Category Archives: Student Housing

Student Housing Pros: Watch Your Backs


The long-term outlook for student housing may be positive, but investors and managers should be on the lookout for competition from new construction.

“You are in a maturing industry where a lot of the easy money has already been made,” says Terrell Gates, founder and CEO, Virtus Real Estate Capital.

Experts expect demand for student housing to increase over the next several years. But student housing operators are looking over their shoulders for potential competition, especially in major student housing markets serving large universities. Nearly all of the new beds under construction are being built near the 300 or so largest universities in the country.


Enrollment at U.S. universities reportedly declined last year by about 500,000 students. That news set off a wave of speculation that the student housing business might be overheated. Some investors worry that the recent dip in enrollment is the beginning of a long-term trend, as prospective students decide not to take on the burden of student loan debt.

“Students and parents are going to be more discerning on how much debt they pile on,” says Jim Arbury, vice president for the National Multi Housing Council. However, students are still likely to enroll. “An average student might pile up $25,000 in student loan debt. For the average job available to a college graduate, $25,000 is worth it.”

Projections from the U.S. Dept. of Education show college enrollment growing overall from 21 million in 2010 to 24 million in 2020.

In the recent dip in enrollment, the majority of the students who didn’t return were graduate students who have put off further education as the unemployment rate declined. “These are not people traditionally targeted by student housing,” says Terrell. Also the biggest drop in enrollment came at smaller, often more expensive private colleges, while most student housing properties can be found near larger, public universities.

“Nobody has seen a major impact on the great bargain schools, the state schools,” says NMHC’s Arbury.

New construction hits markets

Roughly 50,000 student housing beds came onto the market in the summer of 2013, in time for the 2013-14 school year. Next summer another 50,000 beds should hit the market. That’s up from 40,000 that came on line in the summer of 2012, according to Terrell.

The new flood of student housing follows a long period during and after the crash when very little new student housing was built. Also, the level of new construction is not that large considering that there are more than 20 million students now enrolled in college or university.

However, the flood of new construction is concentrated in the area nearby the roughly 300 largest universities with more than 10,000 students apiece, says Arbury. The newest student housing is targeted even more tightly. Because of the high cost of new construction, these new beds target the wealthiest students who can afford the cost. “You can only make the math work if you’re delivering class-A properties,” says Terrell.

Terrell expects to see more consolidation in the business as more large institution investors enter the space and existing student housing companies grow to an institutional size.  “The news is out: Everyone understands that student housing is recession resilient,” he says. “Consolidation is coming.”

Cyber Liability

By Kevin D. Smith, CPCU, ARM, The Graham Company –

Among the many risks that property owners must manage is the risk of cyber liability. Years ago, privacy of residents’ personally identifiable data was confined to filing cabinets and office computers, but now this data exists electronically in the cloud, on laptops, smartphones or tablet devices often in addition to the paper files. Access points are everywhere, and the information can be easily transmitted. What’s more concerning is that cyber criminals are on the lookout for this data, and they are becoming more sophisticated every day. If that is not enough to worry about, state and federal regulations are being enacted that require a duty of care for this data, and complying can be difficult.

Cyber liability insurance is relatively new and has become the fastest growing line of coverage over the last 10 years. Few industries are immune to the risk of data breaches that can include customer, vendor or employee data. As with any risk, it is relative to the type and amount of exposure an individual company faces.

For property owners and managers, the amount of data collected on employees, residents or prospective residents can be immense, and a breach of this data would not only be embarrassing but also costly. Cyber liability insurance can provide a level of protection from this emerging risk and should be evaluated as part of any risk management program.

Cyber liability policies

Cyber liability policies are designed to cover a company for a loss or breach of personally identifiable information. Traditional insurance policies were not designed to cover these types of exposures, so any coverage you might find under your general liability, professional liability, crime or property policies or even a directors’ & officer’s liability policy written for a privately held company will either be very limited or simply accidental. Some carriers might offer you an endorsement to provide coverage for a specific component of your cyber liability exposure, but it is usually not as comprehensive as buying a separate policy.

