February 21, 2020
Greg Gleason oversees Corigin Real Estate’s multifamily, student housing, credit, JV and specialty investment platforms. We caught up with him to discuss Corigin’s current work in the student housing space.
Q: What’s your take on the current state of the Student Housing Market as we move into 2020? Is there anything that Corigin is doing to move the market forward?
A: We’re at an interesting inflection point in the student housing market, as the dust starts to settle following a dramatic transition. In the last 10 years, the student housing market transformed from a relatively fragmented and niche asset class into an institutional favorite. Historically, wider cap rates and steeper borrowing costs for student housing largely converged relative to conventional multifamily, as institutional and foreign money poured into the space, and new development exploded. There were a lot of solid fundamental factors underpinning this industry transformation, including favorable demographics and a major shortage of adequate housing stock to meet expanding demand. But yield-seeking undoubtedly also played a role, as a shortage of higher-yielding options pushed capital into the sector. Recently, there are some signs that things are normalizing a bit, and the market has started to differentiate.
At Corigin, we got our start in student housing back in the 1990s, after we converted an old police station in the Soho neighborhood of Manhattan and master-leased the complex to NYU. The model worked well, and we replicated it several times, ultimately becoming the largest private landlord to NYU with over 2,400 beds. We’ve tended to stick with this foundation of playing student housing though high-quality urban locations serving the demand of top-tier universities. We feel this strategy will hold up well through market volatility and will outperform in the longer term. Overall, we still like the space and believe in the macro fundamentals.
Q: Obviously the student housing segment has grown tremendously over the past several years, and the “amenity war” is going strong. What is your firm doing to buck the trend of having to build properties with high end amenities that end up being obsolete in a few years anyway?
A: We believe the best amenity for student housing is a property’s location, which never goes obsolete. As such, we try to stay disciplined and focus on the best locations that are easily walkable and in dynamic neighborhoods. We try to deliver a high-quality product and living experience, which we believe resonates with tenants more than the bells and whistles. We are generally oriented towards longer term plays. The amenity race can make sense for a shorter-term execution, but it’s not the best way to create long-term value.
Q: What are some of the hottest markets in the Student Housing space? Is your firm active in any of them?
A: The growth in student housing has been fairly broad and development has been active through much of the country. We’ve seen a lot of activity in the Southeast, where we’ve been active on the multifamily side, but have continued to favor the urban, more supply-constrained markets where new development is structurally constrained. For instance, we recently delivered 250-bed student housing property adjacent to UC Berkeley, a leading academic institution that serves as the flagship campus for the University of California.
Q: Can you talk about a recent project or acquisition your firm has undertaken recently that was a success?
A: We are very excited about our recent delivery in Berkeley. It’s a great site, right near the university in the heart of the community culture. We worked with an excellent local developer, Panoramic Interests, to deliver much–needed, high-quality student housing stock to the market. We think the finished product turned out great. It is thoughtfully designed, offering a high standard of living at a compelling rental rate. We feel it’s one of the best markets in the country, and this product is difficult to replicate. We delivered the 250-bed facility last August, and tenants have responded well. As we were nearing completion, Berkeley took interest in the units and ended up bulk leasing a large number of beds from the partnership.
*Pictured above is The Panoramic, a 250-bed student housing property adjacent to UC Berkeley in California that was delivered by Corigin.
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