The growing university housing market proves lucrative for savvy developers who keep up with the evolving needs of students. AP looks at three management firms who are doing their homework.
Students today expect certain technological advances. High-speed Internet access is a widespread requirement. Cable TV is up there. Sophisticated young consumers crave comfort and style to boot.
Landlords can thank their residents’ folks — helicopter parents, as they’re tagged, because of their tendency to hover and overprotect. The parents of today’s undergraduates typically earn more money than their parents did, and, it would seem, allot more time for bonding.
“When we went to school, our car was seven years old,” says Brent Little, who was, until recently, senior VP for Dallas-based MF builder JPI. “The cars of students today are an average of two years old. Everyone has their own TV, their own iPod, and their own computer. It’s a completely different marketplace.”
Little says college kids expect to live in housing that reminds them literally of home. But many off-campus dorms, constructed in the 1960s and 70s, aren’t in great condition, and many on-campus buildings are even older. Kids don’t want to stay there. They wouldn’t have Wi-Fi access, for one thing. They want the lifestyle to which they’ve grown accustomed. That’s where JPI comes in.
“JPI comes from a background of conventional or luxury housing,” Little says. “Our approach brings a lot of the things that we offer in our conventional, our luxury, and our condo product to the student market.”
JPI constructs study-room-equipped “living-learning” and apartment style housing both on and off various campuses.
“They may be group study halls, business centers, or computer centers incorporated into the housing areas,” Little says. “A lot of the new housing is mixed-use, as well. So, it will have a coffee shop downstairs, maybe a video rental store and music store.”
Founded in 1994, JPI’s student-housing branch currently represents about 25 percent of the company’s annual revenue.
Reps at JPI’s capital partner, GE, studied demographics and found that growing numbers of “Eco-boom” students were enrolling in college each year, they were staying there for longer stretches, and schools were having trouble providing accommodations.
JPI quickly built two complexes at University of Central Florida in Orlando, where enrollment increases annually by 1,100 to 1,500 students.
“There’s no way the private or public sector can keep up with that kind of increased enrollment,” Little says, “especially as these schools become more and more landlocked in urbanized areas. Our ability as a private enterprise is better.”
Across the country, JPI has built 52 student buildings, totaling 12,884 apartment homes, or approximately 34,000 beds. These properties are worth $1.2 billion. Fifty-two percent of JPI’s student housing is off-campus; 27 percent is acquisition — property bought from universities by JPI and remodeled; and 19 percent is constructed in partnership with the schools.
Do most schools welcome outside help with housing overflow?
“You have some universities and municipalities that look at it that way,” Little says. “Others don’t. Georgetown University has placed a cap on enrollment and has said, “You cannot increase enrollment until you build more beds.”
Why do some universities resist private off-campus construction?
“It’s what they call town versus gown,” Little says. “They’re concerned about the infiltration of students into the existing neighborhoods and turning them from home ownership into rental housing.”
JPI attempts to combat certain problems associated with student renters, like too many cars on the road and in the lot, by working with schools and transit systems to provide convenient transportation and discourage unnecessary car trips.
Certain universities work with JPI to distribute their housing information; others refuse to open a dialogue.
“We let them know what we’re doing, what our plans are, and their response ranges from, ‘That’s great, we have a need,’ to their seeing us as a competitor and not wanting anything to do with us,” Little explains.
Each of JPI’s communities operates on the industry standard of by-the-bed leasing; i.e. each bedroom has a lock on it and each student is responsible for his or her room and for the common area. If one person fails to pay rent among four roommates, the other paying residents are not held responsible for the default.
Another service the company provides: roommate matching.
“We do a category-by-category comparison to match you with similar people,” Little says. “My niece lives in one of our projects in Denton, Texas. She said, ‘I don’t know how you found these people, but they are my best friends.'”
Does Little identify any important new student housing trends?
“Kiddie condos,” he says. “FHA actually has a program where the student can buy with only 3 percent down and the parent co-signs.”
Little says that many parents decide to invest the money they would spend on four years of rent on the condo. In some cases, they rent rooms to their son or daughter’s friends to help cover the cost.
Higher density housing is another key trend.
“It’s very competitive on the land side,” Little says. “When you look at what it costs to rent an apartment in, say, downtown Austin, $800-$900 a month, without furniture or anything else. Our properties designed for student housing in Austin are $400-$500 per bedroom, which comes fully furnished with cable TV, telephone line, in-unit alarm, resort-style pool, fitness facility, all that in an urbanized area is a tremendous value.”
So, they’re sophisticated. But what’s the attitude of most college students today?
“The kids want to live in a nice, safe, clean and beautiful environment,” he says. “They really do want to study and do well — they are paying a lot for their education.”
STELLAR DEVELOPMENT AND MANAGEMENT
Lubbock, Texas-based Stellar owns 2,400 conventional apartment homes serving the student body of nearby Texas Tech University. Tech boasts an enrollment of 24,000, and about 70 percent of Stellar’s Lubbock apartments are occupied by college students.
Most of the students are moving from dorms or single units to their first apartment community, and Stellar aims to provide conventional housing, a more spacious and grown-up feel than the rent-by-the-room options associated with traditional student housing.
“When they get tired of that type of by-the-room environment, we get to compete for them to get into something that’s even less dorm-like,” says Stellar president Charles Young.
Stellar, also a multifamily provider, formerly owned units in College Station, home to Texas A&M University.
