Student Housing Business is the voice of the student housing industry.
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CAPITAL MARKETS 40 NOVEMBER/DECEMBER 2015 The Year Ahead Even with the complexities and challenges that come with the cur- rent student housing fnancing envi- ronment, the overall lender appetite for student housing continues to be strong — and there's no sign of that slowing into the new year. "Lenders will always have an appetite for projects with strong fundamentals and sponsorship," says Sarah Candy, vice president and senior relationship manager for Bank of the West's student housing lending business. Bradley agrees. "Lender appetite is strong, but, as we have always stated, the underwriting starts and ends with the sponsor's expertise, fnancial strength and, obviously, a good project," he says. Looking ahead, Bradley believes 2016 will be business as usual, but lenders will be more conservative on the construction side and perma- nent side of the business. Like many, Candy anticipates higher interest rates and more con- servative underwriting. "More than a few industry play- ers are anticipating higher rates in 2016," Weaver agrees. "Our volume of early rate lock deals is way up. Borrowers are wanting to rate-lock before year-end on refnances that won't close and fund until April or May 2016." "We are working on 10 to-be-built deals and the refnance side is stron- ger than ever," Weaver adds. "We will book our biggest year ever in 2015 and we are staffng up for a bigger 2016." As for the cap, while there is no offcial statement as of press time that it will be instituted again in 2016, industry experts fully expect it to carry into next year. "We think it will continue to be challenging, but that doesn't mean Freddie Mac won't be active," Mar- tinez says. "We're going to have an incredible year in 2015, and we anticipate having another very good, solid year in 2016." The good news, from Freddie's perspective, is there's less new construction so there's less supply entering the student housing market in 2016. "We think that is a good thing," Martinez says. "It takes some pressure off the existing supply." However, Martinez anticipates that treasuries and spreads will be up, so sales will be down. Dis- cretionary refnances may also be down, he predicts, so there may be fewer business opportunities in stu- dent housing in 2016. Even with these concerns and challenges, Martinez says Freddie still likes the student housing space. "There's stability in college towns, as they're less subject to economic cycles," he says. "Student housing is one of the better performing special- ty products that Freddie Mac fnanc- es. So, even with the challenges at hand, they are challenges we believe we're up for." Stepchuk agrees: "I do expect to be faced with the cap again in 2016, but I also expect Fannie to be quot- ing and winning business, just like this year." SHB WHERE STUDENT HOUSING POTENTIAL Meets PERFORMANCE A Top 10 Buyer of Student Housing since 2007, Pierce Education Properties is a major national investor and operator of student apartments. Through our acquisitions of core, core plus and value-added assets, we have: • Completed approximately $600 million in acquisitions since 2007, representing approximately 14,500 beds • Targeted $600 + million in acquisitions over the next three years • Developed extensive capital relationships for best-in-class investment capacity and execution Our growing team continues to maximize value through positive investments. We are industry leaders with proven experience, innovation, and success. P I E R C E E D U C A T I O N P R O P E R T I E S . C O M Contact our acquisitions team at 619-297-0400 or email mmaruccia@PierceEducationProperties.com to discuss potential opportunities. INVESTMENT SPOTLIGHT: South Duff Community Park, a 490-bed, 192-unit community serving Iowa State University students, is a premier off -campus student housing community just southeast of the Ames, Iowa campus. $600 MILLION IN ACQUISITIONS 1995 2015 2 0 T H A N N I V E R S A R Y " More than a few industry players anticipate higher rates in 2016. Our volume of early rate lock deals is way up. — Lee Weaver, Senior Vice President/Senior Director of Debt and Equity, NorthMarq Capital JOSEPH STEPCHUK Director of Customer Account Management, Fannie Mae