With Student Housing Holding Steady, Prime Property Grabs Coveted Notre Dame Complex

While most sectors of the commercial real estate industry suffer under the pressure of the distressed economy, the student housing market continues to keep its head above water and stay, to a certain extent, in the good graces of the lending community. Among the companies beefing up their portfolios in this relatively stable niche market is Prime Property Investors Ltd., which just closed the acquisition of a 20-building student housing complex just a stone’s throw from the University of Notre Dame in South Bend, Ind.  According to Prime, the transaction marked the largest close-to-campus student housing property purchase ever completed at Notre Dame. Carrying the address of 1710 E. Turtle Creek Dr., the 39-year-old asset offers a total of 330 beds within 192 units in an area with a high barrier to entry. Known as the Turtle Creek Apartments at the time of the transaction, Prime will change the name of the complex to Clover Village Apartments and immediately commence a $2.5 million renovation program. Presently the property is 80 percent leased and Prime expects that, particularly with the upgrades and re-branding, Clover Village will be at full occupancy by the start of the fall lease term, which begins in August.  Prime’s lease-up goal is well within reach, and maintaining high occupancy rates over the long-term is unlikely to present a challenge. An anticipated annual 1.5 percent increase in college enrollment through 2012 will continue to spur demand, according to a recent report by Marcus & Millichap Real Estate Investment Services. Beyond the next few years, higher graduate income levels and an upsurge in the college-aged population will keep vacancy levels low.   “For now, the student housing business appears to be one of the bright spots in commercial real estate; it’s relatively recession proof,” Michael Zaransky, who serves as Prime’s CEO along with Barbara J. Gaffen, told CPN. “Occupancy is tied to enrollments, which are continuing to increase at major universities. Often, in a recession, people tend to stay in school and attain additional degrees instead of entering the workforce.”  Prime isn’t the only one in the buying mood. Just days ago, news emerged that Kayne Anderson Real Estate Partners had bought two student housing complexes at the campus of Virginia Commonwealth University in Richmond, Va. In February, the Preiss Co. announced it had entered the Myrtle Beach, S.C., market with the acquisition of the 436-bed University Village at the Coast near Coastal Carolina University.  While student housing has a certain inherent stability not found in such sectors as office or retail, buyers still have to sing for their supper somewhat when it comes to obtaining financing. “There’s high occupancy and rent growth in the student housing market, so it remains a favorite asset for lending, but I’ve found it’s only available for seasoned operators,” Zaransky said. “It’s still difficult for new entries, but for us, we’ve had multiple sources for financing transactions, even in the current credit constrained environment.”