Jackman Journal Student Housing Blog

A Recap of the [Quiet] 2009 Student Housing Investment Market

mike@gotmike.com (Mike Harris) — Mon, 18 Jan 2010 18:07:00 +0000

Student Housing Business recently posted an article based on Real Capital Analytics data describing the activity in 2009 for Student Housing Investment transaction velocity.

http://www.studenthousingbusiness.com/industry-voices/715-a-recap-of-the-quiet-2009-student-housing-investment-market.html

Credit markets froze following the financial crisis that hit in September 2008, and the commercial real estate sector has been among the hardest hit; not a single property type has been able to avoid the downturn in investment activity. Student housing, an increasingly popular niche for investors, is no exception. Sales volume of properties to trade for $5 million plus in student housing properties hit bottom, with only 20 properties trading hands year to date for a total of $313 million. That marks a stunning 87% fall from 2008 totals, and it is also the lowest volume for the niche since RCA began tracking student housing in 2004. From 2005 to 2008, annual student housing volume ranged between $2 billion to $2.5 billion, and typically represented 2 percent to 3 percent of all apartment properties traded.

Despite the decline in volume this year, student housing sales this year have stayed true to this pattern, accounting for 2.8 percent of all apartment activity.However, cap rates for this niche have risen markedly higher than those for apartments as a whole. Student cap rates are up 140 bps, almost three times the 50 basis-point gain for apartment properties on average. Even so, pricing has held up more for this niche than for the broader apartment sector, with only a 3 percent drop on price per unit compared to a 13 percent per-unit slump for all other apartments.

One indicator of the slow market: to date this year, no student housing asset has traded for $50 million or more; the highest price paid so far this year was the nearly $46 million sale of the Cottages of Lubbock, a 241-unit asset in Lubbock, Texas. The property was acquired by Campus Living Villages, an investor group based in Sydney, Australia, from Capstone Capital Corp.

The thin sales volume cut across the entire country; no region had sales above $100 million, although the Southwest came close and had the most activity five transactions totaling $99 million. Not a single student housing property has traded in the Northeast so far in 2009.

Typically, the public REITs have led investment in this niche, but these companies have stayed out of the market, making no acquisitions to date this year. Private investors accounted for 62 percent of acquisitions. All but two deals involved just a single property. Only Westar Associates and Kayne Anderson Real Estate Partners were the exceptions, each acquiring two assets.

One area where student housing stands out on a positive note is distressed properties. The student housing sector is faring well compared to the entire apartment sector when it comes to the percentage of properties in trouble due to default, foreclosure or bankruptcy. Only 4 percent of the student housing sector is in trouble, less than half of the 8.7 percent of distress afflicting the overall apartment sector. There are a total of 25 student housing properties in distress, valued at nearly $350 million. Most of those – 15 in all, accounting for $225 million – are in the Southeast. The Northeast may have had no sales this year, but it also has no student housing properties that have fallen into distress.

All that being said, student housing will nonetheless remain a safe haven for investors. With more people returning to school during the downturn, many universities short of meeting housing needs, and state governments cutting back on construction budgets, this niche should prevail, especially as public REITs ramp up investment and smaller private players participate. In addition, the relatively small nature of the niche and low volume will together keep prices less volatile than those for the broader apartment sector.

Harvey Green on CNBC's Closing Bell

mike@gotmike.com (Mike Harris) — Fri, 08 Jan 2010 18:14:00 +0000

Harvey Green, President and CEO of Marcus & Millichap was on CNBC's Closing Bell recently to address:

Commercial Real Estate Conditions
Current State of Real Estate Investment Trusts (REITs)
REIT Industry Outlook for 2010

Jackman Prince Group Releases Student Housing Bulletin

mike@gotmike.com (Mike Harris) — Mon, 07 Dec 2009 19:59:00 +0000

The Jackman Prince Group of Marcus & Millichap released the 5th edition of their landmark research publication, the Student Housing Bulletin recently. In the latest issue, Dorothy Jackman and Travis Prince cover the following topics:

Guide for student housing market evaluation
Student housing properties for sale in the market
Student housing on market statistics
2009 student housing sales (year-in-review)
Student housing demand projections
Student housing cap rate trends
Admissions uncertainty

The ABCs of Student Housing

mike@gotmike.com (Mike Harris) — Tue, 01 Dec 2009 16:00:00 +0000

National Real Estate Investor Magazine recently published an article about the Student Housing Investment market, quoting Dorothy Jackman, Vice President - Investments with Marcus & Millichap.

