A Seminal Student Housing Transaction Breaks Records

A Promising Start

In April 2020, CBRE was contacted by an institutional owner interested in exiting a student housing portfolio with eight assets across five states. The properties were located at Division I (athletic) universities, three of which were among the largest in the United States, and had experienced 7.5 percent overall annual enrollment growth. Each asset was close to campus and featured full bed/bath parity with over 6,000 beds.

An Uncertain Future

Because most of the universities shifted to remote learning during the pandemic, the uncertainty of student housing during the 2020-2021 academic year remained at the forefront. However, rent collections had held steady throughout the pandemic, and the student housing sector saw higher rent collections overall than other sectors, including multifamily. With COVID-19 at its height in the United States, student housing lenders maintained a cautious approach until they had more clarity on school reopenings and property performance.

What Investors Want

At launch, 85 percent of the portfolio was preleased, indicating high resident demand. Anticipating that collections and occupancies would continue to be strong, CBRE captured investor interest, notably after facilitating the then-largest-ever student housing transaction at over $450 million in February 2020. CBRE offered the Growth States 8 portfolio as an opportunity for investors who looked to allocate capital for high-performing assets.

Opportunities and Offers

CBRE ultimately generated 13 offers driven by the portfolio’s resilient cashflows, attractive terms and low 2.5 percent floating-rate financing. The investment went under contract before the 2020-2021 academic year, closing on November 3, 2020, as the largest portfolio transaction in the sector since 2017 at $474.7 million.

Sector Resilience and Future Success

Student housing cap rates offers a yield advantage compared with traditional multifamily assets. The student housing sector’s resilience and Fitts’ understanding of investors’ needs led to a resounding success for CBRE and the client.