CAMPUS REITS FOR STUDENT HOUSING

Abstract

Student housing has long been an important factor in helping universities attract talented students from across the land. While the student accommodation of yesteryears was spartan and usually furnished with the bare essentials, student accommodation of today is in a different class of their own. The increasingly competitive higher education landscape and growing affluence of college students who come from wealthy families means that demand for more and better student accommodation is increasing. Attractive yet affordable student accommodation is considered a key criterion of any university that wishes to attract highly profitable undergraduate students. As a result, universities are under pressure to build more student accommodation at an increasing rate. Under these circumstances, universities have sought to involve private investors to finance the development and operation of such accommodation in order to free up capital for other core university activities. One such recent example involves the formation of specialized Real Estate Investment Trusts that buys, develops, and owns properties that cater solely to the student housing market. Also known as Campus Reits, these Reits operate in a different environment from those of other commercial real estates investment trusts. The purpose of this study is to determine the factors that contribute to the viability of these Campus Reits. A case study of one of the largest publicly traded Campus Reits in the United States, American Campus Communities, Inc., is used to highlight the best practices involved in managing such Reits. Through this case study, the risks inherent in managing the operation of such Reits are also drawn out to the reader’s attention. The study concludes that Campus Reits is a viable option for project finance of student accommodation facilities. It also determined that the long term performance and profitability of such Reits is reliant on proper management of the risks and opportunities that are unique to this market.