Philadelphia’s Contribution to the Student Housing Industry

October 30, 2018

I am one of the fortunate ones who gets to observe the genesis of the student housing industry in Canada. I continue to meet new contacts all of which have the same conviction regarding Canadian student housing’s potential. I particularly enjoy meeting those who have experiences with or are educated about the U.S. student housing market and its players.

I recently spoke with a developer about his newly constructed, purpose-built student asset in Ottawa. – Beautiful asset by the way, 100% occupied with a waiting list in its first year of existence, which supports the hypothesis that Canadian students desire similar housing options that are available in the States and Europe.

As with most “getting to know you” conversations, both of us discussed our back grounds in the student business. Inevitably these conversations include “Do you know X? / Do you know Y?” It struck me that a common response of mine is always: “Yes I know him. We use to work together”.

As with with many of today’s student housing professionals, I am an alumni of GMH Capital Partners.  I spent most of the 2000’s at 10 Campus Boulevard, Newtown Square, Pennsylvania, the corporate headquarters of GMH. During that time, GMH Communities Trust was the largest owner of student housing in the nation with more than 60,000 beds. In early 2008, the GMH portfolio was sold to ACC for $1.4 billion dollars.

Since 2008, a core group of the GMH team remained. GMH is once again growing a portfolio which currently totals 3,595 beds in seven states. GMH has an additional pipeline of approximately 2,131 beds.*

Others have relocated within the Philadelphia MSA and continue in the student housing business. When people think of where America’s premier student housing firms are based, they most likely think of Chicago or Austin, but the Philadelphia metro is home to a number of prominent student housing developers, owners and brokers all of which are manned with GMH alumni:

University Student Living (Marlton, NJ) – a company of The Michaels Organization, University Student Living was ranked #22 of the top 25 student housing owners in 2017 with 11 assets totaling 6,580 beds. University Student Living has a reported pipeline of eight properties totaling 7,748 beds.*

Balfour Beatty (Malvern, PA) – Divisions include Balfour Beatty Communities, Balfour Beatty Campus Solutions and Balfour Beatty Investments. Balfour Beatty ranked #14 of The Most Active Developers in Student Housing 2018 with six projects in the pipeline totaling 6,000 beds.*

Campus Apartments (Philadelphia, PA)– Currently celebrating their 60th year, Campus Apartments was ranked #7 of the top 25 student housing owners in 2017 with 33 assets totaling 17,048 beds. Campus Apartments has a reported 2018 development pipeline of an additional five properties totaling 2,039 beds.*

TSB Realty (Paoli, PA) is a full service, national investment sales firm specializing in the valuation and disposition of student housing communities. Founded by TSB Capital Advisors’ Timothy Bradley and GMH alumni Austin Repetto in 2014, TSB has closed over $2 billion in student housing sales totaling more than 22,000 beds since its inception. TSB currently has 10 properties on the market totaling more than 4,000 beds.

*Source: Student Housing Business’ “The Goldbook of Student Housing 2018”.

A few alumni ventured even further and are now located in the above mentioned student housing meccas of Chicago and Austin, holding senior positions at some of the nation’s most well know student housing firms.

When I think of the GMH alumni network I am reminded of the “coaching tree” concept in the NFL.  The most well know coaching tree is that of Bill Walsh who’s disciples went on to be great or even legendary coaches in their own right. Gary Holloway is considered a student housing pioneer so it is no surprise that those who worked for him in the early days have gone on to become today’s decision makers who are tasked with overseeing the evolution and growth of the U.S. student housing industry. I am proud of the accomplishments of my former colleagues and happy that I still call them friends.

Click link below to see the GMH coaching tree.

GMH Coaching Tree

Student Housing in Canada: Is there room for U.S. investors?

