Scion Group, Arch Street Capital Get $52M in Acquisition Financing for Texas Student Housing

Aided by $52 million of financing placed by Holliday Fenoglio Fowler L.P., The Scion Group and Arch Street Capital Advisors have snapped up two student housing properties in Texas.

January 30, 3012
By Barbra Murray, Contributing Editor

The new Republic at Lubbock housing community.

Aided by $52 million of financing placed by Holliday Fenoglio Fowler L.P., The Scion Group and Arch Street Capital Advisors have snapped up two student housing properties in Texas. The Retreat at Denton and The Retreat at Lubbock, renamed The Republic at Denton and The Republic at Lubbock following the acquisition, offer an aggregate 1,345 beds near the University of North Texas in Denton, and Texas Tech University in Lubbock, respectively.

Scion and Arch Street purchased the off-campus apartment communities from a joint venture between the developer and an institutional real estate private equity fund.

The financing came in the form of two five-year, fixed-rate, interest-only loans, one for $18.2 million and another in the amount of $34 million, placed through Freddie Mac’s CME Program. As a sub-sector of the thriving apartment sector, student housing is an appealing risk to the lending community and the high-quality assets that Scion and Arch Street recently acquired have particularly desirable features.

Age is more than just a number, it is a coveted characteristic in commercial real estate financing and The Republican at Denton and the Republican at Lubbock are brand new, both having opened their doors in 2011. High occupancy rates are also a draw and in that category, the assets get high marks with respective occupancy levels of 97 percent and 98 percent. Additionally, student housing in general has a bright future. Population growth and a boom in the college-age population — Generation Y, or the babies of the Baby Boomers — continue to push up enrollment.

With strong fundamentals in place, student housing is hot and getting hotter and the lending community’s fondness for the sub-sector is pushing up the already high transaction volume even higher. “Given the current lower cap rate environment, the high demand by owners/developers to monetize and the high demand by investors to deploy equity, 2012 should see a substantial increase in activity for both total transactions and total dollar volume,” a report by the ARA National Student Housing Group noted.

HFF has certainly been active in the financing of student housing trades these days. Just one week ago, the commercial real estate and capital markets services provider announced that it had secured a $56 million loan for the refinancing for AIG Global Real Estate Investment Corp.’s 260-unit Sterling Collwood student housing community near San Diego State University in California.