Student Housing Business

JAN-FEB 2018

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

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CAPITAL MARKETS UPDATE January/February 2018 48 where we want to be and have a good sense of the owners who own in the markets where we are interested." "There are some groups sitting on the sidelines due to current pricing," adds Klig- man. "Especially those seeking opportunis- tic returns. At Vesper, we believe the student housing sector still offers superior risk-adjust- ed returns, despite aggressive pricing. We will close the acquisition of seven student housing properties during the next 60 days and plan to accelerate our growth during the remainder of 2018." Cycle Change One of the factors affecting the sale of newer student housing assets has been the amount of time it takes for a property to get planned, entitled, designed, built, leased and stabilized before it is sold. The cycle from development to first sale has been extended, mainly brought about by changes in the construction mar- ket. With a shortage of construction labor and increases in labor and materials costs, projects have moved from two-year construction peri- ods to three years; that pushes stabilization back, extending the cycle to a longer term before the time that a first sale may happen. Two-year stabilization periods are also becom- ing more common so owners can show the per- formance of a property over two years. "Over the past few years, the development cycle has extended from two years to three years and now we are also seeing a stabiliza- tion cycle extending from one year to two years," says Lewittes. "Timing from devel- opment to stabilization had historically been three years; that could be as long as five years now. That is an interesting shift for the sector and certainly impacting the timing and volume of transaction activity." International Capital Offshore money continues to ally itself with U.S. student housing players, fueling activity in the industry. At press time in January, GMH Capital Partners announced it had partnered with London-based ACG Equity Partners to fund the acquisition and development of U.S. student housing assets. "For the past two years, foreign investors have become the biggest investor profile," says Vonderfecht. "Every year prior to that, it was private investors. That clearly demonstrates the strong foreign interest and the further insti- tutionalization of student housing. From our transactions in 2017, foreign investors and pri- vate investors make up about 60 percent of the buyer profile. In the past 60 days, we closed 12 assets; five of those assets went to foreign investors." Other entries of foreign capital to the U.S. student housing market in 2017 include Sin- gapore-based Centurion, which entered the market in partnership with Timberline Real Estate Partners as asset manager and Pinnacle Campus Living as property manager, and Can- ada-based QuadReal Property Group, which invested $600 million with CA Student Living and GI Partners. "In our discussions with various groups, there is still a significant amount of global capital that wants to expand in or enter the U.S. student housing sector," says Talbot. With more capital and a larger institutional presence in the market, and a growing number of factors constraining development, a lot of buyers seeking quality student housing assets are feeling the pressure. Owners of properties on the other hand, have a dilemma. "It's a great time to be a seller," concludes Phillips of Texla. "Available existing purpose- built student housing seems to be more scarce than ever and available equity appears to be steadily increasing. Given these conditions, sales should continue to be brisk for 2018." SHB 2017 – 18 TRIAD REAL ESTATE PARTNERS ™ UNIVERSITY OF NORTH CAROLINA RESEARCH REPORT TRIAD REAL ESTATE PARTNERS ™ UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN RESEARCH REPORT 2017 – 18 TRIAD REAL ESTATE PARTNERS ™ MICHIGAN STATE UNIVERSITY RESEARCH REPORT 2017 – 18 TRIAD REAL ESTATE PARTNERS ™ UNIVERSITY OF SOUTHERN CALIFORNIA RESEARCH REPORT 2017 – 18 TRIAD REAL ESTATE PARTNERS ™ THE UNIVERSITY OF ALABAMA RESEARCH REPORT 2017 – 18 TRIAD REAL ESTATE PARTNERS ™ FLORIDA STATE UNIVERSITY RESEARCH REPORT 2017 – 18 TRIAD REAL ESTATE PARTNERS ™ UNIVERSITY OF COLORADO BOULDER RESEARCH REPORT 2017 – 18 TRIAD REAL ESTATE PARTNERS ™ UNIVERSITY OF WISCONSIN - MADISON RESEARCH REPORT 2017 – 18

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