SAN DIEGO–(BUSINESS WIRE)–Thousands of students are heading back to their universities. Most of
them are living on or near their place of learning. If you’re
considering an investment in this space, you probably have
pre-conceptions and questions regarding the sector, in general, and
certain property operating characteristics. Frederick W. Pierce,
President and CEO of Pierce Education Properties (PEP), www.pierceeducationproperties.com,
has answers about four common “misconceptions regarding Student Housing”.
Today, PEP owns and operates approximately 12,500 beds of student
apartments at 20 universities across the nation including the likes of
University of Florida, Florida State, University of Georgia, Georgia
Tech, University of South Carolina, West Virginia University, The Ohio
State University, Purdue University, Iowa State University and many
others. PEP buys at public universities with 15,000+ students that play
Division 1 (FBS) Football. PEP’s equity capital comes from institutional
investors such as pension funds and insurance companies.
Question: It has been reported there is a growing national “student
debt” burden. Does or won’t this inhibit students’ capacity to
pay rent for Class A student apartments?
true for students at traditional non-profit universities. Amongst
those students, ½ graduate with no student loan debt, while the other
half average approximately $25K in student debt upon graduation. Conversely,
it is at America’s private, for-profit universities where students are
amassing large student loan balances. Also, domestic students who
pursue Graduate degrees often accumulate large debt balances, which
does make those students more rent sensitive.
Question: Don’t students trash the properties? Doesn’t that
drive up repair and maintenance costs and negatively impact NOI?
Generally, not true. It is standard amongst student housing operators
to conduct in-depth quarterly unit inspections, which timely reveal
any such damage. Any such damage discovered is immediately
charged back to the resident and the industry has two very effective
means of collecting those bills: we can contact their parents
and/or turn off their internet. You see, in student housing
there are parental lease guarantees and cable and internet is
universally bulk contracted by the landlord. There is also
significant word-of-mouth communication in student housing – word gets
around fast that the landlord doesn’t tolerate property damage. As
a result, at PEP property damage is kept in check and our bad debt
expense averages only 0.5% of revenues.
Question: Aren’t leases written for the academic year producing
high vacancy in the summer when students return home?
Not true. On-campus dorms write academic year leases, while off-campus
apartments typically require 12-month leases. It’s true that
most freshmen reside in university dorms and return home that first
summer. However, after that freshman summer, most students
prefer to stay at their community near school during the summer since
they have new-found freedom for the first time and most all stay at
school taking a summer course, working part-time or just enjoying the
summer since their rent is paid and they have many more amenities and
independence than they would have living back at home! They
also have a new set of friends who also prefer to summer at college.
Question: On-line learning is proliferating. Doesn’t this
trend put traditional university enrollments at risk now and into the
future? Won’t that negatively impact demand for student housing?
Not true at major universities. A significant part of a college
education is what goes on outside the classroom. While it is
likely that traditional students do and will continue to take some of
their courses on-line, they do so while living at college. What
on-line education is doing is providing access to higher education to
those who are not traditional students: lifelong learners, place-bound
students, and foreign students without the resources to study abroad.
As such, distance learning is actually expanding the reach and
enrollments at major universities, with no negative implications for
the core residential student base.
For further information on Pierce Education Properties, please visit the
company website at www.PierceEducationProperties.com.