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Student Apartments

OC Ventures Acquires Two Student Housing Properties in New York and North Carolina

CHICAGO, IL – OC Ventures, a Chicago-based leader in student housing real estate investment, announced the acquisition of two student housing properties in Rochester, NY and Wilmington, NC. These acquisitions mark the beginning of an aggressive growth strategy in the student housing sector for OC Ventures. The investment firm is the second-largest housing owner and operator in New York and has now acquired 3,700 beds in the last two years.
Student housing is one of the most attractive real estate investments today, says Steve Zhang, Chief Investment Officer at OC Ventures. It s one of the few real estate investments that are relatively recession-proof, provides stable cash flows, and offers healthy rent growth as college enrollment continues to increase. We offer investors the opportunity to tap into lucrative student housing investments.
In its latest deal, OC Ventures acquired the Hill at RIT and the Lighthouse at UNCW. The Hill at Rochester, is a 118-unit, 362-bed student community near the Rochester Institute of Technology ( RIT ) in New York. The Lighthouse is a 124-unit, 348-bed student community pedestrian to the UNC Wilmington in North Carolina.
The acquisition of The Hill at RIT and Lighthouse at UNCW are both strategically important to us, Zhang explains. For The Hill, RIT is the only sizable engineering-focused private University in Upstate New York. We believe enrollment will keep growing, thus creating a favorable demand and supply dynamic for student housing owners. Additionally, The Hill represents our fourth acquisitions in Upstate New York with the same capital partner. The four properties make an attractive homogeneous portfolio, which also solidifies our position as the second-largest student housing owner in Upstate New York.
For Lighthouse, we are excited to acquire a true pedestrian asset to be our third acquisition in the UNC system, Zhang continues. Our business plan includes upgrading in-unit furniture, adding a package room, and increasing the overall functionality of the clubhouse.”
Both properties feature spacious floor plans with equal bed-to-bath parity. Each luxury unit is fully furnished and offers modern kitchens with granite counters, high-speed Wi-Fi, wood-style flooring, and in-unit washer and dryer. Community amenities include a fitness center, study lounges, recreation rooms, pet parks, outdoor swimming pools, and hot tubs, grilling stations, and hammock gardens.
Varsity Campus, a full-service student housing management firm, will manage the Hill at RIT and the Lighthouse at UNCW. With six student communities in New York, Varsity Campus is the largest student housing manager in New York by market share.
Varsity Campus is excited to have the Hill and the Lighthouse join our managed portfolio, said Jerry Wojenski, CEO of Varsity Campus. By applying our operations and leasing systems, we plan on pushing rent growth and reducing operating expenses to improve the yield from these investments. We have a proven track record of executing our client s investment goals.
OC Ventures growth strategy includes a robust pipeline of acquisitions planned in 2020. The firm is actively investing in college markets with strong enrollment growth as well as opportunities with a value-add component. OC is on track to become a top 25 owner and operator in student housing by the end of the year.
About OC Ventures: OC Ventures is a Chicago-based real estate investment firm specializing in student housing. The company is active nationally, focused on opportunistic investments. For additional information, contact Steve Zhang at zhangshaofan@oc-ventures.com.
About Varsity Campus: Varsity Campus is a Chicago-based student housing management firm. Varsity manages over 5,000 beds nationally. For additional information, contact Colton Price at cprice@varsitycampus.com.

Categories
Student Apartments

Multifamily Market Leveraging Student Debt

Recently, CBRE released details of a research titled, Student Debt Woes Feed Multifamily Markets; the brief aptly sheds light on how many Americans are hesitant to buy a home and are instead choosing to extend their stay in their rented apartments. However, there was a positive twist to it when considered from a societal perspective.

Jeanette I. Rice, the Head of Multifamily Research for CBRE, suggests that there has been a gradual decline in the number of people seeking out students’ loans and it would frankly make more sense if most young people didn’t have to take out loans to study a course in college or university.

