Student Housing Business

MAY-JUN 2018

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

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MANAGEMENT May/June 2018 StudentHousingBusiness.com 52 Walking the Tightrope The challenge of managing and operating properties with aggressive pro formas and owner expectations. Transcribed by SHB Staff M Managing and operating properties in today's student housing market is a challenge, as operators look to balance aggressive pro for- mas with high owner expectations. At this year's InterFace Student Housing conference, Student Housing Business brought together a team of experts to discuss the current environ- ment. This panel, titled "Walking the Tight- rope — The Challenge of Managing and Oper- ating Properties With Aggressive Pro Formas and Owner Expectations," included Michelle Fuller-Wilson, managing director, Greystar; Adam Byrley, executive vice president, The Preiss Company; Grant Collard, CEO, Red- stone Residential; Ari Rosenblum, founder and CEO, Vie Management; and moderator Casey Petersen, chief operating officer, Peak Campus. Following is an edited transcription of the conversation. Casey Petersen: The sector has matured a lot over the last several years — a lot of new play- ers, a lot of different philosophical approaches to operating and budgeting. We're all facing a lot of the same challenges. How do you view the current landscape of underwriting expec- tations on projects in your portfolio? Adam Byrley: We don't have any hard pro formas. We all know that returns are getting tighter. Everyone is getting squeezed. Those expectations have increased exponentially on our side as an operator. We have two different ways we get pro formas into our shop — one is with our own operating time on the 'own' side, and then some we get dropped to us on the third-party side. When you get squeezed like that, at least on the stuff that we own, you can go back to your team and say, 'no.' On the third-party side, they've gone through a lot of time and effort to vet these numbers, and sometimes they work and sometimes they don't. It's really just that the third-party guys need to involve the operator a little bit more on the front end. We're going to talk about get- ting squeezed, where the expenses are getting cut, where revenues are getting increased and I think this sort of sets the tone for the rest of this panel. Petersen: To that end, Grant [Collard], maybe you can talk to us about you've seen? You've been in this business for a while, and you've seen a lot of deals get done. How has the land- scape changed over the course of the years? Grant Collard: It has changed a lot. Five years ago, I felt like every deal that we walked into just magically worked. We'd walk in, and maybe the property was sold at a trailing 6 percent cap, and there was a clear-cut path to add value. There might be some very easy management switches to make, but no longer can you just assume, 'oh, the guys that were running this property before were idiots and they didn't know how to run the project, and now we're geniuses, and we've showed up and it's going to work out perfectly.' There are a couple of things that I see, especially on the expense side, that are difficult right now. Pay- roll, for example; we're not finding a mainte- nance tech that can hold the zone for $12 per The "Walking the Tightrope" panel at the 2018 InterFace Student Housing conference included (from left): moderator Casey Petersen, Chief Operating Officer, Peak Campus; Michelle Fuller-Wilson, Managing Director, Greystar; Ari Rosenblum, Founder and CEO, Vie Management; Grant Collard, CEO, Redstone Residential; and Adam Byrley, Executive Vice President, The Preiss Company. " We all know that returns are getting tighter. Everyone is getting squeezed. Those expectations have increased exponentially on our side as an operator. — Adam Byrley, Executive Vice President, The Preiss Company

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