RealPage also reported that overall pre-leasing occupancy rates have climbed to record-highs for the Fall 2022 semester. Why I Stopped Buying Treasuries To Buy REITs Instead Any market data quoted represents past performance, which is no guarantee of future results. These cookies are necessary for the Savills website to function. Most universities only provide housing for 20 percent of their students, traditionally freshmen, he says. Most of the previous residents left, and yet we quickly reached 100 percent occupancy.. 15 April 2019, All content copyright document.write(new Date().getFullYear()); Savills. Tours range from 15 - 45 minutes, based on the scope of the tour. In fact, during times of economic weakness, colleges may actually see higher enrollments as people who may not have otherwise attended college elect to leave or defer entering the job market in. Below, we see the enrollment trends from the last several years from the National Student Clearinghouse Research Center. A complete list of holdings and additional important disclosures is available at www.HoyaCapital.com. In recent years ACC has pioneered on-campus housing development in joint ventures with universities. Student Quarters manage in excess of >US$1.1BN across off campus US Student Housing. Analysts Disclosure: I/we have a beneficial long position in the shares of RIET, HOMZ, ACC either through stock ownership, options, or other derivatives. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy. Our integrity, honesty and professionalism is what gives our clients, colleagues, investors and business partners the confidence to work with us. Copyright Nareit 2023. Student housing REITs have decent opportunities to excel on demand for on-campus developments from universities. Although operating within the same narrow vertical, the stock exchange-listed student housing REITs have each carved out targeted niches. 1-202-739-9401 (fax). While real estate ownership is the primary revenue source, these REITs also offer development, consulting, and management services to university partners. As we stated above, the sector trades at an estimated 0-10% discount to NAV, far better than the 20%+ discount it traded in early 2018. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. Once viewed as a riskier asset class than traditional apartment REITs, the sector has matured over the last decade, no doubt helped by the robust demand for student housing associated with the enormous millennial generation. Student housing owners depend on stable or rising college enrollment, particularly at public universities. With the majority of ACC's portfolio comprised of off-campus housing units - unaffiliated with a university - there should be an implicit level of "fungibility" or correlation with the broader non-purpose built housing stock that had appeared to be under-appreciated by the market based on its pre-acquisition valuations. American Campus Communities - along with the broader student housing sector - have delivered a swifter-than-expected rebound as students at flagship universities returned to campus for the 2021-2022 academic year. Following a strong first quarter in which same-store NOI growth surged 5.1% on impressive expense control, second-quarter earnings were generally seen as a step backward. Residential REITs: A Guide for Investors - SmartAsset Data quoted represents past performance, which is no guarantee of future results. Industrials, SFR Lead a Mostly Down Week for REITS | GlobeSt REITs historically have delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation. Supply growth remains an overhang on sector fundamentals as development yields remain attractive enough to keep builders building and private capital from institutional investors remains plentiful. While some investors have expressed concern that rising tuition costs and the availability of online education could slow demand for new student housing, developers maintain that those issues are not having an impact. Find out more about functional cookies here. SoFi positioned to profit from student loan refinancing, says - CNBC Its $10.98 billion in net real estate assets are encumbered by just $5.03 billion in liabilities, giving the company some wiggle room for property improvements, as well as more money going . Student housing assets, especially off-campus units that are not part of a University partnership, are also exposed to changes in University housing policies that can result in significant asset impairment. As we will discuss in more detail below, slowing enrollment growth also continues to be a headwind for the sector. Student Housing, One of the Most Hyped Asset Classes, Runs Out of American Campus owns a portfolio of roughly 112,000 student housing beds with a primary focus on highly-selective flagship universities across Sunbelt markets consisting of high-value on-campus or near-campus purpose-built student housing facilities at major flagship 4-year public universities. Even, Read More What is the Difference Between a High and Low Beta Stock?Continue. With Demand Outstripping Supply, Industrial Remains a Darling Sector. Find Apartments For Rent Near You | IRT Living In-depth research and analysis into property market trends, forecasts from our specialist research teams, and market-leading commentary to help you make the right property decisions. Which Student Housing REIT Should You Invest In? - Money Inc These Two Public REITs Are Making A Killing In Student Housing - Forbes I/we have a beneficial long position in the shares of RIET, HOMZ, ACC either through stock ownership, options, or other derivatives. In response to the Covid-19 pandemic, Savills Office FiT provides clients with practical, strategic and design-led advice and insights from our global experts. The REIT has a fortress, investment-grade rated balance sheet with little debt, and it owns Class A life science buildings that are enjoying 20%+ rent hikes as leases expire because their current . The three largest student housing REITs are led by individuals with deep experience in the property