Regardless, even with the dwindling number of students taking out student debts, the ripple effect is bound to remain for a longer time. Rice further maintained that the loan problem isn’t going to disappear anytime soon, because the costs affiliated with acquiring a graduate and undergraduate degrees are on the rise.

IMPACT ON HOME BUYING

The authors who published the brief to highlight how much impact student debts had on home buying maintained that it wasn’t a new phenomenon, even as Rice reckons that the industry is fully aware that these debts are stopping many people from buying homes.

But the statistics reveal a whole lot about the story, Rice maintains, highlighting that in 2019, student debt hit $1.5 trillion – double what it was a decade ago. In 2018, 65 percent of graduates had one form of student debt. Furthermore, the average student debt per loan recipient rose to over $35,000 in 2018. Besides, most potential young home buyers have held off on the idea of buying a home because of student debt.

According to the brief, once you adjust for inflation in 2019, the cost of tuition, board and room has more than tripled since 1978. Also, the costs of higher education is predicted to continue rising above the inflation rate.

An apartment list survey conducted last year revealed that college grad students that had taken out student loan require around 12 years to save up 20 percent for a down payment. This time increases by around three years for those that reside in metropolitan areas with high housing costs such as Austin, San Francisco and Denver.

Rice also mentions that she has carried out extensive research in factors that influence home buying, including patterns, demographics and lifestyle. Adding that student debt is only a part of the larger picture and it is expected that home-buying will be put on hold by at least a few years compared to the previous generation. Rice also suggested that this development would translate into more rented households in the U.S.

DELAYING HOMEOWNERSHIP

The CBRE also highlighted that despite earning significantly higher income thanks to their degrees, Millennials and Generation Z alike, will likely not become homeowners soon after school thanks to their incurred student debts.

National Association of Realtors (NAR) highlights that around a quarter of millennials opine that coming up with the down payment was the most challenging aspect of buying a home. Also, young homebuyers cite that their incurred debt is the primary reason why they couldn’t save up for the down payments. NAR also reported that High debt-to-income ratio is a common reason why potential homebuyers are refused a mortgage.

Due to lower inventories of lower-priced homes and rising home prices coupled with high student debt, most Millennials will be unable to buy their own homes anytime soon. Conversely, the inability for homebuyers to purchase homes is an advantage for the multifamily housing industry, which – due to increased demands – have since experienced steady growth over the past decade.

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Senior Apartments

Senior Housing 2020: Preparing for the Silver Tsunami

The past year, 2019, has been a relatively simple year for the senior housing sectors. This does not imply that nothing at all happened in terms of transaction, trends and other highlight events. But on the whole, the year passed with no occurrence of any black swan events. Will 2020 enjoy this same serenity?

Development Trends

Overbuilding and surplus supply in emerging markets was a problem grappling the industry in 2019. However, with the start of new construction, market growths have slowed and glutted markets are starting to recover again. Data from the NIC MAP Data Service reveals that in the 4th quarter of 2018, around 29,000 senior housing units were under construction. That number has since seen a gradual decline to approximately 63,000 in the third quarter of 2019.

There has also been a recent trend and shift towards the construction of larger projects, usually in infill locations. Most new constructions have an average of 110 units, and several other projects providing continuum care. This average has since grown at a steady rate, from the initial 24 units in 2015. Also, considering the size, these projects would naturally take a while to finish, substantially slowing the delivery pace of new units.

Operating Environment

Markets have become increasingly competitive, due to the introduction of new products. However, absorption has also been on the rise, accounting for almost no change in housing occupancy in 2019, in spite of more completions. Regardless, resident retention and marketing continue to be significant focus points for operators.

Wage inflation and staffing are also major issues that operators are grappling with. Tight labor market, along with new mandated minimum wages by local and state governments, means that labor costs are on the rise. Unless revenue levels can somehow be increased through other sources, this move can cause profit to drop.

