooms than some of the dorms. SHB: Where do you see the oppor- tunities in the future? Stosser: We have batted this topic around for a while. I have two more parcels that are developable for mixed-use or housing. We have begun to spend more time look- ing outside the area. I can't to go head-to-head with major devel- opers who will pay any amount of money to get into a campus. I have been kicking the tires on some projects that were built in the 1970s and '80s and that may need some rehab. We look for value add opportunities. I believe in invest- ing in those types of projects. Our management program and staff can easily handle 5,000 units and have been successful in those proj- ects. We believe we could expand as a third party manager easily if we choose to do so. SHB: What trends are you watch- ing in the student housing market nationally? Stosser: I have some concerns about prices paid for student housing in the industry. I have been through a couple of bub- bles. Some of the pricing and cap rates that are out there — I never thought I would see them in my lifetime. The pendulum will swing — it always does. Overpaying or over-leveraging a property based on today's cap rates is dangerous in my opinion. It is easy to be underwater when cap rates rise. With the fnancing that is out there right now, there could be some dif- fcult moments. The near failure of the banking industry scares a lot of people, including me. In 2008, you could not have gotten a loan to do anything. That has come full circle; we are risk averse. I like to make sure when we underwrite we can withstand future swings in the market. H A R R I S O N S T R E E T Focused Investments in Education, Healthcare & Storage Real Estate Since 2006 we have acquired or developed ~$4.0 billion in student housing properties more than 70 universities nationwide. As the largest private equity investor in the student housing space we continue to actively seek acquisition and development opportunities. 71 SOUTH WACKER DRIVE, SUITE 3575 CHICAGO, ILLINOIS 60606 W W W.HARRISONST.COM | 312.920.0500 ACTIVELY INVESTING IN STUDENT HOUSING Acquisitions • Developments • Dispositions