July 9, 2018

As an investment sales underwriter, I have a crystal ball that enables me to make the following predictions:

  1. While it will never be on the same level of the U.S. industry due to the market’s smaller size, the student housing industry in Canada will continue to evolve and grow. Purpose-built housing will become more attractive to residents, investor/developers, and Canadian institutions. P3 arrangements will gain traction and offer a logical option for Canadian universities looking to add to or upgrade their on-campus living facilities.
  2. The dominant players will be the ones able to convince the Canadian institutions that student housing is a stable, stand-alone, property type worthy of investment. Due to the many cultural differences discussed in part twoof this series, as well as some financial- and market-specific considerations outlined below, the major players will be Canadian or Canadian/U.S. joint ventures.

Writing these blogs has allowed me to meet many wonderful people in the student housing business on both sides of the border and to reconnect with a lot of old friends in the U.S. industry. In talking to my American contacts, my question was simple: Would you look to build to buy or build in Canada? To my delight, there were several yeses and a few maybes. Though I’m not a tax accountant and don’t know the ramifications of a U.S. company owning real estate or operating a company in Canada, here are some of my observations:

Poor Grades for Demand Tracking
A challenge presented by Canada’s student industry is its young age. According to one owner/developer, there’s a lack of solid supply and demand statistics. Off-campus living is fragmented with students residing in single-family homes and low to mid-rise apartments (high-rise urban markets). As discussed in my second blog, Canada also has a large population of second-generation immigrant students who choose to live at home. When the developer I interviewed decided to build his complexes, he had to “believe” that the demand was there — and fortunately it was. I can see this being a little nerve wracking for any U.S. developer in Canada, although as another U.S. expert pointed out, the situation was much the same in the U.S. in the mid- 90s.

Though a recent article in the Financial Post claims there’s a demand for 416,000 student beds in Canada, this figure was met with some skepticism by the people I talked to.

Urban Locations: Toronto vs. Philadelphia
Canadian universities tend to be located in dense urban areas where land costs are extremely expensive, making new student housing development unfeasible.

Take Toronto versus my home town of Philadelphia as a case in point. Both cities are home to a large student populations. The University of Toronto has an enrollment of 88,766. The University of Pennsylvania and Drexel University have a combined total of 50,401 students in Philadelphia’s University City neighborhood and Temple University has an enrollment of 39,581 in North Philadelphia.

Competition for development sites in Toronto is fierce pushing the prices of high-rise condominium land over $250 per square foot of buildable area. The most recent apartment rental development site close to the University of Toronto sold for $189-per-buildable square foot. High density residential land values in the premier locations of Philadelphia on the other hand range from $45 to $55 per buildable square foot.

Lack of Liquidity
The Canadian student housing industry is in its infancy. Campus Living Centres, Campus Suites, CHC Student Housing, Knightstone Capital Management, and Varsity Properties, along with a few others are industry pioneers. Multiple contributors to this blog commented that there is no student deal flow in Canada. One source asked me “During your research, how many student deals have you heard closed?” My answer was two. According to Real Capital Analytics, three buildings classified as “student housing greater than 200 units” have sold in all of Canada since January 2017! I note that RCA may not have the superior coverage in Canada as it does in the States.

Gary Holloway, stated in Part One that a tipping point for the U.S. industry came in the late 1990s when it was finally proved that there were buyers for student housing. Once the institutions became involved with purchases, student housing was seen as its own product class and the industry took off. This must happen in Canada — institutions are key.

Debt Financing
Every American multi-family or student housing owner/developer looking to expand in Canada should know about the Canadian Mortgage and Housing Corporation (CMHC). As per the document linked below: “CMHC mortgage loan insurance provides access to preferred rates that can lower borrowing costs for the construction, purchase and refinancing of multi-unit properties and facilitates renewals throughout the life of the mortgage. In addition to mortgage loan insurance, CMHC offers a variety of services and products to support the development of rental properties, from planning, through construction, and beyond.”

CMHC insurance is based on its own value underwriting, which tends to utilize going-in capitalization rates 0.25% – 0.75% bps above-market cap rates. The benefits, however, include LTVs of up to 85%, amortization periods of up to 40 years, and below-market interest rates currently estimated at 3.20% to 3.25%. Insurance premiums and recourse provisions do apply. A link to CMHC’s reference guide can be found here.