Dorothy worked with NREI Magazine to pave the way for new entrants into Student Housing from other product types. Click here for the full article online (or click here for a PDF version).

Dorothy Jackman - One to Watch in 2010 (Multi-Housing News)

mike@gotmike.com (Mike Harris) — Tue, 01 Dec 2009 15:45:00 +0000

According to Multi Housing News, Dorothy Jackman is "one to watch in 2010," positioning Student Housing for Marcus & Millichap.

Echo Boomers continue to enroll in colleges across the nation in increasing numbers. Dorothy Joffe Jackman, Vice President - Investments at Marcus & Millichap Real Estate Investment Services, will be a force to be reckoned with as more investors become drawn to the sector into the next year and beyond.

"We continue to work aggressively to close those deals that we currently have listed. As 2009 winds down, we are increasing our pipeline for 2010 business," says Jackman.

Jackman is one of the founding members of Marcus & Millichap's Student Housing Group, a two-year-old division. Since January 2009, the group has underwritten more than $1 billion of student housing assets across the country. Jackman has arranged the sale of more than 3.1 million square feet of space, representing 5,071 apartment units since joining Marcus & Millichap's Tampa office in 2004.

With experience in the on-site management of student housing, Jackman understands the operations side of student housing. This is a valuable skill for brokers in the sector. "Clients appreciate that I recognize the business is different thant the conventional multifamily industry as it relates to day-to-day operations, operating expense loads, lending criteria, leasing seasons and more."

Jackman encourages her clients to get involved in, and educated about, the student housing sector. Indeed, the secret to her success, she says, is her full-service approach.

Student Housing Property for Sale - The Courtyards, Gainesville FL

mike@gotmike.com (Mike Harris) — Fri, 11 Sep 2009 15:05:00 +0000

THE COURTYARDS
(Click here for more info)
Gainesville, Florida

Type: Student Housing Multifamily
Size: 91 Units/ 375 Beds
Price: $18,000,000

Irreplaceable Real Estate Directly Across the Street from the University of Florida – Tigert Hall (Main Admin Bldg)
Strong Historical Occupancies
100% Leased with Parental Guarantees
No Concessions
Yearly Rental Rate Increases have Average of 5% for Past Five Years
Potential for Future Redevelopment as an Urban Mixed Use (Retail + Apartments). Zoning Allows Retail/Restaurant Uses in Addition to (up to) 100 Residential Units Per Acre
Portfolio of Four Additional Student Housing Properties Available Totaling 336 Units/ 754 Beds

Colleges on Limited Budgets Brace for Population Growth

mike@gotmike.com (Mike Harris) — Tue, 08 Sep 2009 16:36:00 +0000

The following article was recently published by the Chronicle of Higher Education. Student Housing Investors may want to explore some of the markets mentioned in this article as future acquisition targets...

Thirty-eight students graduated in May from Georgia Gwinnett College, which opened in 2006. State lawmakers expect that, in five years, the institution will have an enrollment of about 10,000, as the state's college-going population skyrockets.

The college-age population across the entire South Atlantic is growing rapidly, and having a new four-year college with lots of room to expand is highly unusual. Most states are struggling to support their often-overcrowded public colleges, let alone paying to open new ones.

More students than ever applied to South Atlantic colleges this year, at a time when institutions are becoming more expensive and more selective, shifting pressure to community colleges with open-door admissions policies.

Read More.

Marcus & Millichap's Jackman Group Releases Student Housing Bulletin

mike@gotmike.com (Mike Harris) — Thu, 13 Aug 2009 20:57:00 +0000

Marcus & Millichap's premier Student Housing Investment team, The Jackman Group, has released the 4th Edition of the student housing investment industry's most widely used quarterly publication, The Student Housing Bulletin.

This issue covers topics such as:

On-Campus & Off-Campus Student Housing Construction
Strategic Student Housing Investment Services
Student Housing Properties on the Market
2009 Student Housing Sales Statistics broken down by geography including:

Cap Rate
Price Per Unit
Price Per Bed
Average Occupancy
Total Units Sold
Total Beds Sold

State Budget Shortfalls Expected
Fannie Mae Student Housing Lending Requirements
Freddie Mac Student Housing Lending Requirements

Click here to see the latest version of The Student Housing Bulletin.

