Student Housing Business

NOV-DEC 2017

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

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and treasury management services along with deposits. As a result, capital is not as read- ily available — or as inexpensive — for less experienced student housing borrowers that may be doing a one-off student housing project. "It is very difficult for new stu- dent housing sponsors and guar- antors who are young to go out and find new lending relationships for construction dollars today," says Bradley. "We saw an increase in LIBOR for construction loans in 2016, and we've continued to see that in 2017. Most spreads for construction loans range from 290 to 325 basis points above LIBOR, which has risen 100 basis points over the past 12 to 18 months. Upfront fees have also risen as banks attempt to actually make some money on providing con- struction dollars from the balance sheet." In addition, syndication of loans — having multiple parties as lend- ers — is much more common today than in the past. "Construction financing will cost more and be lower levered than it was two years ago, but banks are actively lending to strong, experi- enced borrowers," says Bradley. The biggest challenge to under- writing deals, say lenders, is loca- tion. While some markets have experienced overbuilding, other markets still have demand for new product. "The challenges in the sector are for those markets that have not absorbed their new supply and have more on the way," says Whitehead. "Even if your project is leased to 100 percent, there is the concern that rents may not be able to be maintained if the competition brings down the market rents." The concern with oversupply has somewhat dampened lenders' once enthusiastic confidence in the sector. However, looking ahead, all the lenders SHB spoke with predicted 2018 would be another strong year for the space. "There's muted optimism in the student housing space right now," says Martinez. "There's a recogni- tion that there are more than a few markets with overbuilding. Over- all, the sector is very good, but when you look at some specific markets, some of them are suffer- ing. Some markets are fine. People in the industry are optimistic but they are not quite as enthusiastic as they have been in the past. They are excited about the institutional and foreign money coming into the space." "The sector has benefited from huge amounts of market data collected by dedicated market research companies, brokerage firms dedicated to student hous- ing and industry organizations," says Welsh. "The data has encour- aged large institutional investors to enter the sector, typically by partnering with experienced own- ers and management companies, which has brought a tremendous amount of liquidity and new capi- tal for student housing properties. While cap rates have compressed in recent years, student housing properties generally still trade at a discount to conventional multi- family, leading many investors to believe that student housing is still relatively undervalued." SHB November/December 2017 CAPITAL MARKETS 80 Visit for daily rates, recent transactions and more! C O M M E R C I A L R E A L E S T A T E D E B T , E Q U I T Y A N D S E R V I C I N G As the nation's largest privately-owned servicer and provider of commercial real estate debt and equity, NorthMarq Capital has the strength and stability to execute transactions with certainty and deliver results that suit even the most unique needs. Your real estate financing should be built on "when"... not "if." TIMOTHY BRADLEY Principal, TSB Capital Advisors Want student housing news delivered to your inbox? Subscribe to our e-newsletter at

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