Student Housing Business

JAN-FEB 2018

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

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Page 37 of 88

THE SHB INTERVIE W January/February 2018 37 will become a familiar name. You will see the Pinnacle Campus Living/Centurion relation- ship growing over the next several months. SHB: Is this a set up where there is a minority owner and they are the majority of the equity? How are the deals structured? Stark: Pinnacle Campus Living does not own; we are purely third-party managers. Nate and I do the sourcing of the transactions and put the deals together for them. We work with Centurion on the underwriting of the transactions. SHB: What is your observation on the pricing that you are seeing in today's market? Stark: The market is going to remain strong for student housing. There are a lot of buyers who want to continue growing their holdings in the market. That has kept cap rates very stable. While we've seen some overheating in tradi- tional multifamily and other commercial real estate sectors, student has not been as affect- ed. Student housing is viewed as a defensive investment by many. SHB: How heated was the six-property acquisi- tion with Centurion? Stark: We specialize in finding properties before they are widely marketed, so there wasn't a bidding war. For the six properties that were acquired for Centurion, pretty much all of those were approached in a strategic fashion and there were not a lot of other buyers poking around. We got in ahead of the curve of interest. SHB: How would you describe those properties? Stark: There are some that are brand new, one is from the 1960s, some are core properties and others are value-add. It is truly a blended port- folio with a mix of core, core-plus and value- add assets with a nice return profile. SHB: What are your thoughts on the transac- tion with Scion, CPPIB and GIC acquiring prop- erties from Harrison Street? Do you think that is indicative of the role that foreign capital will play in student housing in 2018? Stark: I do think we are going to see more trans- actions like that. My opinion is that student housing remains a very attractive asset class. These groups are attempting to create a sense of mass and scale. There are several groups who have entered the space and they are attracting other groups. SHB: What about overbuilding in the student housing sector, is that a concern? Stark: Yes, in a handful of markets — maybe two handfuls — there has been oversupply. Once that starts leading into some problems, it will redefine those markets. It is hard to caution a developer beyond the timing of a potential sale. We have seen new development in markets that needed it, and that has been great. When we see thousands of beds coming online at once, like what we saw in Statesboro, Georgia, we must all be cautious of that. SHB Amenities at the Varsity on K include a fitness center, game room, fire pit and computer lounge. The Clubhouse at CEV Clemson West, a former Campus Evolution property near Clemson University in South Carolina, is now managed by Pinnacle.

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