CMHC historically only applied to traditional multi-family and would not include student assets unless the property had an agreement with the university it served or was located basically on the school’s doorsteps.

Recently, CMHC broadened its criteria to allow for student housing assets in close proximity to a university or directly on public transit leading to the school, and which have no more than four bedrooms within a unit. One of my sources questioned this new openness citing a recent experience in London, Ontario, home to the University of Western Ontario. While looking to refinance, this individual’s property was turned down for CMHC insurance because the deal was labeled a student housing asset. So clearly, there are still no guarantees!

Special Thanks
It’s been a pleasure to write this blog series, and I hope you have found them informative – and entertaining. I would like to thank the following contributors to part three: Joseph D. Pasquarella (Newmark Knight Frank), Trip Lukens (Valbridge Property Advisors), David Fulop (Cushman & Wakefield), A.J. Keilty (Varsity Properties), Daniel Bragagnolo (First National Financial LP), Craig Smith (CHC Student Housing), Henry Morton (Campus Suites), Brian Thompson (CA Ventures), Jason Taylor (EdR), Mike Porritt (The Scion Group), Sandy Harrington (IC Funding) and Jason Schwartz (Blue Vista Capital Management).

Investment Insights: Creative Thinking Enhances Opportunity

June 18, 2018

In a land market as tight as Downtown Toronto’s, investors need expert partners with inside knowledge with the ability to see hidden opportunities

With unimproved land availability in Toronto virtually non-existent, developers have turned to purchasing improved sites, up-zoning the land, and redeveloping it. Some groups choose to create additional land value via the zoning process and then sell at a healthy premium to a third-party who will build the end product. With the recent phasing out of the Ontario Municipal Board (OMB), market participants are quoting a 40%-50% premium for zoned vs un-zoned land.

As an urban land specialist servicing clients in this challenging environment, you must have a deep knowledge of the market, understand your clients’ needs, and have that added ability to think outside of the box. Liam Sauro, Associate Vice President in our Capital Markets Toronto Central group, displayed all of these attributes in finalizing a recent deal – and it started with a hunch.

Liam was aware that the Wynn Group of Companies was in conversation with Timbercreek Asset Management to sell a portfolio of approximately 4,500 residential units and three million square feet (sf) of commercial space — a transaction estimated at over $1 billion.

In assessing the portfolio, Liam had a hunch that one of its assets was not being fully valued at market for development lands. The downtown site in question was 484 Spadina, home to the former Waverly Hotel. Zoning was in-place for a rental apartment totaling 15-storeys and 125,423 square feet to accommodate 309 (279 sf) bachelor units and 5,042 sf of first-floor retail space.

On behalf of a client, Adrian Rocca of Fitzrovia Capital, which specializes in high-end residential development (https://www.gta-homes.com/condo-developers/fitzrovia-capital/ ), Liam approached the Wynn family with the theory that the site may be undervalued as part of a larger portfolio. He believed value could be enhanced by broadening the building’s design from small bachelor units catering exclusively to university students to incorporating two- and three-bedroom units that would serve both students and young working professionals.

Together, Liam and Fitzrovia drafted a letter of intent and presented it to the Wynn Group. In the end, Fitzrovia and its partner AIMCO closed on 484 Spadina in March 2018 for $23.6 million dollars, which equates to $188.20 per buildable square foot. Fitzrovia is currently in the process of altering the building’s design in support of Liam’s idea.

With many players chasing very few quality deals, such creative thinking is key to maximizing value in the constrained Toronto development market. For further information about this deal or to inquire about downtown development opportunities, please contact Liam Sauro directly: liam.sauro@cushwake.com

Shawn P. Lubic, is Senior Financial Analyst, Capital Markets, Cushman & Wakefield.

Part Two – Student Housing: The Great Cultural Divide Between Canada and the U.S.

June 7, 2018

By Shawn P. Lubic, Senior Financial Analyst, Capital Markets, Cushman & Wakefield, Toronto

Canadians are Just Like Americans – Wrong!

