Commercial Investment Real Estate September/October 2017 | Page 34

Tier One 2016
Year-End Report
Tansey brokers transactions
and develops retail opportu-
nities for the University of
Iowa campus in Iowa City,
20K+ Enrollment
Iowa. Previously, he was an
owner of student housing
properties.
%
“We work to educate small
Total Transactions
2015 | 169
investors about student hous-
ing, which is not a quick-
profit investment,” he says.
%
“Cap rates are below market,
Total Units Sold
2015 | 29,870
and undergraduate students
are not good caretakers of
properties.”
Likening student hous-
%
ing
to an arms race,
Total Beds Sold
2015 | 72,693
he says as an owner it’s
tough to keep up with
needed renovations and
%
$
desirable new amenities. As
Total Sales Volume
2015 | $3.2M
an alternative, Tansey finds
the student-specific retail
market is a good niche for
investment.
%
$
While Iowa City is a
Average Price per Unit 2015 | $199,298
tertiary market, Tansey
is working with more big
players because “lots of
$
%
opportunities in the primary
Average Price per Bed 2015 | $73,439
and secondary markets are
picked over.”
Source: Real Capital Analytics published by Colliers International
Student Housing Group
On the upside for invest-
ment, “student housing does well when the econ-
omy is strong and is stable in down cycles,” Tansey
says.
37.3 232
39.0 41,509
47.4 107,175
46.4
4.685M
0.81 200,915
-7.72 67,769
Building Reputation
Establishing and maintaining a good reputation at
universities is a top priority. Those colleges attract
high-quality students, drawing from greater num-
bers of applicants.
“Due to the substantial capital investment
required to develop and establish real estate invest-
ments, it is risky for an investor to be the first to
move into areas where a particular university has not
established its gravitational pull for attracting other
viable commercial endeavors,” says Mario Guevara,
CCIM, real estate project manager at Silver City
Partners Ltd. in Winter Park, Fla.
The management of student housing investments
requires providing capital management, overseeing
the property, and keeping up with the local eco-
32
September | October 2017
nomic pulse. “Due to constantly evolving tastes,
student housing assets have to comply and conform
to market trends, which usually means large capital
infusions,” he says.
In Guevara’s market, the University of Central
Florida hit its stride in the 1990s and has been
strengthening its undergraduate and graduate pro-
grams ever since. Through its 54 years of operations,
increasing numbers of its graduates have found good
jobs locally.
For instance, UCF provides many engineers to
nearby Cape Canaveral. Specialized positions in the
military, Walt Disney World, and other entertain-
ment businesses are other good employers for UCF
graduates.
Describing the Orlando metro area as “bursting
at the seams,” Guevara sees UCF spurring multiple
offshoots, which create opportunities for other busi-
nesses to flourish. In turn, this propels demand for
more commercial property development.
Midwest Hub
College towns like Columbus, Ohio, often have
more than one major university to support the
expansion of student housing, as well as other com-
mercial property development. Yet even with 20
universities and colleges in the Columbus metro
area, The Ohio State University stands out for its
consistently robust enrollment growth — between
5 and 10 percent annually. During the past five
years, higher numbers of students have fueled
nearly $2 billion in construction.
Of that budget, 25 percent was invested in reno-
vations and newly built on-campus dorms to support
Ohio State’s mandate in 2016 for sophomores to live
in on-campus university housing. Previously, only
freshmen had to live on-campus.
Despite the loss of sophomores to on-campus hous-
ing, Steve Reynolds, CCIM, predicts 10,000 more
residential units will be added to the core urban cen-
ter of Columbus. “I don’t see any reason for student
housing to slow down here,” says Reynolds, owner of
Pinnacle Associates in Grandview Heights, Ohio. “If
the economy tanks, Ohio State enrollment will not
decrease from 66,000 students to 33,000.”
As an investor in student housing, he advises
buyers “to buy right, sell right, and know what
you’re buying into, such as student housing built
close to campus.”
Retail Gems
In the past decade, some large universities show sig-
nificant shifts in students living on campus versus
COMMERCIAL INVESTMENT REAL ESTATE