Student Housing Breathes Relief

On June 29, Congress avoided doubling interest rates for new federal student loans. Republicans and Democrats came together to keep interest rates on new Stafford loans, which are subsidized by the federal government, at 3.4 percent. The rates were set to double in July. It’s good news not just for matriculating freshmen but also for the student housing sector, including developers and REITs which rely on a funded student population.

The news comes at a time when the student housing sector is thriving. Budget shortfalls coupled with lengthy procurement and contracting processes within public and private universities have created a need for real estate firms that can own and operate residential facilities (usually under a long-term ground lease if the facility is on campus) so schools can keep their cash for core functions.  The largest student housing REIT, American Campus Communities (ACC), with a market cap of around $3.36 billion, acquired seven properties worth a total of approximately $250 million in the last 12 months. At Arizona State University, the company has already invested $350 million and privately owns the school’s honors college, an on-campus dormitory and a student apartment complex.

Other players are Education Realty Trust (EDR) with a market valuation of about one billion dollars, and Campus Crest Communities worth $322 million. According to National Real Estate Investor, Nashville-based EdR is in discussions with the University of Kentucky to completely revamp the school’s student housing portfolio. “The entire industry is buzzing about the implications this one deal might have on other projects,” according the report.  Charlotte, N.C.-based Campus Crest, meantime, has six new student housing properties under development, three of which are wholly owned by the REIT and three of which are owned by a joint venture. The six projects have a price tag of nearly $157 million.

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