Monday, May 4, 2015

Student Housing Fund Partners Seek Value in Dorms

by Steve Lubetkin,

Two large players making a major bet on the student housing sector say students want nicer living facilities near the schools they attend, while the schools are less interested in paying for it themselves.

Enter Campus Apartments, the oldest and one of the largest privately held student housing companies in the nation, and Clarion Partners, a leading real estate investment manager. The pair recently completed Campus-Clarion Student Housing Partners, a closed-end investment vehicle focusing on student housing in the U.S.

The vehicle closed with $402.9 million in equity commitments from high-quality domestic and international investors, predominately institutional. The fund will have approximately $1.2 billion in buying power, and is the largest student housing fund by a vertically integrated manager. Campus Apartments and Clarion Partners are co-general partners for the fund.

“The demand side is fundamentally solid, it’s not superstrong, but most projections indicate you’re looking at about 1.2 percent growth in the student population,” says Rob Greer, managing director for Clarion Partners and portfolio manager for the fund, in an exclusive interview with

Greer says the steady but unspectacular demand growth and universities’ preference for investing in their academic programs instead of in housing. “So they are leaning on the private sector to provide capital and expertise to provide the housing opportunities for them,” he says.

Housing stock is also aging at most universities, he says.

“Our kids today have a higher standard,” he says. “That provides an opportunity to provide not only new product, with fancy pools and nice facilities, tricked-out meeting spaces and that kind of thing, but there’s also existing stock that really hasn’t been revitalized to its highest potential.”

Greer says the market is highly fragmented, and the Campus Apartments platform will enable investors to gather assets from smaller operators.

“We can find those kinds of assets that are very close to campus, that have good fundamental bones, and we can come in and make the necessary updates to them,” he says. “We might change out the furniture, we might update kitchens and bathrooms, and improve conference centers, and pool areas and fitness centers, and then bring a level of professional management to the effort.”

The fund will seek investments in student housing and university-related real estate throughout the U.S. and will look to execute its value-add strategy through the acquisition and development of on- and off-campus projects.

“We’re targeting value add returns,” says David Adelman, president and CEO of Campus Apartments, who also spoke exclusively to “To achieve those returns, we’ll be buying product where maybe it’s first generation product or wasn’t really built as student housing. In the last five years we’ve done half a billion dollars in development. What you’ll also see sprinkled in is some public-private partnership where we help schools redevelop their land using our balance sheet.”

David Adelman, president, Campus Apartments
The fund expects to invest its capital over the next three years, Adelman says.

“We believe the fund benefits from a strong partnership between two platforms with a long and successful track record of investing in real estate,” says Greer. “The fund offers investors exclusive access to Campus Apartments’ pipeline of investments and operational expertise as well as Clarion’s long history as a leading real estate investment manager.”

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