Private Equity Value Creation

Become A College Landlord With This Campus Housing REIT

Many families across the country are preparing to send their kids to college and instead of writing checks for investing, parents are getting out their checkbooks to fund college tuition or dorm living costs.

The quest for yield-enhanced income alternatives makes it difficult as college tuition has been skyrocketing for decades–with growth outpacing the Consumer Price Index, gasoline and even the out-of-control health care costs.

The chart below shows price changes in these categories. The lines represent the price in a given year, as a percent of the price in 1985. For example, if a line reaches 200, that means prices in that year were 200 percent of those in 1985, or twice as high.

Keeping up with inflation is difficult enough but what about trying to prepare for college education? Parents and all investors are constantly looking for alternative income strategies to fund living expenses and with the historical rate of college inflation close to 6 percent it is hard to find a promising alternative.

But what about campus housing?

American Campus Communities (ACC), based in Austin, is the largest campus housing REIT (since 2008) in the United States. American Campus owns 124 student housing properties containing approximately 76,100 beds. Including its owned and third-party managed properties, ACC’s total managed portfolio consists of 153 properties with approximately 99,900 beds.

Since 1996 American Campus has developed more than $3.4 billion in properties (for the company and others) and the company has acquired in excess of $2.8 billion in student housing assets. The growth in the specialty campus housing sector is driven by strong demographic trends–primarily college enrollment trends. Between 2009 and 2020 college enrollment is projected to increase by 13 percent to approximately 23 million students.

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