What is it that American student housing owners and operators don’t understand about Canadian student housing?  To my surprise, a common refrain has surfaced: “Americans don’t understand our culture.”

Weighing Cultural Differences
In addition to Canadians spelling color, favorite, neighborhood, and center incorrectly, I’ve learned that there are lots of cultural differences between Canadians and Americans. In my two years living above the 49 parallel, I’ve observed the “niceness” we hear about is real, social justice is top of mind, and giving back to the community is big for individuals and corporations.

Once you think you’ve figured things out, you then realize you only know about oneprovince; in my case, Ontario. Next to Russia, Canada is the second largest country by land mass, and its ten provinces and three territories are all unique in their own way. Quebec is even recognized as a distinct society in the constitution, and has its own French language and civil laws. Then there’s the Western and Atlantic provinces, which are whole other stories.

As one Canadian student housing veteran put it: “It’s hard to successfully manage properties in each of these provinces from Chicago or Texas.”

 It’s Not a Party Scene

Of course, closeness to campus is the most desired trait of a Canadian student housing asset, and students appreciate purpose-built amenities such as fitness centres, social /study rooms, and so on, but American staples like one-to-one bed-bath ratios and in-suite washers and dryers are not expected. Neither is a “party atmosphere”, which is a common feature of off-campus, purpose-built housing.

“Canada doesn’t need jiggly leasing agents,” said one source. While this sounds crass, I got what he meant. How many student residences have I toured that had beautiful staff at the front desk? Each complex is a pool party or BBQ waiting to happen. Websites are populated with gorgeous young people having the time of their lives. In Canada, the “party scene” as a selling feature is pretty much non-existent. Housing is more utilitarian in nature.

On-Campus Living is First Choice

Like many U.S. university students, I did my time in on-campus housing for one year and then high-tailed it off campus for the remaining three years (four actually – sorry Mom and Dad). Canadians, on the other hand, see living on campus as a big part of the post-secondary education experience. Universities, as a result, are continually looking to add beds on campus for both first- and subsequent-year students.

The Foreign Student Factor
Canadian universities have a high foreign-student ratio. According to a CBS News study, the number of foreign students at the University of Toronto increased from 10% of enrollment in 2007 to 20% in 2017. Foreign enrollment at the University of Ottawa has tripled in the past 10 years and represents about 23% of total enrollment at the University of British Columbia. Contributors to this blog series consistently commented that 50% of the students living in their facilities were either foreign or first-generation immigrants.

As a source commented:  “Canada is a young country with a large immigration population. A lot of students are first generation. This group is more cost conscious so they’ll live at home or rent housing based on cost. If they were to live away from home, they would prefer to live on campus or in university-controlled housing.”

Another person noted that 50% of the students living in his purpose-built housing were foreign. Unlike new immigrant students, foreign students must pay a hefty premium for being educated here and tend to be well financed. In fact, as my source said, these students desired a higher living standard that his complex provided. This, he saw, as an opportunity.

Close, But No Baguette

Nothing exemplifies the perils of not understanding a culture more than Campus Crest’s entry into Canada. McGill University students in Montreal are a prime example of a community after the “experience” and demand for on-campus and university-controlled housing is immense. Between 2003 and 2010, McGill purchased three hotel properties within blocks of the campus and converted each to student housing. These projects were highly successful.

In an attempt to replicate this success, Campus Crest purchased the Delta and Holiday Inn Midtown between mid-2013 and early 2014, and converted them into the Evo Centre-Ville and Evo Vieux-Montreal. Both properties were well located close to campus and renovated to a high quality. According to an article in RENX, at the beginning of the 2014-2015 school year, Campus Crest achieved a total occupancy level of 10.9%. In order to drive occupancy, management held “the world’s largest Toga party” in the winter, threw an “EvoHouse party” in April, and hosted a McGill varsity sports awards gala. As of May 2015, preleasing for the 2015-2016 school year was 14.6%. Campus Crest sold their interest in the Evo assets in the fall of 2015 (prior to their portfolio sale to Harrison Street).

