Three US Student Housing REITs Dominate through Growth and Acquisition

Three public REITs, with total market capitalization of $6.4 billion, focus on student housing. The fragmented nature of the industry provides room for growth through acquisitions.  These REITs represent just 1.0% of the overall REIT industry. Student housing is a specialized real estate sector that experienced significant acquisition and development activity in 2012 and that continues to shine in 2013.

Solid dividend yields that currently range between 3% and 5% reflect the main attraction of the public student housing REITs. Investors envisage long term growth for the sector fuelled by positive demographic trends, including growth in the college-aged population. Colleges and universities have become less willing to invest their capital in housing for students, creating an opportunity for private owners and developers.

Student housing proved relatively recession resistant during the credit crisis because college enrolment did not decline. Students stayed in school during the recession rather than face the uncertainty of the job market.

  • Campus Crest Communities (CCG) recently announced an acquisition that will make it the second largest student housing REIT. CCG is purchasing a 48% stake in Copper Beech Townhome Communities with an option to acquire the remainder of the company over several years.
  • Education Realty Trust (EDR), which owns and manages 34 communities with more than 25,400 beds and provides management services for an additional 10,000 beds, is repositioning its portfolio through acquisition, development, and sales activity.
  • American Campus Communities (ACC) is the largest student housing REIT and has been one of the most active buyers and developers of student housing. ACC added 51 properties with more than 30,000 beds totalling $2.2 billion in 2012. Its acquisitions included a 19-property portfolio containing 11,683 beds and 366 beds under development at an existing property.{Forbes}

The supply of student housing is also increasing, as illustrated by the REITs’ aforementioned strong construction pipelines. This risk is highly location specific. Supply and demand conditions vary widely by campus. Additionally, projects closer to campus bear less risk.

Notwithstanding the hazards, it is important to note that the sector’s positive influences compensate for the negative implications. Healthy dividend yields should attract investors while interest rates are low. The solid outlook for long term demand is another important factor that should attract investors. While supply is high, the risks are limited and location specific, since many colleges and universities need new student housing to accommodate growth, or to replace outdated housing. All these factors combine to ensure that public student housing REITs should remain well sort after by investors.

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About Matthew Campaigne Scott

I'm a freelance writer and researcher. I have written for periodicals and websites, composed speeches and sermons and prepared copy for web advertisements and research papers. I can tailor my work according to your needs. I love a challenge and enjoy building work relationships.

Posted on July 22, 2013, in Commerce, Property and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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