Obama's Ambitious Plan for Community Colleges Raises Hopes and Questions

mike@gotmike.com (Mike Harris) — Thu, 06 Aug 2009 00:54:00 +0000

The former pastry chef studying for a fresh start as a clinical therapist. The professor who gets so many calls from laid-off autoworkers he can recite them by heart. The college president coping with 300- person waiting lists.

Their struggles framed the backdrop on Tuesday as President Obama visited Macomb Community College here, outside Detroit, to propose an unprecedented federal infusion of dollars for two-year colleges.

“All too often, community colleges are treated like the stepchild of the higher-education system,” Mr. Obama said. “They’re an afterthought, if they’re thought of at all.”

Read more here...

Savings Are Good, But May Slow Recovery

mike@gotmike.com (Mike Harris) — Wed, 05 Aug 2009 12:59:00 +0000

Mark Gongloff recently reported in the Wall Street Journal an interesting piece which may affect the long-term valuation models of many real estate investors. In our discounted cash flow models, we must assume a certain stabilized growth rate and over the recent years, those growth rates were likely higher than we expect to see going forward, according to Gongloff. The article references a recent San Francisco Fed Paper which predicts as much as a 75bps drop in consumption growth each year due to increased savings rates. The latest personal-income and personal-spending data is reported at the BEA website. Below are some highlights of the article:

Strength of the recovery dependent upon savings accounts

Combination of falling incomes and higher spending means consumers' savings will likely fall after surging to 6.9% in May

Long-term path for savings is inevitably higher

Ratio of household net worth to disposable income is at its lowest level since 1992

Current net-worth figures are consistent historically with savings rates of between 6% and 10%

If savings merely rise to the low end of that range, $700 billion in consumer income could be removed from GDP next year

A 10% savings rate between now and 2018 would shave three-quarters of a percentage point from consumption growth each year

High savings rates could spur demand for Treasury bonds and short-term corporate debt, keeping interest rates low

Small GDP Contraction Signals the Recession is Winding Down

mike@gotmike.com (Mike Harris) — Wed, 05 Aug 2009 11:59:00 +0000

During the second quarter, gross domestic product (GDP) beat consensus expectations, declining at a far more modest rate than in preceding quarters. The economy is still contracting; however, the recent data suggest that the recession is nearing an end and that a recovery could begin to take shape in the coming months. GDP fell at an annualized rate of 1 percent in the second quarter, compared to annualized declines of 6.4 percent in the first quarter and 5.5 percent in the fourth quarter of 2008. While the more subdued decline is a welcome sign, the depth of the downturn has been significant; GDP has now contracted for four consecutive quarters for the first time since the government started tracking the data in 1947.

The economic stimulus has begun to kick in, limiting the recent decline in GDP and likely supporting modest growth in the coming quarters. Government spending increased by an annualized rate of 5.6 percent in the second quarter, compared to a 2.6 percent drop in the first quarter.

In contrast to the acceleration of government spending, consumers are holding back. Personal consumption expenditures, which account for approximately two-thirds of GDP, fell at an annualized rate of 1.2 percent in the second quarter, after ticking slightly higher in the first three months of the year. Severe job losses and persistent weakness in the housing market have weakened consumer demand, which will likely result in a slower recovery than in past cycles. A “U-shaped” recovery, or one where the economy comes out of a recession with an extended period of low growth before posting solid gains, is increasingly likely.

In response to softer consumer demand, businesses are scaling back inventory levels. While a reduction in inventories is a drag on GDP, it also can provide fuel for a recovery. When spending begins to gain momentum, businesses will have to crank up production, rather than pull from existing stockpiles of goods, to meet the new demand. The industrial sector will be the primary commercial real estate sector to benefit from increased production.

Reduced consumer demand is weighing on retailers. During the first six months of 2009, negative net absorption of retail space topped 30 million square feet, and vacancy increased 110 basis points to 9.5 percent. With demand softening, property owners have dropped rents and offered greater concessions, resulting in decreased investment activity and rising cap rates, particularly among multi-tenant properties.

More Cuts for Colleges Are Likely Even After States Pass Budgets

mike@gotmike.com (Mike Harris) — Tue, 04 Aug 2009 01:07:00 +0000

A few weeks after wrapping up their budgets for the new fiscal year, lawmakers in some states already expect a new round of spending cuts, including to higher education, as tax revenues continue to fall.

Estimates of states’ revenue shortfalls have grown worse since the spring, reaching a total of nearly $143-billion when most states began the 2010 fiscal year, on July 1, according to a survey by the National Conference of State Legislatures. But at least 11 states are already expecting to make midyear cuts, totaling more than $22-billion, according to the Center on Budget and Policy Priorities, an advocacy group... Read more here...