Here are several reasons why your traditional insurance policies might not respond to a cyber liability claim:

■ General liability policies do not respond to claims for damage to intangible property (there is also typically a specific exclusion for claims arising out of electronic data)

■ General Liability policies typically exclude claims arising out of “blogs” you own or host

■ Property policies only provide loss of business income coverage if there was direct physical damage caused to your property (not caused by hackers or rogue employees who shut down your website or computer systems or the systems of a service provider you rely upon to conduct your business)

■ Crime policies do not respond to claims for damage to intangible property (there is also typically a specific exclusion for loss of confidential information)

■ Private company directors’ & officers’ liability policies typically exclude claims arising out of bodily injury (including emotional distress), property damage and specific types of personal injury

■ No traditional insurance policy currently provides coverage for the expenses associated with notifying affected individuals when their personally identifiable financial or medical information was breached while in your care, custody or control

These are just some of the hurdles to overcome in order to find coverage for cyber liability claims under a traditional insurance policy.

Evaluating costs

Costs resulting from a breach can vary greatly, and when you take into account lost revenue or reputational damage, they can be significant. The costs associated with the breach include defense and judgment costs from lawsuits as well as notification and credit-monitoring expenses. Consider just the costs of notification and credit monitoring for a multifamily property manager with 3,000 residents. The cost of notification and credit monitoring after a breach can range from $30 to $50 per person. If the data lost compromised 3,000 records, these costs alone would be over $100,000.

Policies can be structured to provide limits anywhere from $1,000,000 to $10,000,000 or more, with various deductible and coverage options to tailor the policy to fit the coverage and cost needs of the insured. Premiums will vary and will be dependent upon the amount of coverage, size of your organization, type of data collected and security measures in place. Generally, policies will start around $10,000 for $1,000,000 in limits.

Some of the exposures and costs that can be covered under a well-structured cyber liability policy include:

■ Information security and privacy liability for failure to protect personal or corporate information (like tenant Social Security numbers and credit research) held on computers systems, smartphones, laptops or paper files or entrusted to third-party vendors

■ Costs to notify affected individuals that their personal information has been breached, as required by law

■ Other costs associated with data breaches, such as public relations, investigative costs and defense costs from lawsuits

■ Loss of business income when a “hacker” prevents your customers from accessing your website or disrupts your systems

■ Loss of business income when your service provider’s systems are affected by a “hacker” (such as a cloud service provider or credit card processing company)

■ Personal injury (such as libel) that may result from the use of blogs on your website or other social media

When employees are cyber criminals

Breaches can happen in a variety of ways, and there is no shortage of news of examples of significant breaches. The FTC reports that identity theft complaints were up 32 percent in 2012, and over 12 million people have been a victim of identity theft.

While cyber criminals account for much of these instances, there is also the threat of human error of employees that causes data to be lost. For example, laptops left in cabs, smartphones lost, USB drives left in the open and stolen, or simply emailing a file with this data to the wrong address. While encryption can be a line of defense against the release of this data, many times it is not sophisticated enough, or it simply does not exist on every computer or device. In 2012, Blue Cross Blue Shield of Tennessee paid a $1.5 million settlement for penalties under the HITECH Act for a breach of over 1 million patient records after the theft of computer hard drives (with unencrypted health information).

The use of third parties, such as a rent payment portal, does not eliminate the risk. The company that selected the third party would also be involved in a lawsuit or breach since they selected and promoted the third party for resident rent payments. A lawsuit would examine what level of due diligence was done by the property manager to select the third-party rent payment portal and its security measures.

The need for prevention

Preventing breaches with security protocols is a no-brainer and often a requirement of state or federal government. Good security and prevention measures also make you a more appealing risk for cyber liability underwriters, which help keep costs down if insurance is purchased.

