CAPRE Exclusive | Student Housing Roundtable: What Do You Do When a University Adds Hundreds of Beds?
RALEIGH, NC — The first panel discussion at CAPRE’s inaugural Carolinas Student Housing Forum was a round-table titled “Carolinas Student Housing 360: Development, Investment & Leasing Activity in 2019.” To kick off the session, Moderator Brian Klebash, CEO and Founder of CAPRE, looked to his group of panelists and asked them to compare their current Carolinas portfolio performance to the rest of their portfolio.
“The Carolinas are very strong. Overall our portfolio is about 92% leased for this upcoming year. we have one market, Buffalo, which is a little bit behind for this year, but here in the Carolinas, it’s all over 90%,” replied Jerry Wojenski, Chief Executive Officer at NDG Student Living. “Our strongest market, surprisingly, is our smallest market, Wake Forest University. We’re 100% leased for this upcoming year and we’re already 96% leased for the year after. Only seniors only live off campus there. This is just one of those market that we took a risk in, and we were surprised at the rewards there.”
At that point, a member of the audience, impressed with Wojenski’s numbers, asked Wojenski for some more info – how many beds? “It’s about 265 beds, and we’re increasing it to 320. There’s no more room for growth, so please don’t develop there!” he chuckled in reply. “But it’s been a strong market for us, and it’s really the demographic of the students, the strong, Greek housing profile there. Fraternities and Sororities really have nowhere to go, except for private-style product. And we’ve taken advantage of that market.”
At that point, Klebash looked to Wojenski’s co-panelist, Donna Preiss, Founder and Chief Executive Officer of TPCO for some more flavor. “The University of North Carolina at Wilmington recently announced that they’re adding 1800 on-campus beds,” he remarked. “As an operator, how would you react when such a market has a surge like that in on-campus supply?
“Well, let’s broaden it. Let’s ask, what happens whenever this happens?” suggested Preiss. “It can happen anywhere, and actually Wilmington has had a great year. It’s one of the best pre-leasing years that we’ve had. The Hurricane closed some dorms, and then I think they shut down some beds for the on-campus growth. So this is actually one of our very best years. but this is going to happen anywhere. So what do you do?”
Next, Preiss offered three suggestions to prepare for such an eventuality. “One thing is to refine or filter, which we are doing on the front end,” she suggested. “What we’re looking at is refining it down to only looking at the top 100 schools based purely on selectivity – not looking at athletic conferences or anything. Two, if you’re already in a supply-rich market, like Wilmington or whatever, we try to figure out capital insertions.”
“To try to drive up velocity, you can put money into the amenity spaces or the common areas. If we want to drive up the rents, then we’re going to put money into the unit,” she specified. “We’ll put in plank flooring or refreshed cabinetry or hard surface countertops. The last thing is something that has worked really well for us – and that’s to differentiate the pricing. Basically, for each project that we have, we try to have three different levels of pricing. That’s a standard unit, a deluxe unit and a premium unit. we’ve found that it works pretty well.”
Finally, Andy Feinour, President and CEO of Student Quarters chimed in to build off of both Wojenski and Preiss’s remarks. “Jerry talked about a really successful asset at Wake Forest, but he followed it quickly with, please don’t develop there. Donna said we see this all over. And we do. But the reality is, when you get away from the flagship markets and the secondary and even the tertiary markets, your sensitivity within those markets exponentially increases,” he clarified.
“So when North Carolina State University decides it wants to add dorms, that certainly has an impact on the market, but the market overall is so much larger, that the impact is somewhat different than at University of North Carolina at Wilmington or even a smaller school,” continued Feinour. “So you have to be very careful about where you’re investing, and what the likelihood is that the university will develop or that the private sector will develop and add more supply. and when you get into the tertiary markets, where something similar has happened, it’s been pretty efficient. There just isn’t enough demand to go around.”
“We try to do all of the things that Donna talked about, but at the end of the day, if you flood the market with supply and you don’t have an increase in demand, somewhere is going to soften. That’s just the reality of the numbers,” concluded Feinour. “From our perspective, we try to focus only on flagship markets and then secondary and tertiary markets in states that we believe that strong long-term growth aspirations, which will increase enrollments in those markets. But you have to be very careful about where you decide to go.”
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