Uncertain Summer - Colleges Try to Control Enrollment Melt

mike@gotmike.com (Mike Harris) — Tue, 04 Aug 2009 00:35:00 +0000

The Chronicle of Higher Education recently released an article discussing enrollment "melt" and the efforts many colleges are taking to counter this difficult phenomenon. The unstable economy has caused university administrators to plan for more attrition than usual, and they are taking extra steps to minimize the effects. Read more here...

Hessam Nadji on Commercial Property News

mike@gotmike.com (Mike Harris) — Mon, 03 Aug 2009 16:09:00 +0000

Hessam Nadji, Managing Director of Marcus & Millichap recently discussed the economy and commercial real estate markets on Commercial Property News. In this video, he covers the following issues:

Job Losses

Tight Credit Market

Property Fundamentals Reversing

Maturing Debts

Tenant Concerns

Complex Loan Structures

and more...

Total Commercial Real Estate Debt - $3.5 Trillion - Harvey Green

mike@gotmike.com (Mike Harris) — Mon, 27 Jul 2009 23:17:00 +0000

CNBC's program, Squawk on the Street, recently discussed the CMBS market and the concerns which exist going forward with these investments. Total commercial outstanding debt in the U.S. is estimated at $3.5 trillion, and concerns are mounting as roughly $400 billion in debt comes due this year. Harvey Green, CEO of Marcus & Millichap Real Estate Investment Services, shares his insight.

Student Housing Waiting Game Coming to an End

mike@gotmike.com (Mike Harris) — Fri, 24 Jul 2009 16:37:00 +0000

As Apartment Finance Today's Les Shaver reported in May, the student housing "waiting game" is rapidly coming to an end. Where the pre-leasing numbers for the 2009-2010 school year effectively land will certainly have a significant effect on values.

Les points out in the article that:

It's more than demographics

Management matters

Start early

Remember that The Jackman Group is always available to benchmark your pre-leasing activity in a specific market and against the industry as a whole.

Student Housing Bulletin - 4th Edition Released

mike@gotmike.com (Mike Harris) — Tue, 21 Jul 2009 19:28:00 +0000

The Jackman Group just released the latest version of the Student Housing Bulletin. You may download a copy here.

The bulletin includes valuable data such as:

On-Campus & Off-Campus Student Housing Construction Trends
State Budget Statistics
Fannie Mae & Freddie Mac Student Housing Lending Requirements
Student Housing Properties on the Market
2009 Year-to-Date Statistics (Price per Unit/Bed, Cap Rates, Occupancies, etc)

Chronicle - As Fiscal Year Ends, Big Questions Loom for Colleges' Financial Futures

mike@gotmike.com (Mike Harris) — Tue, 07 Jul 2009 18:41:00 +0000

Will the stock market close on a high note tomorrow, the last day of the fiscal year for most colleges? Will that last big gift come in before the books close?

While the end-of-fiscal-year value of a college's net assets is just one indicator of the institution's overall health, it's an important one. If the value falls too low relative to debt, bondholders could find the institution in default on covenants and demand repayment. [Read More]

Both Standard & Poor's and Moody's Investors Service have noted the deterioration of college finances over the past several months and say they expect the difficult financial conditions to continue through 2012. [Read More]

As the economy worsened over the past year, more than 40 states made midyear cuts totaling nearly $60-billion, according to figures from the Center on Budget and Policy Priorities.[Read More]

CPM - 2009 College Housing Report

mike@gotmike.com (Mike Harris) — Mon, 06 Jul 2009 16:54:00 +0000

College Planning & Management Magazine recently released their 2009 College Housing Report.

From the Report:
"A funny thing appears to have happened on the way to the development of college residence halls this year: The cost has fallen. While the median residence hall reported on a year ago cost almost $74,000 per student, an equal number of halls surveyed this year cost $69,135 per student. This interrupts a 10-year trend that had almost tripled the median cost per student from just under $25,000 in 2000." [Read More]

Colleges Should Start Planning Now for Net Price Calculators

mike@gotmike.com (Mike Harris) — Mon, 06 Jul 2009 16:48:00 +0000

College officials need to begin planning now to comply with a new federal requirement that they post on their Web sites within roughly two years the net price to attend their institutions, panelists said at a meeting of institutional researchers here this week. 'This is going to end up being more complex as you get into it than people realize,' Mary M. Sapp, assistant vice president for planning and institutional research at the University of Miami, told members of the Association for Institutional Research. Congress mandated the new feature last year to give prospective students a clear idea of the actual cost to attend each institution. The net figure will be derived from total cost - tuition, fees, room, board, and other expenses - minus average aid from all sources of grants (but not loans). [Read More (Subscription Required)]

Think Ahead LLC, a developer of college financial planning software, had developed a White Paper on the Net Price Calculators, available here.

