Student housing in coronavirus
Hope all are staying safe. Would love to hear some stories/insights from those of you that own or work on student housing assets for schools that have shut down (especially those in college towns where the students have gone home - your assets are virtually vacant now). How are you working with your tenants on rent concessions (if at all)? So far, what kind of concessions have tenants been asking for? As I've never dealt with a student housing property, are lease terminations standard? Thanks in advance.
The vast majority of private student housing properties have no formal relationship with the universities they rely on, thus terms of their resident lease agreements are comparable to traditional MF. A private owner/operator generally would have no obligation to release a resident from their lease obligations simply because they are no longer occupying the unit and/or because the university is not holding in-person classes. I don't expect many concessions are being offered, however I expect an increase in delinquencies and bad debt this spring/summer, but in most cases the student's parent has co-signed and guaranteed payment. Nationally I'm hearing these types of properties are ~95% leased, but ~50% occupied currently.
P3 properties located on-campus are subject to lease and/or operating agreements which will dictate policies on a case-by-case basis. If a university has closed campus and ordered university-owned facilities to clear out, they are likely asking their private partners to do the same. But in that scenario, 1) the university may not have the authority to require the private party to cease operations, and 2) the private owner/operator is still likely to be bound by landlord-tenant laws and unable to remove a resident if they have not violated their lease (disregarding the current moratorium on evictions).
I'm looking for the PM's answers to students pre-signing leases for SA positions and internships falling through.
Most student housing building sign 12-month leases. It's not on the property to lease for summer; it's on the student to sublease. Conflicts between the person on the lease and their subletter are not the problem of the landlord - rent is still due for summer and the person on the lease, and most likely their guarantor, are still responsible.
I think the sector is going to run into a lot more issues than people think. While many students end up qualifying via a guarantor, many are still expected to contribute towards some, if not all of their rent. That typically is done through service industry jobs centralized around their university (bars, restaurants, coffee shops, on-campus work). I think delinquencies will shoot through the roof over the next 4-5 months as these places likely remain closed/hemmoraged until the start of the next fall semester.
Annecdotally, I am still apart of a Facebook group for an off-campus student housing project that I worked at during undergrad, and the conversations between tenants that I am seeing are already troubling. The irony is that the project was bought by TIAA in 2016 at a heafty premium.
Can you elaborate on this? I'm curious what type of conversations are occurring, outside of "I can't believe they are making us pay rent even though I don't want to live there anymore".
I work in the industry and I am sensitive to the frustrations and financial pressure on these students and their families, but I also find myself irritated with the way various outlets are reporting on the topic. The reports tend to suggest that landlords are either holding students hostage in an unsafe environment or attempting to charge excessive amounts of money if the student wants to leave the property and/or terminate their lease -- when in reality the quoted termination amount is likely the remaining rent due under their lease agreement, the amount they previously agreed to pay without consideration of whether they were actually inhabiting the space.
It feels different than traditional multi-family because the reason most of these students are living in these college towns is specifically to attend class and get the "college experience", but the local landlords -- whether it's purpose-built SH, traditional multi-family, rental home owner, etc. -- have no control over University operations and didn't sign a lease contingent that the tenant remain enrolled and attending classes. A lot of working individuals living in traditional multi-family properties only chose to live in that property/market/city due (at least in part) to its convenience to their job. If that individual loses their job and no longer wants/needs to reside at that location, are we asking traditional multi-family landlords or rental home owners to release the individual?
That being said, I agree the next few months will be rocky and collections will be a process and potential reputation hit, but the biggest concern/priority for this industry is ensuring that the universities open their campuses for the Fall. The sooner we can get the spread under control and the universities can announce their intention to hold classes on-campus in the Fall, the sooner students can feel comfortable signing leases for '20/21 again.
It is mostly typical college student grumblings about getting a petition signed to exit their leases, but the logistical issues are very real. As you can imagine there is also an overwhelming supply of sublet posts with little-to-zero demand.
I went to school in Southern California, so it's high COL + numerous out-of-state & foreign exchange students that simply want to be home with their families. I also worked and lived at the property for two years, so I got to see first-hand how many parents were willing to use their income to qualify but then expected their child to make up a portion of rent through part time work. All of those employers have been shut down, and some of that pressure will defintely be felt by the owners.
Restaurants, bars, night clubs, coffee shops in college towns are all fucked, fucked, fucked. I feel bad for all the college town small business owners and their workers; there's really no way for them to get anywhere close to enough revenue to pay their rent.
SBA paycheck protection program loans being provided as a result of the crisis, 2.5x monthly payroll - "Borrowed money used for expenses relating to payroll, mortgage interest, rent, or utilities in the eight weeks following the date of origination can be forgiven. That means business owners will not have to pay the government back the full principal amount of the money borrowed."
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