I was always under the impression that student housing was immune to the ups and downs of the economy.
But the Coronavirus may eventually challenge my argument. Will these Infectionious Diseases change the way we live in the long term. Or will it be just a short term adjustment?
I use Student Housing as an example because I always thought it was insulated industry. But this questions is really to all industry's real estate. What are your thoughts.
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Are student housing complexes giving more breaks on rent than normal apartments? I don't see why they would be an outlier.
No, but schools seem all over the place in terms of classroom policies. Everyone in SH is on edge.
Would anyone be able to provide some color to my original post?
I know there have been properties put up for sale, but haven't heard about vacancies or occupancy rent breaks to entice buyers.
I would appreciate it.
Once we get past this virus there may be some upside from trying to buy from some illiquid owners.
I think this is an example of 'what ever can go wrong, will' ... its crazy, but SH is one asset class dead center in the cross hairs of the virus and it's fall out.
There MAY be a way for SH to come out strong; you need active and strong managers for sure, creating value by forgeing relationships with the uni's themselves. They will reduce density in dorms, and the SH assets need to capture that demand.
If there is a blanket 'go home' message from the Uni's ... it will be catastrophic for a lot of owners. First of all, there's little to no credit, and if there is there are tons of covenants on the loans.
IMO, the whole asset class was a function of people thinking Multi was easy, and pricing SH to where they could squeeze any kind of yield. Basically, IMO, SH has been over priced for years, and groups buying hopefully were not over levered, had great active management, or they're fucked .. margin of error in SH has always been tiny, but now its insane... it's comperable to hotels nad retail losing all tenants and customers over night
also, collections have been okay. the problem is pre leasing. I mean, you have properties going into Sept at 50% occupancy... if you dont have cash to help cover yourself... idk what to tell you.
You also have markets where supply is too much, and schools are glorified community colleges. These tenants dont care, they wont pay if htey dont have to bc they dont care about their credit, and the gov is not going to help because of the pandemic. It is a complete mess, but honestly the risk profile vs the returns, and caliber of operators makes me think the writing was kind of on the wall for this asset class, but i would not have thought it would happen to this extent.
Also, the entire concept of agencies lending to SH bc they have a 'mandate to provide quality housing' give me a freaking break. What a joke. Made a tonnnn of millionaires into multi millionaires though lol
Source: we manage a small portfolio, everything is performing, but we had a scare; we also get the inside scoop from countless sellers trying to sell or recap asap, so I see where the concerns are, but this is not an 'investable' asset right now, let alone with the valuations being marketed and prayed for. again, IMO
I always thought student housing was risky because properties become outdated so quickly (for what students want)
Student Housing has a similar risk profile to multifamily, the recession resistance is BS. Buying SH in a college town is like buying MF in a one employer town, it may be good forever or it may not it depends on the quality of the university/company. Even in a diversified city your downside scenario on SH is converting to MF, can the submarket absorb it, how much will conversion cost, etc... Operationally SH is different from MF but you can underwrite and think about downside scenarios similarly.
Sit qui a hic sequi quis. Enim perferendis veniam laboriosam facere.
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