Seven Years of College Down the Drain
Understanding the culture is key to owning and managing successful student housing properties in Canada. While high living standards are universal, cost-conscious first-generation Canadians, foreign students, and generally more conservative Canadians are not the ideal target audience for extras like planned parties. Students, being students, find other places to have fun.

The upcoming third part of my blog series will delve into the “numbers”. What are the ramifications of cross-border investing? Is there enough demand to warrant U.S. companies coming to Canada? Is it worth the headache?

I would like to thank the following contributors to this blog: Jason Taylor, EdR Collegiate Housing; Mike Porritt, Scion Group; Patrick Miksa, Knightstone Capital Management; Henry Morton, Campus Suites; and Craig Smith, CHC Student Housing.

 

Part One – Student Housing: Solving the Mystery of the Missing Industry in Canada – Complete Q&A with Gary Holloway

May 9, 2018

blog 1 graphic personal blogAs part of a blog series I am writing on the differences between the Canadian and U.S. Student Housing markets, I conducted an interview with a U.S. student housing pioneer Gary Holloway. The interview was edited for length before the blog was published. The following is the original blog with an unedited Q&A I had with Gary:

Part One – Student Housing: Solving the Mystery of the Missing Industry in Canada

By Shawn P. Lubic, Senior Financial Analyst, Capital Markets, Cushman & Wakefield, Toronto

Welcome to part one of a blog series in which I will explore the differences between U.S. and Canadian student housing industries based on interviews with professionals on both sides of the border.

By way of background, I’m a native Philadelphian currently working for our Capital Markets team in Toronto. Due to my prior work experience I have a particular fascination with student housing. One of the first things I noticed in my new role in Canada was the absence of a significant student housing industry compared to what exists in in the States. The question is, does this present an opportunity to investors?

U.S. Student Housing Overview

Student housing is a stand-alone asset class in the U.S. with an entire industry built around it. According to a recent survey, 149 student housing transactions were completed in the U.S. in 2017, totaling $9.65 billion, 27,000 units, and close to 74,000 beds. Approximately 47% of this volume was purchased by foreign capital, 18% by syndicators, 14% by funds, and 10% by REITs. There were 103 new student housing properties built in 2017, totaling approximately 15,700 units and 47,000 beds. It’s a very large and growing industry!

Canadian Enrollment Sets the Stage

Canada has 93 universities with a total enrollment of 1.7 million students. Seven universities attract more than 40,000 students each and four are above 50,000. The University of Toronto had a total enrollment over 89,000 in 2016-17. So, why isn’t there a large and well-established student housing industry in Canada? Or is there?

Solving the Mystery (if there is one!)

In this series of blogs, I’ll try to solve “the mystery of the missing industry” through interviews with people on the front lines who have their finger on the sector’s pulse. First up is my interview with Gary Holloway, a former employer and U.S. student housing pioneer. When I joined GMH Capital Partners in 2002, Gary and his son Gary, Jr. were well established industry leaders. To date, their firm has owned some 80,000 student housing beds since its inception.

Gary Sr. kindly agreed to answer some of my questions about his role in the industry’s evolution in the U.S. – and what he sees for the future. Read on!

SL: What were you doing prior to your involvement in student housing?

GH: In 1985 I started my own business GMH Associates.  Prior to 1985 I was CFO of my Father’s family business, which had a real estate development arm and also owned various operating companies.  Prior to joining my father I was in public accounting.  I worked for Touche Ross in the tax department.

SL: What events sparked the idea to get into student housing? What year?

GH: When I formed GMH Associates I was focused building a real estate operating company.  My first acquisition was a multifamily project in State College, PA.  The asset was Parkway Plaza and it was acquired in 1985.  The project was a mix of seniors and students.  After operating the project I realized that the student market was underserved so I started to develop a business plan around catering to students out of this acquisition.  My second asset was also in State College Pennsylvania.  I later purchased an asset in Pittsburgh servicing Duquesne and then grew the portfolio heavily in the mid 1990’s.

