A major U.S. student housing developer and investor has formed a $2 billion venture with one of the world’s largest sovereign wealth funds to expand its portfolio of properties in a move that is double the size of a venture the duo formed together earlier this year.
Athens, Georgia-based Landmark Properties will build student housing next to the country's largest universities to hold for long-term income, known as build-to-core, with Abu Dhabi Investment Authority. The two created a $1 billion venture in March to buy existing student housing properties. Last year, Landmark recapitalized eight properties with Blackstone.
Landmark’s deal with the Abu Dhabi group comes as the student housing market has strengthened considerably over the past year. Despite higher construction and labor costs, “we’ve never seen better operating fundamentals,” Wes Rogers, Landmark’s CEO, told CoStar News.
Commercial real estate firm Newmark, for example, reported that it sold 43 student housing properties and financed 11 others through the first half of this year, totaling $2.9 billion in transaction volume. Newmark said its sales represent 38% of the total volume of more than $7.6 billion of student housing deals through June. Total sales volume last year was $9.6 billion, according to commercial real estate firm Berkadia.
“With the capital supply pipeline at an all-time high and multiple strategic recapitalization and portfolio opportunities, we expect strong activity throughout the remainder of the year,” Ryan Lang, head of Newmark’s student housing group, said in a statement announcing the transactions.
Enrollment at the country’s largest public universities has seen a dramatic increase, according to Rogers and others in the industry. But new supply was constrained early in the pandemic when schools closed classrooms and students went home to take classes virtually, emptying out existing student housing.
Construction has been trying to catch up since most schools reopened their campuses last year and increased enrollment.
Landmark recently started construction on a 19-story student housing tower in Ann Arbor, Michigan, for University of Michigan students. The project will have 521 beds among the 253 apartments. It is being built through a joint venture with Cerca Tova, a real estate investment firm based in Bloomfield Hills, Michigan, that has about 21 student housing and multifamily projects in its development pipeline.
Preleasing across the country for this school year has been setting records, real estate management software company RealPage reported earlier this month. As of July, 91.4% of the beds that RealPage tracks at 175 core universities had been claimed. In 2019, the level was about 86%.
Landmark’s Rogers said the company has record occupancy across its 95 properties with all but one at about 93% occupied.
Year-over-year rents have increased as well. RealPage showed student housing rents were up an average of 6% in July, marking a record, and that many schools reported a 10% increase in rent.