sector. ACC recorded same-store Net Operating Income ("NOI") growth of 14.3% from last year as same store revenues increased 10.0% percent and operating expenses increased 4.3%. The period of school closures and online learning alternatives has caused a dip in the prices for publicly traded REIT shares, and although this is still a factor that has caused a drop in share prices, it creates an opportunity for new investors to get into REITs for a lower investment cost. These Are The 10 Best Residential And Apartment REITs To Buy For Income! Baby boomers who lived in a cinderblock dorm room with three roommates and a communal bathroom may feel a twinge of jealousy when they drop off their kids at posh college housing that resembles a four-star hotel. . Whether buying a townhouse or selling a country cottage, leasing corporate office space or renting farmland, our experts make it their business to understand your needs and help you find the right property. Access shareholder services and read FAQs relating to Savills plc. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Student housing REITs were recognized as a good investment as the larger schools packed their dorm rooms and apartment complexes with a higher demand for housing than could be met. Want to see more? While BREIT may be the "best of the bunch," non-traded REIT managers have, for decades, capitalized on investor interest in private real estate vehicles based largely on the (likely faulty) notion that private real estate doesn't exhibit the volatility of public REITs simply because it is priced less frequently and in a substantially less transparent manner. When we consider the number of business closures and the rising unemployment figures, its been a trend for decades to see enrollment numbers increase as more people are returning to school to augment their employment skills and credentials, in hopes of securing better jobs in the future. Published June 6, 2022 Leslie Shaver Senior Reporter Permission granted by American Campus Communities In April, public student REITs essentially went extinct when private equity colossus Blackstone took American Campus Communities private in a $13 billion deal. This reflects an increased burden placed on taxpayers and middle-to-upper income families but has likely also increased access to traditional four-year universities to lower-income students, keeping enrollment growth steady despite economic and demographic headwinds. The outlook for a rebound is good, although there is no certainty about when things will return to normal. All commentary published by Hoya Capital Real Estate is available free of charge and is for informational purposes only and is not intended as investment advice. Student housing REITs trade at a free cash flow (aka AFFO, FAD, and CAD) discount to the REIT average and appear attractive in the FCF/Growth metric. We focus on sector-level fundamentals, analyzing supply and demand conditions and macroeconomic factors driving underlying performance. Within the Hoya Capital Student Housing Index, we track the lone student housing REIT, American Campus Communities (ACC) which accounts for $6.4 billion in market value. Among the seven apartment REITs to report results thus far, blended rent growth accelerated to nearly 15% in Q1 - a fresh record-high - and up from 13% in the prior quarter. State Of REITs: Distress Brings Opportunity | Seeking Alpha Sell Alert: 2 REITs Getting Risky | Seeking Alpha Whatever your needs, we have someone who can help. Is The Batman Motorcycle From The Dark Knight Real? After jumping 14% through the first four months of 2019, the sector has treaded water and is higher by 12% this year, the third worst-performing REIT sector. The average age of dorm facilities at many universities exceeds 50 years, built for the boomer generation in an era where privacy, connectivity, and amenities in dormitories were afterthoughts. Entering text into the input field will update the search result below. Off-campus units are also highly exposed to changes in university housing policies. Hoya Capital has no business relationship with any company discussed or mentioned and never receives compensation from any company discussed or mentioned. Nareit's members are REITs and other businesses throughout the world that own, operate, and finance income-producing real estate, as well as those firms and individuals who advise, study, and service those businesses. While still trading at a modest NAV discount by our estimations, it appears that the company is beginning to look into re-opening the acquisition pipeline which has been dormant for the past several years. 30 May 2023, International Property Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. A university, in need of new dorms but without the capital to build one, leases land to the REIT, which then builds, owns, and manages the facility. Nationwide, roughly a quarter of students live in university-owned. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing. REIT investments offer a good ROI while ensuring the investor doesn't have to be involved in housing management and administration. Expanded REIT Rankings Reports With Exclusive Content, Hoya Capital "Real Estate Robo Investor" ETF Model Portfolios. Which student housing sub-sectors are the best bet? Founded in 1983, the company has a portfolio of properties with over 1.2 billion square feet and counts Amazon, FedEx and DHL among its top ten customers. - the first of three student housing REITs to go public and the last one still publicly traded - was scooped up last week by, ) in one of its five major REIT acquisitions since last June to feed its fledging non-traded REIT ("NTR") business, Blackstone Real Estate Income Trust ("BREIT"). For ACC, this partnership is called the ACE Plan. Nareitis the worldwide representative voice for REITs and publicly traded real estate companies with an interest in U.S. real estate and capital markets. Please. As of Q422, industrial enjoyed a near all-time high occupancy rate at 96.1% and annual double-digit rent growth of 11.1%. The building had a 70 percent occupancy rate before we took it over. Learn how your comment data is processed. 