SL: Who were the student housing players at the time and what were they doing that intrigued you? Were there developers building purpose built student housing at the time or did that come later?

GH: At the time the Student Housing market was still very much in its infancy.  The players that were in the market were focused on dormitory style housing.  Allen and O’Hara was probably the largest player in dormitory style housing.  Northwest Mutual Life was also an early player in the space as they brought capital to the private dormitory space.  Players had not yet emerged in the purpose built off campus market.  The industry really started to evolve in the early 1990’s when purpose built garden style product emerged as its own product class.

SL: Did you have a good relationship with the other players in the industry / compare notes / work together in any way to enable the sector to take off?

GH: Early on in the space there were only a handful of players in the industry.  I could probably count the early entrants in the space on one hand at that time.  The industry was highly fragmented with local mom and pop owners. We actually served as a take out for many of the purpose built early developers in the space.  We formed a joint venture with Goldman Sachs in 1995 and acquired a portfolio of 10,000 beds valued at $1 billion in 1995 dollars.  This was the largest roll up of Student Housing at the time.  From 1995 until going public in 2004 we grew the company as the GP and sourced institutional LP equity.  In addition to Goldman Sachs Fidelity Investments, Berwind Property Group, RMB, and AEW all invested alongside us.  Allen and O’Hara and Capstone were early entrants but we did not speak regularly in the early days.  Industry collaboration did not come until the end of the 1990’s.   The Dinerstein Companies got into the space in the mid 1990’s and we were extremely close.  I believe we have acquired 33 assets from the Dinerstein’s over the years and our teams are still very close today.

SL: What market dynamics did you see that reinforced that there was an opportunity in student housing?

GH: In the early years in the industry there were huge spreads in student housing cap rates to conventional apartment cap rates at about 200 basis points and I saw that the risk everyone perceived in the student space was not warranting such a drastic spread.  Today the spread is almost completely eroded and some would argue that in certain markets student housing trades at a premium to conventional student housing.    We also saw that there was a pent up demand for quality housing at nearly every university.  In our early research we determined that college enrolments were increasing at staggering rates and that the housing stock could not keep up with current enrollment projections. 

SL: What were your first target markets and why?

GH: Our first target markets were the largest state systems or institutions generally with enrollments of 30,000+ students.  They were the low hanging fruit at the time with the largest pent up demand so it was easy to drive to a net demand that made sense.  It was also easier to convince institutional equity to invest at larger universities.  The early investments in addition to Penn State included schools such as University of Missouri, The University of Tennessee, Ohio State University, Texas A&M University, University of Illinois and University of Wisconsin. 

SL: Did you buy existing product at first then move to development or both at the same time?

GH: At first we were purely aggregating product.  We did do some early on major renovations to the Penn State and Duquesne assets.  We started to develop from the ground up around 1998.

SL: Who were your early partners (coworkers, equity, and debt) and how did you convince them that student housing was a good idea?

GH: Already referenced equity above.  Before Goldman equity was high net worth investors.  Debt was largely regional banks to start many of which were consolidated and don’t exist today. GE was also an early lender as were some of the large Investment Banks.  We also worked hard early in the industry to get Fannie Mae comfortable in the space.  Along the way had our challenges convincing equity to come in because the product class was un-known which was why we progressed from high net worth investors to high yielding investment bank funds to more mid-market institutional funds to ultimately a publicly traded company.

SL: What were the early pit falls / mistakes and how did you overcome them?

GH: An early pitfall was learning to manage the turn process. Since we were largely operating on 11-12 month leases we had to learn how to turn 50% or more of a property in a 2-4 weeks.  This required a staff that was trained in process and vendors who had the staff and resources to move as fast as we were.  We had a lot of growing pains in finding the right vendors in our early days.  We overcame this by forming teams that could train our newly acquired properties in the art of a turn.  We also built out our vendor pool and where we could developed national relationships.  Another early pitfall was missing lease up which is still a battle for many assets today.  As you know in Student Housing you only have one window to fill you asset and if you miss you must wait a full 12 months in most cases to have a shot at filling the asset again.  This became more of a challenge as other players entered the market and supply became more abundant.  We dealt with lease up issue by tackling each market separately and keeping data on how each asset in the portfolio leased up.  In the early days a lot of this data proved crucial as we had to rely on our own market research to pick up on leasing trends and patterns.

