Commercial Investment Real Estate March/April 2013 - Page 18

INVESTMENT ANALYSIS Big Money on Campus Student housing remains a lucrative investment. e by Dan Bernstein Economic cycles close the door on some opportunities while opening the door to others. In the case of student housing, all key indicators suggest that the door continues to remain wide open — promising the availability of attractive investment opportunities for years to come. 16 March | April | 2013 T e current economic climate has caused business leaders across industries to shif gears by f guring out how to do more with less, and academic leaders are no excep- tion. To that end, colleges and universities are now turning to the private sector to f nance their new student-housing projects with greater frequency than ever before. T ese partnerships, if structured properly, af ord developers and investors access to precious and normally unobtainable land that, considering the recession-resistant demographics of higher education, should result in attractive, risk-adjusted returns for decades. Beyond the shif to the private sector, other positive macro-level fundamentals indicate the investment strength of student housing, whether it is on- or of -campus. College-age cohorts are keeping demand for housing high, but today’s students are not settling for the same dorms of their parents’ era. Against this backdrop, developers and investors alike can rest assured that the sector’s outlook is as bright as ever in 2013. Rising Demand. Reduced endowments and continued declines in state funding have produced budget cutbacks, hiring freezes, and reductions in capital spending on college campuses across America, at a time when many institutions are experiencing all-time highs in enrollment. College-age cohorts will remain above the 5 million mark annually through 2020. T ese population projections should translate into steady undergraduate enrollments throughout this period. Private Capital. Generally, capital spend- ing budgets are extremely tight with most institutions preferring to preserve their debt capacity for those projects that support the core academic mission. Public-private partnerships of er advan- tages to both sides. For student-housing developers, these arrangements provide access to unparalleled locations, which can of er better risk-adjusted returns over the long run. For colleges and universities, these partnerships deliver new, state-of-the- art facilities, while the developer typically assumes the f nancial burden and risk asso- ciated with the project. T e end result is that the university usually incurs only indirect Commercial Investment Real Estate Investment Outlook