Furthermore, since the recent introduction of capital sources into the market, the importance of quality operators in a senior housing investment cannot be overemphasized. This has also compelled some capital sources to buy into operating companies. One notable example is The Bridge Investment purchase of the Somerby Senior Living.

Finance Market

Agency vanguards – Freddie Mac, Fannie Mae and HUD – all recorded an eventful year. However, Freddie and Fannie had to restrict their activity haven reached their annual lending limits in the fourth quarter of the year. Concerns about subsequent cap reduction in future years were finally allayed when released 2020 caps were higher than that of 2019.

Interest rates have since remained attractive, as insurance companies, banks and debt funds remain active players and capital providers in the senior living sector and agencies.

Transaction Market

The transaction market recorded relative success in 2019, as buyer activity remained impressive across several areas. Moreover, the institution capital, public REITs, foreign capital, private equity and affiliated operators were all active.

Transactions were equally distributed across various areas, from large portfolio to single-asset transactions, including the Welltower’s sale of a Benchmark portfolio valued at around $1.8 billion-dollar to a private equity group.

2020 Predictions

2020 will herald the year when the first set of the Baby Boomer generation hit 74 – a year away from the widely-predicted silver tsunami. However, the average entry age at senior housing is also said to be on the rise and most industries have set their sights on 2026 – when the first set of baby boomers turn 80 – as the year when demand will markedly soar. Likewise, independent living and senior apartments are very confident of younger dwellers, and many are being proved right, causing a notable growth in those sectors.

In the absence of a major financial market mishap, lending to the sector is expected to remain active, with very favorable terms.

Large players and REITs will possibly streamline their portfolios, and developers that have grown assets throughout the years will see this as an excellent time to sell, while the finance and transaction markets are strong. Similarly, operators that have built impressive portfolios over the years may consider now as the right time to leave. Overall, 2020 is showing positive signs of being another successful year in terms of lending activity and robust transactions, backed by a stable to improving operating environment. Hopefully, the black swans remain dormant!

Categories
Apartment Development News & Trends

Apartment Building Amenities – What Are They Worth?

Apartment communities and complexes are looking to stand out in a relatively stationary residential market with amenities, but which ones are renters keen on?

Most potential renters are particular about the value an apartment can offer them. In most residential areas, the rent at the end of each month can remain relatively unchanged. When it comes down to it, what will sway the choices of potential renters are the amenities that the apartment can offer.

But sometimes it can be hard to tell which amenities will appeal the most. Is it proximity to the supermarket or a gym on the first floor or a common area for socializing? Or perhaps a fully functional laundry floor in the building? A recent survey has revealed some of the most sought-after amenities and can potentially offer answers to these questions.

The survey titled “Adding Value in the Age of Amenities Wars” was conducted by the National Apartment Association (NAA), and highlights some of the preferred amenities that guarantee the highest returns in apartment communities.

According to Robert Pinnegar, NAA President & CEO, the research revealed that modern conveniences and community spaces are the leading amenity demands. He also adds that the survey highlighted what offerings could enhance the appeal of an apartment, and even the simple and affordable amenities that can be added to increase appeal.

The community-level list was hugely dominated by a sense of togetherness by bringing people together. Likewise, upgrades and high-end finishes topped the unit-specific list. Furthermore, business centers and fitness centers are widely clamored for by most communities – heading the list of amenities that owners have entirely upgraded or added recently.

Other amenities also favored by residents are clubhouses for socializing and common areas. Also, pet-friendly communities are a plus, as well as those with pools, playgrounds, landscaped common areas, outdoor areas and package holding areas. Fitness centers and pet-friendly amenities are rated the biggest community revenue influencers. In the unit-specific amenities, a dryer and an in-unit washer were top of the list and almost equal with high-end and energy-efficient appliances regarding items that can potentially lead to increased rent. However, with the cost of a dryer and washer averaging around 60% less than energy-efficient appliances, they remain a very clear option for any owner looking to increase appeal. Other unit-specific amenities include ceiling fans, lighting, electrical upgrades, plumbing, garbage disposals and cable TV.