It begins with identifying the type of information collected and putting policies in place to protect this data. This protection can range from employment policies to control employee behavior, such as policies on downloading unauthorized software and rules related to personal device usage to technology solutions such as keeping anti-virus software up-to-date and complex password protection measures. Your IT department should regularly monitor security measures and look for signs of attempted breaches. Many companies have used an outside consultant to perform an audit of the cyber security systems in place to determine vulnerable areas.

The threat of lost data, the ensuing costs, and potential liability for property owners and managers is real and growing each year. Companies spend a lot of money and effort on keeping this data safe, but the sheer number of incidents suggests that it is only a matter of time before companies experience some sort of breach.

Kevin D. Smith CPCU, ARM, is vice president, real estate division director at The Graham Company, a property and casualty brokerage specializing in the multi-housing. 

Feeding the Insatiable Need for Internet Speed

By Bendix Anderson –

The Internet connection at University Village Apartments on Colvin Street in Syracuse, N.Y., seemed like it would be more than fast enough.

But by the time the property opened in 2009, the definition of “fast” had changed.

The students at University Village demanded connections that would let hundreds of them watch video clips and whole movies over the Internet at the same time. While students grilled property managers at town hall-style meetings, the developer rushed to have copper cables torn out and fiber-optic cables installed at the brand-new, Class-A property.

“We’ve got to provide it or risk not being 100 percent leased,” says Scott P. Casey, senior vice president of strategic business development for EdR, a REIT based in Memphis, Tenn.

Super-fast Internet connections are now the most important technological amenity developers and managers can provide at student housing properties.

Strike Up the Bandwidth
Fast Internet speeds have become something students depend on and expect—64 percent said they would consider relocating if Internet speeds were lower in their student housing than expected,according to data from J Turner Research.

“There is just this insatiable appetite for speed,” says Joseph Batdorf, president of J Turner Research.

Fast Internet is not only the most important technological amenity for students. It is also the third most important amenity of any kind for any demographic—a washing machine in the apartment, and a bathroom to one’s self, were the only amenities rated higher, according to J Turner Research.

“Students are doubling their usage every two years,” says Joe Coyle, president of University Student Living.

The race to speed up Internet connections began when students started to watch movies and television shows online. The need for speed has grown rapidly ever since.

All students polled by J Turner Research spent some significant amount of time using the Internet in their homes—86 percent say they spend more than 3 hours per day.

Multiple devices also make a difference—a quarter of students surveyed say that they connect to the Internet with more than three devices.

“Each kid is using three to five devices,” says EdR’s Casey. That multiplies the Internet needs at a property by several times. “A 500-bed property almost becomes like a 2,000-bed property.”

TVs and Smartphones
Some other forms of connectivity are no longer considered amenities, they are simply taken for granted. For example, students assume that they will be able to talk on their cell phones in their homes without dropping calls. In 2011, good cellular phone service rated as second most important amenity, after a large bedroom.

“It would be absolutely critical,” says Batdorf. “If they don’t have good cell phone reception, I think they’re dead. It’s like having a car with no AC in Houston.”

Bad cellular service would probably be exposed as soon as a student visits the community: Many prospective residents phone friends or family from the model apartment.

Students also still watch cable television and have begun to ask more high-definition television channels in their cable service. “Student are really demanding that, for the first time in years,” says EdR’s Casey.

A Lesson in Student Housing Financing

By Will Baker –

If you are a student housing owner and have needed to borrow money in the past 10 years, life has been pretty good.

A decade ago, conduit lenders were offering extremely cheap financing at 80 percent plus leverage and 1.20x debt-service coverage (DSC) with interest-only constants. And to say due diligence was “limited” would be an understatement.

In an effort to keep up with the commercial mortgage-backed securities (CMBS) guys, Fannie Mae dropped its DSC to 1.20x and underwrote student housing loans to the exact same parameters as conventional loans.

