Student Housing Business

MAY-JUN 2018

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

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Page 55 of 88

MANAGEMENT May/June 2018 55 AQUISITIONS DEVELOPMENT INVESTMENT Aggressively pursuing student housing developments and acquisitions in primary, secondary, and tertiary markets, up to 5 miles from campus. Acquisitions: Phillip A. Duke (310 435-1269 Development: Michael Augustine (435) 214-7431 DEVELOPED BY MANAGED BY money.' From our experience with foreign capital, their pencils are really sharp, they're looking for the same yields as institutional, pri- vate equity companies across this country. There may be a little more of an education process in terms of the actual asset class itself, but the returns they're looking for are very similar. Most of them come in in a concerted, educated way and have done a lot of work before they show up. I wouldn't say interna- tional capital is pushing up prices, just more capital and more inter- est in this space. There's a debate about risk-reward premium. Stu- dent housing is an operationally intensive business, much more akin to extended-stay hospitality than conventional multifamily, and at what point do cap rates start to stop making sense? I was just speaking with someone an hour ago that said that pedestrian-to- campus student housing in Austin, Texas, is trading tighter than Class A multifamily in Houston. Does that continue or can it continue? And is there actually value there? Byrley: You're right, [foreign inves- tors] are very seasoned and they have very detailed numbers. What we've learned is you really need to educate them on the why behind the numbers, not just what the numbers are. Student housing is a very nuanced and specific beast, so some of those specific expense cat- egories, you can't just cut or change certain numbers because there are very specific reasons behind those. That's a big thing for us. Petersen: Michelle, where do you really see people getting aggres- sive, whether it be overseas or domestic capital? Michelle Fuller-Wilson: Everyone has to sharpen their pencils. Five years ago, you'd have maybe five or six buyers looking at an asset. Now, it's 20-plus. People are start- ing to really have to be strategic, and as operators, we are the ones that have to deliver those expecta- tions. We usually will start right out front with the rent piece of it and just look at all of the economics and all of the supply and demand traits and trends in enrollment on a macro and micro level to see how far we can push it, what that prod- uct will allow, who is our student, how can we get there and really make sure we're maximizing every value for your rents. That is where you are going to get your dollars. We'll go to the expense piece, but those are pennies on top of what you can really add to value. Then, we look at every ancillary oppor- tunity and look at it from every angle. We look at the current in- place utility caps; we are not afraid to be the first ones into a market to start charging back the students without jeopardizing the pre-leas- ing velocity and the ultimate angle. We will do a balancing act of where we can push on charging back util- ities — do the kids really need their cable to be paid anymore? I know my millennials watch television from Netflix on their iPads. Is cable required as a competitive advan- tage anymore? We're always trying to determine those buying behav-

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