LADERA RANCH, CA—Similar to the self-storage category the firm has focused on most, class-A student housing is a necessity-driven asset class that offers the opportunity for asymmetric returns due to its recession-resistant characteristics, strong demographic growth rates and more, SmartStop Asset Management LLC's founder, chairman and CEO H. Michael Schwartz tells GlobeSt.com. As part of the firm's new focus on student housing, Strategic Student & Senior Housing Trust Inc., a private REIT sponsored by SmartStop, recently acquired the District, a 198-unit, 592-bed student housing property adjacent to the University of Arkansas in Fayetteville, AR, for $57 million.
We spoke with Schwartz about the firm's new focus and where he sees the student-housing sector headed.
GlobeSt.com: Why has your company begun to focus on student housing?
Schwartz: Similar to self-storage, class-A student housing is a necessity-driven asset class that offers the opportunity for asymmetric returns due to its recession-resistant characteristics, strong demographic growth rates and substantial institutional and cross-border capital-markets investment activity.
GlobeSt.com: What is your strategy in this market?
Schwartz: SmartStop seeks to acquire best-in-class, pedestrian-to-campus, amenities-rich and purpose-built student-housing communities adjacent to Tier 1 universities. We recently purchased the District in Fayetteville, AR. The community offers one, two, three, and four-bedroom, fully furnished floor plans, and has numerous safety features, such as gated access, a pass-key system and a controlled-access, six-story parking garage. Additionally, the community provides residents with a computer lab and business center, fitness center with a yoga room, and an expansive pool, spa and courtyard.
SmartStop expects to acquire student housing communities like the District and hold each property for cash flow and future appreciation.
GlobeSt.com: Where do you see the student-housing sector headed in the future?
Schwartz: Class-A student housing is a highly sought-after investment product by both institutional and cross-border investors that accounted for 60% of all investment activity in 2016. These investors are attracted to this recession-resistant asset class (more people attend college as the job market shrinks), especially this late in the economic recovery cycle.
Additionally, current college attendees are more likely to be from Generation Z, which in three years is expected to comprise 30% of the US population. With this large Generation Z cohort, coupled with the increase in college enrollments of about 1.5% annually, the outlook for off-campus, class-A student housing remains strong.
GlobeSt.com: What else should our readers know about this topic?
Schwartz: Student housing has evolved from on-campus, basic dormitory living constructed in the 1970s to off-campus, 21st-Century-designed, amenities-rich communities. They are fully furnished and come with high-speed Internet, enhanced privacy, 24-hour fitness centers, resort pools and energy-efficient appliances. These modern student-housing communities feature amenity packages that are a great value to the student/resident and, ultimately, to investors.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