Chronicle - Giving to Colleges Declines Nearly 6 Percent

mike@gotmike.com (Mike Harris) — Mon, 06 Jul 2009 16:36:00 +0000

The Chronicle of Higher Education recently reported that giving to colleges and other charities declined by nearly 6 percent, the steepest decline in the history of the survey which began in 1956. Below are some highlights, please visit the website for more details.

Individuals donated $229.3-billion last year, a decrease of 6.3 percent. Giving through bequests also dropped: $22.7-billion was contributed through people’s wills, a 6.4-percent decline. Altogether, gifts from individuals, including bequests, accounted for 82 percent of all charitable giving in 2008.

Corporate donations totaled $14.5-billion in 2008, an 8-percent decrease, accounting for 5 percent of all giving.

Foundation grants decreased only slightly, 0.8 percent. They totaled $41.2-billion. Grants from private, community, and operating foundations made up 13 percent of the total contributed to charity last year.

CBPP - State Budget Troubles Worsen

mike@gotmike.com (Mike Harris) — Mon, 06 Jul 2009 16:27:00 +0000

The Center on Budget and Policy Priorities released a report which discussed the fiscal stress currently being experienced by state governments. Below are some highlights, you can get the entire article here. (PDF is available here)

At least 48 states addressed or still face shortfalls in their budgets for the upcoming year.

Even before the new fiscal year starts July 1, new shortfalls of $23 billion have opened up in the adopted 2010 budgets of at least 12 states and the District of Columbia. Shortfalls for fiscal year 2010 – those already addressed and those still open -- total $166 billion.

At least 29 states have prepared estimates for the 2011 fiscal year. Initial estimates of these shortfalls total almost $38 billion. As the full extent of 2011 deficits become known, shortfalls are likely to equal $160 to $180 billion.

Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total over $350 billion.

Public-Private Investment Program (PPIP) to be Unveiled Wednesday

mike@gotmike.com (Mike Harris) — Tue, 30 Jun 2009 12:18:00 +0000

The U.S. Treasury is planning to roll out its long-awaited Public-Private Investment Program (PPIP) plan, aiming to unveil it on Wednesday.

The program is likely to include as many as nine participants. CNBC has confirmed that two firms will be Wilbur Ross's Distressed Real Estate/debt fund and a joint venture between GE Capital and private investor Angelo Gordon & Co. As many as seven other firms will likely participate.

Other firms widely expect to be named include PIMCO and Blackrock. [Read More Here]

Harvey Green | Marcus & Millichap CEO on CNBC Closing Bell

mike@gotmike.com (Mike Harris) — Mon, 29 Jun 2009 20:09:00 +0000

Harvey Green, Marcus & Millichap's CEO recently appeared with Neal Elkin, Real Estate Analytics on CNBC's Closing Bell to discuss the whether the recent decline in Moody's real commercial property price index is a sign of a bottom in real estate.

Mr. Green emphasizes the importance of differentiating property level performance based on transaction vintage with the highest risk transactions in this cycle having been executed in the late stages of the up-cycle. He also highlights some of the differences of addressing distressed assets in the current environment compared to the early 1990s.

Endowments Dipped | Aid Experts Like President's Plan

mike@gotmike.com (Mike Harris) — Mon, 29 Jun 2009 19:53:00 +0000

Foundation Endowments Dipped in 2008, but Giving Rose

Grant makers’ endowments plunged by 26 percent last year as the stock market fell to levels not seen in years, says a new report from the Commonfund Institute.

That was a sharply different picture from the one in 2007, when endowments grew by 9.9 percent. But foundations’ returns still compared favorably to the overall performance of the market. [Click Here for more]

Aid Experts Like President's Plan to Streamline FAFSA but Hope for Bigger Changes

"The plan that the White House unveiled on Wednesday for simplifying the form, known as the FAFSA, wouldn't go that far, and its most significant changes would require Congressional approval. Still, financial-aid experts say the president's proposal will greatly simplify the process of applying for student aid, while creating momentum for broader change going forward," The Chronicle of Higher Education reports. [Click Here for more]