Student Housing Business

JAN-FEB 2018

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

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QUESTION OF THE MONTH January/February 2018 28 What do you predict we will see during 2018? In 2018, the student housing industry will ben- efit from the "wealth effect." 2017 was an unbe- lievable year for stocks, as the Dow grew by 25 percent and the Nasdaq by 28 percent. I suspect that many parents are feeling quite comfortable with the value of their college savings accounts and that we will see a student consumer that is less price conscious than in prior years. This should bode well for those owners that offer a high quality product and experience, as there will be less competitive pressure from low cost providers. David Adelman, Campus Apartments Looking forward, I expect the public equity markets to recognize the significant discon- nect between discounted public valuations and record pricing for private student housing assets. In 2017, global private capital contin- ued to aggressively invest in domestic student housing, acknowledging that the sector remains in an early phase of expansion. This "smart money" understands the appeal of consistent organic cash flow growth, combined with the opportunity for incremental return through new acquisition or asset development in a sector that continues to be one of the most fragmented and least competitive in all of real estate. Bill Bayless, American Campus Communities We believe that more intensive focus on property operations will be a key determinant of performance in 2018. Leasing headwinds in select markets last year underscore the need to market, transact and serve students more effectively through the media channels in which they communicate. Scion contin- ues to invest significant human and financial resources in inno- vative technology and sophisticated data analytics to optimize the impacts of our social media and targeted digital marketing initiatives. These strategic investments can be rationalized by the enhanced scale and growth of our national portfolio. Rob Bronstein, The Scion Group I haven't been very good with predictions since I dropped my Magic 8-Ball on the sidewalk in junior high, so I'll try to make sure this reply isn't hazy. I believe we'll see that the hur- ricanes in Texas and Florida and the wildfires in California that occurred in 2017 will have a lingering effect on student housing and development projects in general. There's a lot of rebuilding still to be done in those areas, which will put pres- sure on the construction labor markets in those and nearby states. That demand for construction workers will make it challenging to get some new projects off the ground in 2018. Randy Churchey, EdR I will beat Randy Churchey in a 7-iron chal- lenge and William Talbot will land a 360 in wake surfing. In other industry news, 2018 will see a continued growth in institutional capital invest- ment, expanding the sector's ability to both inno- vate and mature. Marc Lifshin, Core Spaces • Several major markets will be grievously over-built based upon "It Never Rains in Southern California" proformas. • The resort lifestyle amenity race will continue unabated: Jumbotrons standard in every living room; free massages daily; gourmet chef and butler services with early renewals. • "What? Me Worry?" capital will continue to slosh into stu- dent housing space. • Interest rates will continue to rise, cap rates will follow slowly as market players resist the end of the party. • Spread compression on debt will ameliorate some of interest rate rise, however capital providers will resist. • Magical thinking will continue to prevail (i.e., this time is different, this expansion will continue ad infinitum, it's the other guy's project that won't fill up). Nathan Collier, The Collier Companies Despite predictions to the contrary by some, international student enrollment will be report- ed as declining due to Donald Trump's hostile stance towards immigrants. The 2017 figures will be reported in 2018. Peter Stelian, Blue Vista Companies In 2017, the student housing industry experienced another stellar transactional year totaling north of $8.25 billion. The sector saw multiple large portfolio sales of core and core-plus assets, as well as continued portfolio pruning by the REITs and private equity firms. Both REITs slightly missed guid- ance late in the year, and as such, Wall Street analysts unfairly valued their stock prices. This is surprising considering the REITs' portfolio average occupancies are well above 95 per- cent, with most of the negative performance being reported in only a few select submarkets. This does not represent the industry as a whole with the majority of student housing markets still performing quite well. New international capital coupled with fresh domestic equity alongside seasoned sponsors will continue to dominate the transactional landscape in 2018. The sector will experience between $7.5 billion and $8.5 billion of activity this year. Peter Katz, Institutional Property Advisors I predict that all operating partners in the space will not achieve 95+ percent occupancy with 3 percent year-over-year growth and pre-leasing ahead of last year as they all state during confer- ences and in their marketing material. Christopher Merrill, Harrison Street Real Estate Capital We'll continue to experience a decline in international stu- dents, affecting the off-campus housing market in the second rung of Tier 1 schools. To stay competitive, our industry will need to proactively respond to increasing expectations of con- sumer smart home/tech trends (accommodations for online food deliveries, Alexa/Google Home, etc). Thankfully, we see continued movement away from the common area "amenity race," with more focus on true value — considering price and services. Watch those online reviews to know what residents want. Mike Peter, Campus Advantage

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