About halfway through 2007, when the CMBS engine ran out of steam, Fannie Mae and Freddie Mac were still there, cranking out loans at a time when no one else was even in the market. The banks and the life companies were effectively shut down, making the availability of cheap capital from the government-sponsored enterprises (GSEs) that much more crucial.

As all the major GSE competition was sent to the sidelines, both Fannie and Freddie got a bit more conservative on the underwriting for student housing loans. For most deals, DSC rose up to 1.30x and and the loan-to-value ratio (LTV) was reduced down to 75 percent. Starting in 2009, construction financing was scarce and sales took a dramatic dip.

Fast-forward to 2013, and things could not possibly look any different. Sales volume in 2012 reached approximately $3.7 billion, almost double the $1.9 billion reached in 2011. Fannie Mae’s $700 million in student housing financing, combined with Freddie Mac’s $1.7 billion, set an all-time record in the student space. Banks are pumping out construction loans all over the country as developers are aggressively chasing sites to meet the ever-rising demand as student enrollments continue to climb. The CMBS market started to pick up some steam in 2012 and presents serious competition for the agencies, especially as it pertains to the availability of interest-only financing.

Over the past year, cap rates have slowly dropped to the point where Class A cap rates hardly offer a premium over Class A multifamily projects. According to the ARA National Student Housing report, new student housing deliveries will increase dramatically in 2013 and 2014, which should stabilize Class A cap rates in the 5.5 percent to 6.5 percent range.

Fannie, Freddie, and many CMBS shops are offering 10-year, non-recourse, fixed-rate financing in the 3.9 percent to 4.2 percent range with interest-only periods available for a slightly higher rate. The GSEs’ regulator, the Federal Housing Finance Agency, has made it clear that it wants the agencies to be careful with their interest-only options and has told Fannie and Freddie to dial it back a bit in the coming year, in order to make sure the loans exit at an appropriate level.

Fannie is underwriting student housing loans to a 1.30x DSC at a 5.25 percent underwriting floor and a 75 percent LTV (70 percent for a cash-out refinance). Freddie is underwriting a 1.30x to the actual rate; however, if the property is less than three years old, it bumps it up to a 1.35x DSC. Freddie is one of the few providers out there that will offer a full 80 percent loan on an acquisition (75 percent for a cash-out refi); however, the deal must be in a strong market at a school with at least 8,000 full-time students and the borrower must have student housing experience. Most of the CMBS players out there will offer a 75 percent LTV and possibly even more with some mezz financing blended in.

If you are refinancing a brand-new development, the agencies are going to want you to keep some “skin in the game,” and not completely cash you out with a refinance in the first year. Typically, Fannie will allow up to a maximum 90 percent loan to cost, and Freddie will be somewhere between 80 percent and 85 percent.

Borrower credit has become increasingly important in underwriting student housing loans, and if you are a “mom-and-pop” borrower who is new to the student space, Fannie and Freddie may not be the best option. Both agencies like to see a proven track record in the student housing space. If you are an out-of-state owner, they also like to see a third-party manager with significant student housing experience implemented at the property.

With so much new supply on the horizon, lenders will start taking a closer look at borrowers’ schedules of other real estate owned to ensure that the new supply has not caused the operating performance of other properties to suffer.

One of the most critical features to student housing financing is the timing. If you are looking for financing in the spring, lenders will be taking a close look at your pre-leasing to make sure that it is at least as good as last year and at least as good as the market. There were many properties that were strongly pre-leased in spring 2012, but for whatever reason, those high leasing numbers did not prove out in the fall when students started school.

The absolute best time to close a student housing loan is in September or October, after your lender has seen a couple months of rental collections for the new school year at the new rent levels. If you must close a loan before August, it certainly helps if you close it before May. If summer is approaching and you are not 100 percent pre-leased for the coming fall, most lenders will likely tell you to wait it out until September (at the earliest) for funding.

