INVESTMENT PREVIEW Back To Business T Investment sales activity is quickly returning to normal. The 4th quarter of 2021 might be a record setter. Interviews by Randall Shearin The fourth quarter has traditionally been the busiest time of the year for investment sales in the student housing sector. In 2020, invest-ment sales took a dip as the sector rebounded from COVID-19. This year, activity has re-sumed, but many sellers waited until fall 2021 lease-up was complete to bring properties to market. The third quarter began with owners prepping properties for sale, and investment sales executives presenting opportunities at InterFace Student Housing in July. Now, the buying begins. SHB recently interviewed a number of in-vestment sales executives to get their out-look on the fourth quarter. SHB interviewed Jaclyn Fitts, executive vice president and co-leader of the student housing team at CBRE; Austin Repetto, principal, TSB Realty; Teddy Leatherman, senior director, capital markets, JLL; Peter Katz, executive managing director, investments, at Institutional Property Advi-sors; Sean Baird, director, national student housing group, Colliers International; Sean Lyons, founder and partner, Triad Real Estate Partners; Douglas Sitt, student housing spe-cialist, Rittenhouse Realty; and Ken Wellar, managing partner, Rittenhouse Realty. SHB : Investment sales have seen a big uptick in the past two quarters. Who are the inter-ested buyers (types)? Leatherman : In the month of August alone, our team closed over $1.5 million worth of student housing transactions, so we’ve certainly seen an uptick in yields within the market over the past 60 days. It’s been all types of transac-tions, from oppor-tunistic value-add plays, all the way to TEDDY LEATHERMAN core and core-plus Senior Director, properties. We’ve JLL also seen quite a lot of joint venture ac-tivity. We have all types of assets on the market and they they are getting acquired at pretty aggressive pricing. 52 September/October 2020 Repetto : The inter-est for student hous-ing over the past two quarters is un-precedented. Buyers today range from the institutional buyers of the past two decades to frus-trated conventional multifamily buyers looking for proper-ties and everything in between. Leatherman : We are seeing a lot of deals that we expected to go to market in 2020 coming to market now. With how aggressive pricing has been and with so many new groups looking to invest in student housing — which has been helping to make pricing more competitive — now’s a great time to be a seller. I think for the majority of the deals we’ve brought to market, we’ve had minimum double digit ROI, and that’s enabled us to really push prices. The capital markets fundamentals are what are re-ally driving the flurry of deals on the market. SHB : There have been a number of portfolios and one-off deals marketed this year. What trends/tactics do you see with sellers bringing properties to market? Lyons : This trend is reflective of the current active buyer pool, in my opinion. There are more quality assets coming to market or port-folios with mostly core-type projects with a handful of outliers included as well. Given the overall flight to quality with assets at top tier universi-ties, some sellers are seeing this as an op-portunity to capital-ize on the scarcity of new inventory in higher demand mar-kets as they believe they can achieve top dollar pricing from SEAN LYONS a very select group Founder & Partner, of well-capitalized Triad Real Estate buyers who are all chasing the same quality of product. Demand is high for these specific assets while supply remains lower than the typical pre-pandemic transactional marketplace. Baird : Buyers still love ‘off-market’ opportu-nities that are only presented to a handful of investors, but these tend to be more core op-portunities. Value-add achieves higher pricing when mass marketed. With any listing, pric-ing the deal right and moving the sales price upward through competitive bidding always achieves pricing above guidance versus the old tactic of starting high and moving down. StudentHousingBusiness.com AUSTIN REPETTO Principal, TSB Realty Lyons : The main product types we are seeing trade are newer construction, core-type deals that are located closer to campus. The most active buyers have been the traditional ‘Top 25’ owners with institutional or foreign capital, along with a smaller group of new private equity firms entering the space. There has been much less activity in the secondary and tertiary school markets in the wake of COVID as everyone continues to wait for the dust to settle on what enrollment numbers will look like going for-ward in a post-pandemic world. If anything, we have seen a major flight towards quality by an overall consolidated buyer pool of usual suspects who appear to be big believers in the space over the long term. SHB : What is coming to market as we enter the fourth quarter? Katz : The fourth quarter will see an incredible flurry of transactional activity through year-end. Both large ‘one-off’ transactions and larg-er multi-asset portfolios are slated to close. We expect this phenomenon to continue into 2022. Baird : We brought out a handful of deals once school was officially back in session and the rent rolls were stabilized for the upcoming school year. That said, we have seen signifi-cantly less available inventory than is typical for this time of year and we expect that trend will continue through the end of this year. We believe January will represent somewhat of an overall reset in the market and we will estab-lish the ‘new normal’ going forward in what is ideally a post-pandemic world.
Student Housing Business September/October 2021: Page 52
