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Big Investors Eye Student Housing as Safety Net

July 9, 2018

Student housing, which tends to offer high returns for investors but also requires more intense management and administration, has proven a difficult niche in the multifamily sector in the past. However, institutional investors are increasingly taking on the heavier lift of student housing in order to build a safety net with the healthy returns.

Greystar, a multifamily investor and affiliate of The Blackstone Group, recently announced a $4.6 billion plan to buy Education Realty Trust, which has a portfolio of 45,000 off-campus housing units at 47 universities nationwide. The deal will make Greystar the second-largest student housing firm in America.

“Safety cannot be overlooked as a factor; student housing is generally a stable and recession-resilient asset,” Bob Faith, founder and CEO of Greystar Partners, told the CoStar Group. “The key is to construct a well-capitalized and well-located portfolio that can withstand the ebbs and flows of the market and choose universities that are competitive with growing enrollment.”

Faith says that student housing properties consistently delivered steady returns during the Great Recession, and enrollment at big state universities also is on the rise. Plus, rents are increasing in the student housing sector as more facilities have been upgraded with rooftop pools, gyms, and common areas with pool tables and coffee bars.

“Whether you think of [student housing] as a safety net or not, every investor with a well-rounded portfolio is looking for something like this,” says Ryan Dennison, senior vice president for capital markets at American Campus Communities. “We focus on large universities, enrollment-based plays of 30,000–40,000 students.” Student renters are going to be there “through thick and thin,” he adds.