10 Reasons to Avoid Newark Airport at All Costs. Below we outline the five reasons that investors are bearish on the student housing sector. The second recommendation is EDR, which went public in 2005, and prior to that maintained a decades long history of providing student housing. Prologis Inc. (PLD) Prologis Inc. primarily buys distribution and fulfillment centers. Entering text into the input field will update the search result below, generally cheaper and are equipped with more applicable amenities for students than typical off-campus housing facilities. REITs in general allow investors to buy into real estate property without the hassle of sourcing, developing or managing that investment. Since completing its strategic portfolio refinement in late 2018 through the end of March before the acquisition announcement, ACC had outperformed the broad-based Vanguard Real Estate ETF (VNQ) by roughly 1.5 percentage points annually. For more information about how we and our partners use cookies on our site, see our Cookie Policy. The millennial generation - the largest cohort in American history - supported the maturity of the student housing industry over the last decade into a mainstream institutional-grade real estate sector. Despite the broader enrollment declines at the national level due to a myriad of sho Schools had to replace meals like Salisbury steak and turkey tetrazzini with organic vegetables and free-range chicken, and they know they wont win the hearts of students unless they upgrade their housing, Goldfarb says. In recent years the company has maintained the quality of its portfolio by selling old assets and focused on development on or close to university campuses. The most attractive of these models, we believe, is the public-private partnership. After seeing enrollment growth rates of 0.5% or less from 2018-2020, RealPage noted that enrollment growth exceeded 1% in the Fall 2021 semester and appears likely to accelerate further into 2022. Student Housing Investment REITS - Investment Companies and Markets usually adjust to any overdevelopment within a year or two because developers figure out pretty fast when one area is getting oversaturated and they move on to other areas, he says. Meanwhile, supply growth continues to be a headwind for the sector as capital remains plentiful. Readers should understand that investing involves risk and loss of principal is possible. Its a growth industry because of the need to replace aging facilities, the capital constraints on universities and the fact that students want amenities.. Loss of principal is possible. The spread between conventional multifamily and student housing was 40 bps, indicating a 10-basis-point, year-over-year spread increase. According to Newmark Knight Frank, supply growth is expected to reaccelerate modestly this year with roughly 46k units under construction. World Research, International Property As discussed, margins for student housing assets are generally significantly below those of the conventional multifamily sector. Find out more about targeting and tracking cookies here. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. I am not receiving compensation for it (other than from Seeking Alpha). Purpose-built student housing facilities are generally cheaper and are equipped with more applicable amenities for students than typical off-campus housing facilities. Nothing on this site nor any commentary published by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Is this happening to you frequently? Motley Fool recommends American Campus Communities, which is one of the largest REITs with a strict focus on student housing. Find out more about strictly necessary cookies here. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Is this happening to you frequently? Residential REITs include REITs that specialize in apartment buildings, student housing, manufactured homes and single-family homes. Joint Venture strategy to build a portfolio of off-campus properties at public 4-year universities. Please. Build sustainable portfolio income with premium dividend yields up to 10%. In markets such as Australia and some less mature European markets, there is potential for yields to decrease further. While its full-year outlook was withdrawn due to the pending acquisition, ACC had previously expected its FFO to fully recover to pre-pandemic levels this year and in its last earnings call, CEO Bill Bayless commented that ACC is "experiencing the most substantial fundamental tailwinds we've seen in many years.". Since its IPO nearly two decades ago, American Campus has been the pioneer of the institutional student housing ownership and development model. While the situation became sketchy from March of 2020 to the present, it served to lower the price per share of some REITs. We want to create an environment to complement academics with our own programming and social, cultural, educational and recreational activities, he says. According to Nareit, Campus Crest Communities, Inc. is an REIT that is focused on student housing construction that offers a quality experience for renters, making them more attractive over the more antiquated dorm rooms. Members gain complete access to our investment research and our suite of trackers and exclusive income-focused portfolios targeting premium dividend yields up to 10%across real income-producing asset classes., Real Estate High Yield Dividend Growth, Visit www.HoyaCapital.comfor more information and important disclosures. Student enrollment has declined in certain areas, and this has decreased the demand for housing in many areas of the nation. 1-202-739-9400 Student housing REITs pay out roughly 80% of their available cash flow, leaving enough capital to deploy towards new development and, once the cost of capital improves further, towards external acquisitions. When hard economic times hit, there is an upswing in students returning to school. 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