Student Housing and the Enrollment Bet
Student housing underwrites to the admission numbers, not the rent roll, and the admission numbers move slowly then quickly.
Student housing is a real estate bet dressed as an enrollment bet, and the enrollment bet is the one that pays or loses the rent. A building near a university with rising admissions will lease up against the academic calendar, and a building near a university with flat admissions will lease up against the competition.
We underwrite student housing to the admission trend, the pipeline of competing beds, and the rent a student can pay after the aid package. The rent that looks strong on the pro forma can be the rent that empties the building when the aid falls, and the aid is the variable the sponsor cannot control.
The lease up is the calendar. A student housing lease runs August to July, and a building that misses the August lease up waits a full year to recover. We sequence the delivery to the academic calendar, because a certificate of occupancy in October is a building that sits until the next August.
An investment priced to the pro forma rather than the rent roll will sit, and then sell below the number it rejected.
Industrial at the Scott County interchanges is the tightest product in the region, and the frontage is gone before the rent.