Campus Advantage, Pension Fund Complete $100M Student Housing JV

Student housing owner/manager Campus Advantage of Austin, Texas, has closed a $100 million joint venture with one of the nation’s largest pension funds following its recent acquisition of two properties, the company announced late last week.

February 21, 2012
By Scott Baltic, Contributing Editor

Crimson Student Living in Tuscaloosa, Ala.

Student housing owner/manager Campus Advantage of Austin, Texas, has closed a $100 million joint venture with one of the nation’s largest pension funds following its recent acquisition of two properties, the company announced late last week.

The first acquisition, Hawks Ridge (formerly The Lodge) in Iowa City, Iowa, serves students at the University of Iowa. The property contains 201 units and 561 beds and is 100 percent occupied. It’s the only large-scale purpose-built student housing in that market, and the university currently master-leases 174 beds. The second acquisition, Crimson Student Living (formerly Sterling Crimson), in Tuscaloosa, Ala., serves students at the University of Alabama and Stillman College. The Class A property, which opened last August, contains 316 units and 700 beds and is 95 percent occupied.

The $100 million equity commitment from the pension fund was leveraged to a total of $200 million, Michael Orsak, Campus Advantage’s vice president of acquisitions, told Commercial Property Executive. The JV began in 2007, and three properties were purchased in 2008, he said, but the recession delayed further acquisitions until two more were made in 2010. The final two, which closed in October and December of last year, bring the JV to completion.

The seven properties total 1,540 units and 4,749 beds in Texas, Florida, Missouri, Kansas, Iowa and Alabama, with an average occupancy of more than 99 percent. Debt financing for the joint venture’s acquisitions was sourced through Berkadia Commercial Mortgage, Horsham, Pa., using both agency and life insurance company lenders.

Next up for Campus Advantage is more of the same. Orsak told CPE that the same pension fund is looking to assemble another $100 million for further purchases of student housing. CA is hoping for the pension fund to give final approval within the next 60 days.

Orsak told CPE that student housing has sustained a surge in investor interest over the past two to three years, in part because the recession has helped boost college/university enrollment, giving student housing a good deal of recession resilience. Barriers to entry in many markets also help attract investors, he said.

Student housing has been unique in the multi-family sector, Orsak noted, by maintaining occupancy rates from about 2009 through the present. In addition, he said, 2.5 to 3 percent annual rent increases have been typical in their properties over the past two years.

In addition to its acquisition activities, Campus Advantage currently manages nearly 30,000 beds at 50 student housing communities in 20 states.