In addition to the normal package of information that Freddie is accustomed to seeing on a new loan quote, it would also like to see a list of every new project scheduled for completion in the coming two years. As lenders, we need to be confident that your project is well positioned within the market to withstand the new supply and continue to grow rents throughout the loan term.

It can be rather daunting to try and figure out the rules and rates from the different capital sources out there, but it’s nice to know you have options. The underwriting, pricing, and process from each of the main student housing capital providers are all different, so it is wise to choose a lender who is very familiar with the student housing product and can guide you through the entire loan process.

Borrowers in this space have had it pretty good for the last 10 years, and as long as the increasing enrollment trends continue and markets don’t get oversaturated with new supply, the good times should continue to roll for the foreseeable future.

Will Baker is senior vice president at Walker & Dunlop, a national commercial real estate finance company, with a primary focus on multifamily lending. Contact him at

Top 10 College Town Destinations for Gen Y

By Derek Mearns –


Where are Gen Y students most likely to find jobs? If you guessed New York or San Francisco, you’d be wrong.

There was quite a shake up on this year’s College Destinations Index, a ranking of the nation’s healthiest economies for Gen Y students to live in, produced by the American Institute for Economic Research.

Despite all the hype surrounding the major metros, New York, Boston, Washington, D.C., and San Francisco were all knocked out of the top 10 on this year’s list for college towns. The list is determined based on overall economic health, measuring unemployment rate, entrepreneurial activity, and arts and leisure considerations.

And this year, small towns led the way as larger cities were more susceptible to economic downturns and only ranked outside of the college towns division on the index. As the report suggests, many small towns are essentially recession-proof since they house a consistent population of spenders. Here’s a look at the top 10 college destinations for 2012-2013:

Rank 2010-2011 Top College Town Destination 2012-2013 Top College Town Destination


Ithaca, N.Y. Ithaca, N.Y.


State College, Pa. Ames, Iowa


Boulder, Colo. State College, Pa.


Iowa City, Iowa Iowa City, Iowa


San Francisco, Calif. Corvallis, Ore.


Ames, Iowa Ann Arbor, Mich.


New York, N.Y. Champaign-Urbana, Ill.


Washington, D.C. Lafayette, Ind.


Boston, Mass. Lawrence, Kan.


Ann Arbor, Mich. Morgantown, W.Va.

IU student Linden Whitt dies after fall from balcony during party

By Abby Tonsing

An Indiana University student died Saturday after she and another IU student fell from a balcony during a party at an apartment early Friday morning.

Linden Whitt, 20, died from spinal cord injuries in her neck at 4:55 p.m. Saturday at IU Health Bloomington Hospital, Monroe County Coroner Nicole Meyer confirmed. No autopsy will be conducted, but results from toxicology tests are pending, Meyer said.

Whitt and 20-year-old Joseph Lao were both taken to the hospital after they fell from a balcony during a party.

Whitt was a sophomore from Mishawaka and her parents were with her at the hospital Saturday, according to university spokesman Mark Land.

She was a 2010 graduate of Penn High School in Mishawaka.

Emergency responders were called to the 1300 block of North Lincoln Street at 2:59 a.m. Friday after a report that two people had fallen from a balcony, according to Bloomington police Lt. Bill Parker.

Witnesses directed police to Whitt, who was lying on the ground near a deck, where the two had fallen an estimated 6 to 8 feet from a balcony at 1385 N. Lincoln St. Police found Lao leaning against a wall underneath a nearby balcony at 1335 N. Lincoln St., according to Capt. Joe Qualters.

Officers supported Whitt’s neck and started CPR as firefighters and medics arrived, Parker said.

One witness told police that Lao had been sitting and leaning against a railing, and that Whitt was standing in front of Lao and leaning against him. This witness reported hearing a crash in the bushes below the deck, and said that nobody knew exactly why the two fell, Parker said.

A second witness told police that no one else was standing near Lao and Whitt at the time of the fall. This witness said Lao lost his balance, and as the two went over the railing, they twisted as though they were attempting to break their fall, Parker said.

