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Spring Break Means 'Spring Bargain' For This Campus Housing REIT


  • At four-year public universities, 40% of students graduate with no debt, and of those graduating with debt, the average student loan balance is only $27,000.
  • Student loan default rates remain low, at roughly half the levels from two decades ago.
  • Today, college housing is like living in a four-star hotel.
  • Compared to the traditional multi-family REITs, campus housing is considered cheap.

While most college kids are thinking about spring break, I am sitting here at my laptop sweating out REIT picks, wishing I was sitting in the shade...

(Photo Credit)

However, if I am diligent with my job as a REIT analyst, I could possibly take a much-needed vacation somewhere soon. Of course, the key to success is selecting a basket of high-quality dividend paying stocks with a history of uninterrupted dividend payments.

Honestly, I am counting the days. I have written way too many articles over the last few months - over 1700 articles since 2010, to be exact. I’m long overdue for a few “boots on the ground” trips to Hawaii or Costa Rico.

Anyway, it’s time for spring break, and as I began to ponder my destination, I am reminded of all of the college kids (like my daughter) who are planning “fun in the sun”. I don’t know about you, but most of my kids have stashed away enough cash away for spring break.

In fact, the perception of increased student debt has been driven by private for-profit institutions. In the public four-year university markets targeted by American Campus Communities (ACC) and Education Realty Trust (EDR), the environment remains healthy. At four-year public universities, 40% of students graduate with no debt, and of those graduating with debt, the average student loan balance is only $27,000.

A close up of a map Description generated with high confidence

Student loan default rates remain low, at roughly half the levels from two decades ago, as evidenced by the chart below:

A close up of a map Description generated with high confidence

The composition of current housing supply in the U.S. creates significant opportunity for campus housing REITs. Until the mid-1990s, student housing was virtually ignored by property developers, who failed to see the opportunities to replace traditional dorms built in the 1950s to 1970s.

Most universities only provide housing for 20% of their

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This article was written by

Brad Thomas profile picture

Brad Thomas has over 30 years of real estate investing experience and has acquired, developed, or brokered over $1B in commercial real estate transactions. He has been featured in Barron's, Bloomberg, Fox Business, and many other media outlets. He's the author of four books, including the latest, REITs For Dummies.

Brad, with his team of 10 analysts, runs the investing group iREIT® on Alpha, which covers REITs, BDCs, MLPs, Preferreds, and other income-oriented alternatives. The team of analysts has a combined 100+ years of experience and includes a former hedge fund manager, due diligence officer, portfolio manager, PhD, military veteran, and advisor to a former U.S. President. Learn more

Analyst’s Disclosure: I am/we are long ACC, AHP, APTS, ARI, BRX, BXMT, CCI, CHCT, CIO, CLDT, CONE, CORR, CUBE, DDR, DEA, DLR, DOC, EPR, EXR, FPI, FRT, GEO, GMRE, GPT, HASI, HTA, INN, IRET, IRM, JCAP, KIM, LADR, LAND, LMRK, LTC, MNR, NXRT, O, OFC, OHI, OUT, PEB, PEI, PK, PSB, QTS, REG, RHP, ROIC, SBRA, SKT, SPG, STAG, STOR, TCO, UBA, UMH, UNIT, VER, VTR, WPC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (33)

