Commercial Investment Real Estate March/April 2013 | Page 19

debt, which greatly minimizes the project’s impact on its credit rating/debt capacity. High Expectations. Institutions across the country are facing the same situation: Much of their on-campus housing stock consists of 1950s- and 1960s-built dormitories that may no longer carry debt but still require a tremendous amount of ongoing capital for operations and maintenance and fail to meet the higher expectations of today’s students. As a result, university administrators need to replace these outdated buildings with new residence halls featuring the amenities that attract students. Furthermore, because universities only house about 30 percent of students on campus, there is opportu- nity to modernize housing both on- and of-campus. Fragmented Sector. Te top 10 student- housing owners own fewer than 10 percent of total housing stock, so there is also oppor- tunity to consolidate. Trough consolida- tion, national operators can take advantage of management efciencies and economies of scale and improve the operating perfor- mance of stock acquired from local frms. However, some local student-housing frms know their market extraordinarily well and could teach the national frms a thing or two. Just as with acquisitions in other sec- tors, it’s important to take the time to explore what’s being done well. Investor Challenges Despite attractive demographic and national trends, savvy student-housing investors must pay very close attention to the individual markets they are consider- ing for investment. Tis includes gaining a thorough understanding of a market’s supply/demand fundamentals, barriers to entry, and the overall campus culture of the particular institution. While occupancies and annual rent growth are great macro-level data points to test a market’s overall health, investors should dig deeper to ensure that they are identifying well-positioned opportunities within a specifc market. For example, a luxury student-housing project may not work at a public commuter institution with a price-sensitive student body, but it could work at a state fagship institution with a signifcant number of nonresident students willing to pay a tuition premium for the out-of-classroom experience. Tis type of market analysis applies to both on- and of- campus housing investments. Finally, student housing is management intensive and the experience of the manage- ment frm or operating partner will play a key role in infuencing investment perfor- mance. Te compressed leasing cycle, high tenant turnover rate, and unique property- level training require a seasoned operations team. Best advice: Select your management partner early in the process. Dan Bernstein is executive vice president and chief investment officer of Campus Apartments based in Philadelphia. Contact him at [email protected]. Log on for the latest CCIM member beneft National Virtual Deal Making Session CCIM Designees present property listings to CCIM members and prospective buyers in a free webinar. TUEAPRIL 2ND — Offce TUEOCTOBER 1ST — Land TUEJUNE 4TH — Industrial TUEDECEMBER 3RD — All properties TUEAUGUST 6TH — Retail Don’t let this exclusive opportunity pass you by. Register for the APRIL 2ND session today. Visit for more information. Registration will close the day prior to the session at 12 p.m. Central. March | April | 2013 