Whitt was the first to hit the ground, this male witness told police, and Lao fell on top of her.

He told police that when he went to check on her, she was responsive at first and moved her shoulders.

A third witness, who said that he is certified in CPR, told police that he was inside the apartment during the party at the time of the accident and went downstairs to check on the two injured people. He reported helping Lao get off of Whitt, so he could assist Whitt.

Four police officers took witness statements and interviewed people at the party. Parker could not provide an estimate as to how many people were at the apartment at the time of the gathering.

Lao told officers he had been consuming vodka, Parker said. Police issued no citations at the party.

Hospital officials did not have information on Lao’s condition Saturday afternoon.

Correction:  The balcony that had been shown in photos attached to an earlier version of this story was not where the students fell, but showed where Joseph Lao was moved after the accident. The accident happened nearby, on a lower balcony.


College Towns Primed For 2012 Investors

By Natalie Dolce –

CAMPBELL, CA-As parents across the country prepare to send their college-bound students to school this fall, many quickly find student housing can be a huge financial undertaking. So says a recent report from Because of that, according to the site, some are now considering buying homes for their students to live in with classmates, while other potential investors are looking at college towns for rental properties that’ll deliver a steady stream of student tenants and profits.

“I’ve had parents of students get frustrated with the huge price tag on some of the rentals here in the Boston area and they found that it made more sense to buy a condo for their child,” says Willie Mandrell of At Home Real Estate in Boston, in a prepared statement. “Most recently I worked with a Boston University student and her parents purchased a two-bedroom condo in South Boston for her to live in while attending school.”

Darla Jobkar of Northwood Realty Services adds, “Because we’re home to almost 10 colleges and universities within a 10 mile radius of the Pittsburgh city boundaries, there has always been a shortage of housing for students.  For this reason, college and university real estate investments in this area over the years have been a huge success to both long term and short term investors.” also recently released its second annual round-up of college towns to consider when investing in real estate. Selected from the top 25 schools featured in a recent national report, 10 markets were chosen based on today’s average monthly rent prices compared to estimated mortgage payments of a median priced home in each city.

The list includes: Boston; Princeton, NJ; Chicago; Washington, DC; Houston; Philadelphia; Atlanta; Pittsburgh, PA; Providence, RI; and Los Angeles.

“In today’s market, many real estate investors aren’t necessarily the experienced short term investors of the past,” explains Errol Samuelson, president of “In many cases, they’re average consumers interested in planning for their financial futures and they look to real estate as a longer term investment option. Rental properties in college towns can be a great option for some investors since schools can present a steady stream of renters that need housing.”

Tips for the Parent Landlord

Having a rental property can present challenges in many circumstances, so often investors hire management companies to deal with the day-to-day needs of renters, explains “For parents whose tenants are their own child along with friends as roommates, setting up a business relationship can benefit both the parent and child. Tips include requiring the child and their friends to sign a lease agreement to guarantee a steady income each month while holding them accountable for condition of the property.”

According to, the lease should cover terms such as a designated day that rent is due, the security deposit and defines who pays utilities. “These terms will not only teach the students a valuable lesson, but will also protect the parent-landlord and child from a falling out among friends or other issues that can arise and jeopardize rental income.”

Exclusive Interview With Bernards’ Steve Pellegren

Natalie Dolce Natalie Dolce, editor of the West Coast region for

LOS ANGELES-In terms of student housing trends, two major things emerging are educational institutions both partnering and competing with private student housing developers for residents, and secondly, most educational institutions now require sustainable/green building features. That is according to Steve Pellegren, VP of preconstruction services for Bernards, who recently chatted with on the subject of student housing trends and what’s driving them. What are some of the newest trends in student housing?

Steve Pellegren: There are two major trends emerging in the student housing arena. First, most educational institutions now require sustainable/green building features. Over the last few years, there have been new student housing projects on a few California campuses including the University of California Merced, Claremont-McKenna College and CAL State Northridge, two of which are LEED Silver Certified projects.

