Commercial Investment Real Estate March/April 2016 | Page 27

Partners With Deep Pockets
Will Kreuzer, CCIM, successfully com-
pleted retail developments for students at
University of Illinois, Illinois State Uni-
versity, and Indiana University. When his
small f rm dabbled in mixed-use retail and
student housing at Indiana University in
2005, he realized that his company needed
a development partner with deeper pockets
and student housing management experi-
ence to be successful in this arena.
“Now a partner and I identify where we
can build mixed-use retail and student
housing projects and then we bring in CA
Ventures, which manages real estate proj-
ects nationwide and has invested $1 billion
in student housing,” says Kreuzer, a princi-
pal of Tartan Realty Group in Chicago. “T e
growth and stature of the university corre-
lates to its ability to demand higher year-
over-year rent growth.”
He sees opportunities for the mixed-use
retail and student housing as being especially
strong on urban campuses, which are not as
af ected by ebbs and f ows of student depar-
tures for breaks and vacations.
“Student housing is a niche that our f rm
in partnership with CA Ventures really tar-
gets to kids coming from higher household
incomes who want amenities and security,”
Kreuzer says. “T e opportunity is there, and
we have f gured it out on a few campuses.
For the Midwest universities where we have
combined student housing with retail, the
keys are bed to bathroom parity, developing
a safe and secure environment, great WiFi,
and study rooms on each f oor.”
Unusual Challenges
In Huntsville, Texas, Sam Houston State
University has seen a steady 3 percent
growth in enrollment due to more aca-
demic programs that attract larger numbers
of freshman students. While SHSU has a
$70 million 800-bed student housing proj-
ect underway, as well as private develop-
ment of similar student housing, the college
population is expanding faster than new
housing development. Also, the land avail-
ability close to campus is limited, according
to Jon Montoya, CCIM, associate broker at
MariRealty.com in Huntsville.
“Still there’s a great opportunity for out-
side investors to buy land and develop stu-
dent housing,” says Montoya, who originally
moved to Huntsville to retire and lef retire-
ment to work with many people involved
with SHSU in brokerage and development.
While still a niche of multifamily hous-
ing, of -campus student housing has come
into its own as a top investment choice for
institutional investors, REITs, and private
equity funds. As long as U.S. and Canadian
universities continue to draw more students,
especially those from international coun-
tries, this sector should thrive and provide
multiple opportunities for CCIMs to close
transactions, build developments, and work
with investors or invest themselves.
Sara S. Patterson is senior editor at
Commercial Investment Real Estate.
STURDY INVESTMENT TREND
While every university campus and each student population has specifi c nuances, nationwide, luxury
student housing in rural and urban settings has become a top investment for the institutional asset class,
according to Jaclyn Fitts, national director of student housing at CBRE in Dallas.
“We see universities and developers buying older homes close to campus, tearing them down, and
building new pedestrian-oriented, amenity-rich student housing,” Fitts says.
Real estate investment trusts and other large investors are adamant about investing only in student
housing close to campuses in the last few years, according to Fitts. There’s 100 basis point difference in capitalization rates
between student housing that’s farther from campus and walkable student housing.
Overall, universities in the U.S. are growing because of the large millennial generation, more students attending college, and
the rise in international students. “The beauty of international students is that they like furnished apartments and have been the
primary drivers for amenity-driven student housing,” she says.
The investment appetite for student housing grew from $3.6 billion in 2014 to $5 billion 2015. The average cost per unit was
$135,800 in 2014 versus $158,300 in 2015. The jump in student housing investment compares to a smaller increase of $34.8
billion in 2014 to $49.1 billion in the highly touted multifamily marketplace, according to Byron Moger, executive director of
multifamily business development and client services for Cushman & Wakefi eld in Tampa, Fla.
“Even though student housing is only about 10 percent of multifamily marketplace, it has become much more powerful in the
last fi ve years,” Moger says. “The price and amenities for off-campus student housing have risen signifi cantly.”
Overall, it’s a great market for investors, he says. For the variations from one university to the next, commercial real estate
professionals have to consider the number of students, if that number is increasing year over year, how many students need off-
campus housing, and what off-campus student housing is available.
“Especially in urban centers, many students still look for housing in the general rental market,” Moger says. “The solution is
not to offer the same amenities and to focus on including high-speed Internet and many opportunities for social interactions
among the students. In most markets, there’s plenty of demand.”
CCIM.com
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