What’s the biggest difference between renting to students versus young professionals or families?
“There’s not a great variation as far as wear and tear’s concerned,” Young says. “The great variation is in managing lease expirations. If you’re not leased up by the end of August, you’re going to have a lot of stock left over, particularly in three-bedrooms.”
Though Young says Stellar loses money in the summer, it makes up some lost profit because student renters are willing to pay 10 to 15 percent more than many renters who work 9-to-5 jobs.
“The closer the property to the university], the higher it will be,” Young says.
Does management experience more security or noise violations from students?
Not really. Stellar makes clear its community policy and occupancy rules on day one, Young says, and this proactive approach has proven effective.
“We tell them if the police are called for a disturbance, you get one warning,” he explains. “If you get another after that, you will be evicted. It typically only takes one person getting evicted for them to get the message — it’s all in how stringent you are.”
Many of the students are underage, coming from student-model living situations. Young admits his staff members think of themselves as landlord-parents, to an extent.
Stellar works closely with the Texas Tech housing department and regularly attends its housing fair. Stellar launched a city-wide marketing campaign recently, establishing a call center and website.
What’s the most important strategy when marketing to students?
“With students, you really need to have a lot of your marketing in place very early, say, February,” Young explains. “They’re going to go home at spring break and talk to their parents about what they want to do, so you want to have your information in their hands.”
EDUCATIONAL HOUSING SERVICES
George Scott, president of nonprofit Educational Housing Services, partners with several schools in New York City to provide housing under contract to the colleges themselves. Seventy percent of his business falls into this contracted category.
NYC is the biggest college town in the country, with more than 700,000 students in residence. Colleges provide only 50,000 beds, and landlords are notorious for gouging renters. Scott estimates college kids in New York pour about $20 billion into room and tuition annually.
Scott formed the EHS organization in 1987 as a 5013C nonprofit after identifying a real need for affordable housing in the city for both university students and faculty. He hopes to create faculty housing in the future.
“It is a crisis,” Scott says. “Hunter has 28,000 students and only 600 beds. John Jay has about 12,000 students and no beds. A lot of kids change their mind about going to school in New York because they can’t get housing.”
Today, Scott’s organization is responsible for 2,300 beds in Manhattan and Brooklyn. All rooms are furnished, decked out with cable TV, DVD player, telephone, refrigerator and microwave.
Each year, EHS receives roughly 160,000 room inquiries. The organization has locations on the Upper West Side, the Upper East Side, Chelsea and Brooklyn Heights.
Scott sees the nonprofit as a partner to several universities, an extension of their campus, and a social tie.
Christie Gatey serves as VP of student life for EHS. Her 10-person staff provides comprehensive counseling and support. They host between 20 and 30 events weekly to help new students form connected communities.
Rent ranges from $800 a month to $1,300.
“They receive a really good value for this price,” Scott says. “And the advantages are they don’t have to sign long-term leases, pass credit checks, or put down the security deposits normally required by most landlords. The other benefit is that they are living in a community.”
Scott places students from different universities in each building. The diversity helps build community, he says. One student’s school has a football team; another’s doesn’t. So they attend games together.
Scott, who spent six years as VP of Robert Morris College in Illinois before relocating to New York, was attracted to the nonprofit model for several reasons.
“Since I came out on the educational side, I felt that colleges would be more open to a relationship with that kind of an organization,” he explains.
Another reason involved rent stabilization, which guarantees residents fixed rent for life. Scott found that many landlords were waiting for the law to be repealed, leaving buildings empty rather than renting for a low fixed sum.
“I found those landlords very receptive to me,” Scott says, “because nonprofits are exempt from rent stabilization law, so we can charge a market rent.”
Scott’s ambitious goal was to become qualified by the dormitory authority of the state of New York — a goal he achieved.
“New York issues triple tax-exempt bonds, and we’re the only organization other than a university in this state that is approved for this program,” Scott says. “We can borrow as much as we can handle, and that has led to the fulfillment of my ultimate dream.”
So, what’s Scott’s largest dream come true? He’s in the process of setting up 600 beds on the City College of New York campus. He will engage a 40-year ground lease with the school; his organization will own and operate the residence. There’s talk of many more beds down the road.
While Scott has been invited to take his model to other cities, he wants to stick with NYC for the time being.
“We really do want to expand to upstate New York,” he explains. “We’ve been to St. Louis and Denver recently, and we’ve been invited to Hawaii as well as Ankara, Turkey, and Puerto Rico.”
To qualify for EHS housing, a student must be enrolled in college, must attend a recognized institution, and must be willing to pre-pay by the semester.
Students pay a $250 damage deposit — Scott refunds about 95 percent of these deposits. He’s also pleased to note that many of the same renters return semester after semester.
“We try to create a very friendly and nice environment, and the kids treat it accordingly,” Scott says. “Our managers inspect every hallway every day, and if they see any graffiti it’s removed within 24-hours.”
Why don’t more universities take a cue from Scott and build user-friendly housing?
“It’s an interesting dilemma,” Scott says. “The problems of development in NYC are so considerable that colleges tend to move slowly, so that by the time they’ve reacted to an available site, it’s usually gone. I assume that I’m going to get it, based on the need. If I hear about a building this afternoon, I’ll take my team over and within seven days I’ll have a proposal to the landlord saying we’d like to do this deal.”
Author: Betsy Boyd