CAPRE’s Canada Student Housing Forum: Q&A with Brian Minnehan, Blue Vista Capital

TORONTO, ON — Brian Minnehan is a Senior Vice President at Blue Vista, with responsibility for sourcing, underwriting, structuring and closing transactions for Blue Vista’s Student Housing investments. Since joining Blue Vista, Brian has participated in the financing, acquisition, and development of over $750 million of student housing transactions. Prior to joining Blue Vista, Brian worked in the Structured Equity Investments Group for Eagle Realty Group, a subsidiary of Western & Southern Financial Group; while at Eagle, he participated in the closing of $400 million in commercial real estate assets. Prior to that, Brian worked as an Asset Manager for Boston Capital. We connected with Brian in anticipation of CAPRE’s Canada Student Housing Forum this week, where he will be a featured speaker to learn about the lay of the land at Blue Vista and the Canadian student housing market.

CAPRE: Thanks for chatting with us today, Brian. Let’s dive right in. How did 2018 close out for Blue Vista?

Brian Minnehan, Vice-President, Blue Vista Capital

Minnehan: We actually had our most active year in student housing in 2018. We are wrapping up investing a $240 USD discretionary fund. It’s our primary investment vehicle, focused on value add acquisitions and development. We had 7 acquisitions we closed on domestically in the U.S. as well as advancing 2 different development deals under construction. In addition to that, we actually had a first closing on a new student housing venture in Canada. We acquired a site in March and closed on our venture with our partner at the end of 2018 to build, over time, 1300 beds over 3 phases in a greater Toronto area market, which is a new venture with a Canadian-based pension fund that’s hopefully going to expand to continue to develop purpose-build student housing as well as acquire Class A student housing in Canada. So that’s most of 2018.

CAPRE: And what about now and the rest of 2019? What’s the latest for Blue Vista?

Minnehan: In 2019 our goal is to finish investing the remainder of our domestic funds and start fundraising for a second fund. The target will be $250-$300 Million USD – and with a similar strategy of value-add acquisition and development. And we’re actively pursuing new opportunities in Canada with our partner – that’s open-ended and we will continue to try to find deals that work for that investor.

CAPRE: What the state of the Canadian student housing market?

Minnehan: We’ve been in the U.S. since the early 2000s, and we were the first group to raise a purely dedicated student housing fund back in 2007. So we’ve been very active in U.S. for a long tie and have seen how the purpose-built sector has evolved from a lot of low-density products to more in-fill, mid-rise product, walking distance to campus. And the amenities have changed over time as well.

We feel there are similar demographics at certain universities in Canada that can help us replicate that strategy, to take the lessons we’ve learned from 15 years in the U.S., to apply them to Canada, to be more targeted, in terms of what we’re developing and which markets we’re attacking. It looks to be still a pretty nascent industry. There has been some growth in the last 15 years, but not a lot of supply except for a handful of markets. We’ve seen that when there is supply, it’s pretty well-received. So we have a lot of confidence that if we’re providing the right product, there is demand. And we’ve seen investors willing to pay really low cap rates to acquire some of this product and there are strong financing options.

New SquareCAPRE: So there are a lot of parallels that we see between the US and Canada industries?

Minnehan: Yes, but they’re probably 10 years behind in terms of a product standpoint and a cap rate differential between multi-family. So if things continue to trend in the way that it did in the U.S. student housing industry, then now’s a good time to get in and start developing product that can benefit from the supply-demand imbalance, as well as the strengthening capital markets and investor interest in the space.

CAPRE: What are the biggest opportunity and challenge for Blue Vista looking forward?

Minnehan: We spent about a year looking for opportunities since we identified our investor. What we’ve seen is that, while we’re hoping to be able to buy a lot of high-quality, student-oriented housing in great markets, it doesn’t really exist in large quantities. So what we’ve tried to buy, we haven’t been able to make sense from an economic standpoint. We’ve had a handful of bidders willing to pay more, maybe due to the low cost of capital, but while we’ll continue to pursue some of these opportunities, we have a good story to tell. That should help us in some cases. We’re seeing more opportunities and we feel there is more growth potential in the development side at the moment.

So we’ve shifted gears in terms of more outreach to existing developers looking for opportunities in the pace and advancing efforts with our vertically integrated development partner, who is planning to start pursing more development in earnest in Canada. While we’ll continue to pursue acquisitions, we’ve found that to be a bit challenging. Not that the development space is easy, but we see enough demand for high quality housing that we feel if we can partner with more developers and find more opportunities in that space, it will be potentially easier to put capital to work. It makes sense given how over-heated the acquisition space is.

CAPRE: What are you looking forward to about CAPRE’s upcoming Canada Student Housing Forum?

Minnehan: It will be a great opportunity to meet with like-mined groups interested in the space. this is my first conference dedicated to Canadian student housing. So understanding what others are looking to do, where they see opportunities, and seeing what else is out there, is a great opportunity. Hopefully we’ll be able to find some new partnerships and relationships to advance our mandate. This is a brand new event and were really looking forward to getting in front of people and hearing what they all have to say.

CAPRE: Got it. Thanks Brian. Looking forward to hearing from you at the Forum.

Hear more from Brian at CAPRE’s Canada Student Housing Forum, where he will participate in the 10:45 am-11:15 panel “Debt, Equity, JV Equity and Alternative Capital Raising: Is the Resiliency of Student Housing Drawing in a Lot of New Investors to Canada??