Privately owned housing abounds and competes with Campus housing. I’ve invested in Both over the years and find Private to be soo much better. But given this is a REIT and you have to do the Private on your own this is a good choice.
what is your opinion of edr. no discussion in your article.
Student housing is a great investment. Until online school ruins everything
StrattonOakmont profile picture
Too much bureaucracy to allow that to happen, unfortunately.
When will the downturn in RIETS end?
My dgt is a student at university of Maryland. after her first yr, she moved to off campus apartments for students. They were brand new. Private bath, swimming pool, study rooms, computer center, etc. Of course it was $1009/month, but it was a lot better than the dorms. Full kitchen & washer and dryer.
thorgood4 profile picture
I am sure if you were to go inside one of these places, you'd be very disappointed. Kids are slobs. The noise level must be atrocious. Their hygiene disgusting. The odors coming from the rooms..Oh please! It's just like the apartments you see online..night and day difference to the real thing ..filthy carpeting, etc. I have no interest in student housing reits. I do like the single rentals..
Guy at Work reading SA profile picture
"college housing is like living in a four-star hotel", literally laughed out loud. "Today, college housing is like living in a four-star hotel with resort-style swimming pools, tanning salons, fitness centers, sand volleyball courts, fire pits, cafes with wood-burning fireplaces, and bedrooms with walk-in closets and private baths.". This is very misleading Brad, the VAST majority of students do not live like this. Does ACC breakdown what their properties offer? I would be very surprised if the majority of their properties have resort style swimming pools, tanning salons, with walk in closets and private baths.
I wouldn't say this is misleading. All the new stock of student housing all over the country is considerably nicer than traditional student living. Housing has become like an arms race in the University space. Kids are literally choosing colleges based on housing. Of course this is not true for the Ivies and others like it, but that is only a small portion of the overall beds. Of course the amenities vary from campus to campus and is very dependent on the space available and many of the ultra plus units are at the larger public colleges (Texas A&M, Arizona St., etc.) but private rooms with private baths is becoming much more standard in new facilities and even in renovated ones. I saw this first hand even at smaller "middle of the road" schools. I worked on financing student housing before I retired and I can not tell you how nice many of these new facilities are. Many were nicer than my condo in DC!
Winston Van profile picture
Well there are some places like this with really high rent. But they're a super minority. I'm also willing to bet the picture is CGI; there's way too many apartments that look good on paper but they're actually pretty crappy.
StrattonOakmont profile picture
This type of student housing is quite common. Its amazing how little people know about housing and yet make comments about what they don't know.
650Driver profile picture
Brad its Costa Rica an a not o on the end. Try Hotel Costa Verde at Manuel Antonio state park on the Pacific coast. The owner Allan Templeton is your kind of guy...ask for an airplane room. Tell him I recommended you.....Pura Vida
StrattonOakmont profile picture
I was wondering about EDR yesterday.

I don't think I've ever seen you cover WY or Rayonier. Since commodities prices are historically destined to skyrocket and these lumber reits are the closest thing I could find for a commodity coverage.

Do you have any opinion on them Brad?
Unbelievable how student housing has changed. I had a tiny room with bed, desk, and sink. Shared showers. Cafeteria. Who would have thought ...thanks for the article.
Impressive-- Article --
On second thought ... have that resort-like photo been vetted? How many students live like that?
StrattonOakmont profile picture
Its quite common.
Winston Van profile picture
This is a great article. But why has it been going down the past few years?
thkalinke profile picture
Thanks, Brad. I confess to having a mental block when it comes to student housing REITs. When I was in school, every place I lived was a dump. Good times!
Why didn't they increase the dividend? My guess is that one factor they are very concerned about is rising rates. Many of their individual projects, especially ones on or adjacent to college campuses, are financed with individual bond deals versus ACC capital. No market has benefited from the low interest rate environment more than these student housing transactions (also a reason why competition has heated up significantly with many new entrants into the market). Low rates have enabled them to fully finance projects as well as refinance many projects, but rising rates (and credit spreads) will not allow this to happen and they will be forced to use variable rate instruments and derivatives or use their own capital and equity. This will likely drive up their cost of capital, so they are concerned about increasing the dividend in this environment. Rising rates have more of an impact on ACC than many other REITS. I could very well be wrong about the dividend, but I am fairly certain about the cost of capital issues. They are certainly manageable but will have an impact on earnings. There are other challenges, but I do like the market, the company and its management, but I think it is better to see how they manage some challenges into 2018. To me, the lack of dividend increase is very telling.
Brad Thomas profile picture
bason FYI..."If you look at the trend, ACC's history since 2013 has been to provide the increase in the May dividend each year. I was mistaken, ACC has never increased the dividend in February." All the best. Brad
Yeah, I saw that later, but I still have concerns about the stock.
thorgood4 profile picture
Brad- student housing is anything BUT living in a four star hotel..where do you get that stuff? have you been inside that many to make that claim or just looking at all the "enhanced" photos? I don't like the chart= too bad they didn't enhance that!
As always enjoyed the article.
I think the entire REIT sector is trying to find a bottom.
The long term chart of ACC confirms this view.
Just trying to see what level of capital commitment I'm comfortable with at this stage of the bull market.

Brad Thomas profile picture
thebroker8829 - Thank you for reading and commenting. All the best. Brad
Brad, doesn’t ACC normally increase its dividend in May, rather than February?

Anyway, take a long vacation. You’ve earned it after your numerous good articles over the past few years.
Brad Thomas profile picture
greenway - I just made the edit to the article..... If you look at the trend, ACC's history since 2013 has been to provide the increase in the May dividend each year. I was mistaken, ACC has never increased the dividend in February. All the best. Brad
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