Secondly, educational institutions are both partnering and competing with private student housing developers for residents. Additionally, the top ranked schools are competing for the top students and top professors. Therefore, the current generation of both student and faculty housing looks and feels more like well-appointed apartment projects than traditional campus housing facilities, providing top quality finishes, a rich array of amenities and ample community spaces to promote social interaction.

For example, Bernards is currently providing preconstruction services for a top-ranked university on a $400-million student/faculty residential village. This project is on par with our latest mixed-use project, Americana at Brand, which is a high-end, $267-million residential-retail development in Glendale, CA, by Caruso Affiliated.

All of these new student housing projects are designed to appeal to GenY students, with spaces that promote greater social interaction, including comfortable student lounges and group study areas; meeting, music and recreation rooms; and open spaces for events and recreational uses, such a courtyards, BBQ areas, and exercise facilities, as well as a full array of technology services [internet, WiFi, cable TV and telephone]. The UC Merced project even has its own TV channel, which provides blockbuster movies, information about campus events and educational content. Are colleges and universities upgrading older student housing facilities, and if so, what’s driving renovations?

Pellegren: Yes, in fact, the Cal State Northridge student housing project was precisely that: an upgrade to replace aging student housing. Existing student housing facilities are being upgraded for two major reasons. In California, older campus facilities of all types are being retrofitted to meet seismic guidelines of both the Federal Emergency Management Agency and California Emergency Management Agency guidelines, as well as upgraded to sustainability standards.

Additionally, student housing is becoming a marketing issue, because the attendees are making decisions about which schools to attend based on quality of campus life, including living accommodations. Therefore, educational institutions are modernizing student housing and adding amenities and technologies that students now expect. For instance, aesthetic upgrades that were completed on two student residence halls at Claremont McKenna College were aimed at supporting competitive student recruitment efforts, with new community living areas, toilet/shower facilities, and new doors throughout. Could you further explain what you mean by institutions partnering and competing with private student housing developers for student residents? 

Pellegren: This is a relatively new market niche that offers opportunities for private developers and investors on and off college and university campuses. The trend developed out of the need for colleges and universities to continue to invest in academic programs  during the economic downturn, which left little to no funding for student housing at many higher education institutions, while the need for additional housing increased as the huge GenY population reached college age. Consequently, publicly traded housing REITS have emerged, such as Education Realty Trust, American Campus Communities and Campus Crest Communities. Additionally, market operators are attracting private equity capital for student housing projects. Greystar, Campus Apartments, Capstone Cos. and Opus Development all have broken ground on thousands of new student housing units over the last two years. Some of these projects are being developed in partnership with academic institutions, which are experiencing an uptick in enrollment due to the large GenY student population, but, as I mentioned, lack funding for new housing projects. What makes student housing of interest to private investors?

Pellegren: It’s profitable. While capitalization rates are compressed for conventional multifamily properties, cap rates on apartment deals close to campuses have remained typically 50 to 100 basis points higher, averaging in the upper 7% range. Depending on the quality and distance to campus, the spread can be 150 to 200 basis points higher for apartment properties that serve as student housing. What other changes do you foresee for student housing projects in the future?

Pellegren: Adding even more amenities to aggressively market properties to GenY as well as the next generation of students.  In fact, it’s already happening. Greystar Student Living recently built a 477-bed student housing project within walking distance of the University of Texas at Austin campus that features upscale amenities, including resort-style pool, tanning beds, a community study café and lounge, recreation rooms with TVs, poker table and gaming systems. Loft-Right, a posh new student housing project on the DePaul University campus in Chicago that costs students $1,000 per month, has all new amenities, expansive city views, granite countertops in kitchens and bathrooms, modern designer furniture and satellite TV hookups. That lobby lounge area is similar to what you might find in a hip, boutique hotel, with a pool table and fireplace, and there is are tanning and hair salons and Starbucks next door.