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Student Housing: American Campus Communities Is Playing The Long Game

May 06, 2019 10:38 AM ETBlackstone Inc. (BX)IYR, VNQ2 Comments


  • After battling through a series of operational missteps and oversupply issues over the past two years, American Campus appears to have found its mojo once again.
  • Disciplined capital allocation, along with the broader REIT Rejuvenation of 2019, has erased the NAV discount that had stifled the company’s external growth ambitions. FFO growth is projected to reaccelerate.
  • While short-term fundamentals remain uninspiring, we remain confident in the long-term secular growth story rooted in the much-needed modernization of the physically and functionally outdated university housing stock.
  • Enrollment growth is expected to remain flat-to-lower over the next decade, however, and the attitudes towards the traditional 4-year model of college education are shifting amid a backdrop of robust economic growth.
  • As American Campus noted on their recent earnings call, the company is at its best when it's in acquisition-mode and able to put its operational efficiencies to work.

REIT Rankings: Student Housing

In our REIT Rankings series, we introduce and update readers on each of the residential and commercial real estate sectors. We analyze REITs within the sectors based on both common and unique valuation metrics, presenting investors with numerous options that fit their own investing style and risk/return objectives. We update these rankings every quarter with new developments.

student housing REITs

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Student Housing Sector Overview

Down to just one major player after the acquisition of EDR by Greystar in 2018, the student housing sector comprises 1% of the REIT Indexes (VNQ and IYR). Within our Hoya Capital Student Housing Index, we track the lone student housing REIT, American Campus Communities (ACC) which accounts for $6.5 billion in market value. American Campus owns roughly 110,000 student housing beds of the more than 5 million purpose-built student housing beds across the country. ACC's portfolio is primarily on-campus or near the campuses of major 4-year public universities. Small-cap REIT Preferred Apartment (APTS) also owns a portfolio of roughly 6,000 beds.

A microcosm of the trends seen across the REIT sector over the last four years, the student housing REIT sector has been gobbled up by the private markets. Private domestic and international investors, seeking a defensively-oriented and countercyclical real estate asset, continue to see significant value in student housing properties, pushing capitalization rates to levels on-par or even below their apartment peers. A record $11 billion of capital flowed into the sector in 2018 according to Newmark Knight Frank as the sector has quickly emerged from a niche business into a full-fledged institutional marketplace.

student housing REITs

Student Housing

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The views and opinions in all published commentary are as of the date of publication and are subject to change without notice. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Any market data quoted represents past performance, which is no guarantee of future results. There is no guarantee that any historical trend illustrated herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that any outlook made in this commentary will be realized.

Readers should understand that investing involves risk and loss of principal is possible. Investments in real estate companies and/or housing industry companies involve unique risks, as do investments in ETFs. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes.

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