SL: What ideas did you develop that were brand new to the sector, i.e. leasing by the bed, BR to Bathroom ratios, parental guarantees etc.?

GH: I would like to think that we developed many new concepts and brought them to the sector.  We would like to think that we were the first to adopt by the bed leases in off campus housing, but that is something that key insiders in the space often chuckle about and is up for debate.  We definitely pioneered the parental guarantee and the joint a several leasing philosophy.  We also adapted the fully furnished apartment concept early in our growth and learned that by furnishing all the units we were able to turn properties more efficiently and get an outstanding return on cost on the investment in furnishings.  Some of our best deals return wise were early acquisitions that we were able to furnish and get a premium by going to by the bed leasing.  Bundling of services and giving parents and all in pricing model also was an early concept.  Parents loved the idea of writing one check and not having to worry about how much their son our daughter spent on utilities or cable.  We were not the first to bring bed bath parody to the industry that came later in the cycle.  Most of our early developments were 4 bedroom 2 bath units as were the majority of our early acquisitions.  We also had a large amount of residence hall style product in our early portfolio which had shared bathrooms and no in unit kitchens.

SL: What was the tipping point? How did this asset class take off?

GH: I believe the tipping point for us in the industry was when we proved to Goldman that there was an exit in the space with our first portfolio.  When we proved this, others took notice and new capital providers started to invest in the space.  Increasing liquidity at the end of the 1990’s and into the early 2000’s is ultimately what lead to Student Housing being seen as its own product class.  Once this happened everything else took off from there.

SL: What are you most proud regarding your place in student housing history?

GH: I am proud of the fact that so many people and companies got their start with GMH. At or peak we employed over 2,000 people in the REIT and many of these folks are the industry leaders of today.

SL: How is the student housing market different today than it was when you started and at your pinnacle?

GH: The industry has changed in so many ways.  For starters there are countless new players in the industry and this is driven by ever increasing liquidity in the market. The new equity in the market continues to drive pricing to all time high levels and I don’t think this is changing anytime soon.  The product that is being built today is also far different than the garden style product that was built at our peak.  Assets are now vertical and constructed of concrete and steel as opposed to stick built.  With vertical construction assets are closer to campus.  In our legacy portfolio we were easily 1.2 miles on average from campus and today our portfolio is under .25 miles on average.  With all of these changes one thing still remains the same.  The industry is about servicing our residents and their parents and in order to service our base properly you must have an outstanding staff and we pride ourselves on calling our staff family.  Without this family we would not have been what were and what we are today.

SL: Where are the opportunities today?

GH: I believe there are still good opportunities to be had in developing new assets.  You need to be disciplined on what markets should be developed and show discipline in deploying capital.  We also believe we are aggregating the highest grade institutional portfolio in the market made up of assets that will withstand the test of time based on construction quality and location.  When our pipeline of assets that we are developing deliver they will also be of the same institutional quality if not greater quality than our existing portfolio making our portfolio even more desirable.

SL: Summarize your latest activity and what your plan moving forward?

GH: We recently formed a strategic partnership with AGC out of London.  AGC tailored a fund around our platform and we currently deploying the fund.  The fund is targeting core acquisitions pedestrian to campus as well as development.  By developing and acquiring we are able to deliver a solid return and offer stable cash flow out of the gate.  So far we have acquired three assets in the new fund and we are under agreement on two additional assets.

Part 2: Where the Student Housing Industry Stands Canada

Stay tuned! My next blog will ask both U.S. and Canadian experts to weigh in on where student housing stands in Canada, how it differs from the U.S., and where opportunities may exist for investors.

A special thanks goes out to Gary Holloway and Gary Holloway Jr. for participating in this first blog. Please visit www.gmhcp.com to learn more about their company.