TEMPE, AZ-Pierce Education Properties has made its third acquisition in just seven months, buying Block 1949, a 640-bed, off-campus housing community serving Arizona State University students.
The San Diego-based company teamed with Partners Group to buy the $52 million property, which was sold by Dallas-based student housing developer JLB Partners. The deal marks PEP’s first time to partner with Partners Group, an investment management firm based in Switzerland, according to Frederick W. Pierce IV, president and CEO of PEP.
With acquisition of Block 1949, PEP’s portfolio now consists of 5,600 beds. The firm’s other assets are located at Michigan State University, Central Michigan University, University of Oklahoma and University of California – Riverside.
“Block 1949 is part of our initiative to spread our footprint nationwide,” Pierce tells GlobeSt.com, adding that the company is focusing its search on markets that are home to universities with 15,000 students or more and Division I athletics. “We have a goal of acquiring $200 million in student housing properties this year.”
Developed in 2010, Block 1949 offers 225 units with a mix of studios, two bedrooms, three bedrooms and four bedrooms with bed-to-bath parity. It is located within 1.5 miles of the ASU campus and was 96% leased at closing.
Pierce says Block 1949 presented a unique acquisition opportunity. “It’s very rare to be able to acquire a core asset that allows us to achieve a double digit cash-on-cash return and an IRR in the high teens,” he points out, adding that the company is “very sensitive to cap rates” and prefers assets with cap rates to exceed a minimum of a high 6% range.
Pierce attributes the favorable yield environment to the inventory available for sale. “Given the volume of assets on the market, cap rates are artificially high, in our judgment,” Pierce explains. “We don’t think that’s going to last.”
The company obtained CMBS debt financing of $38.5 million from Deutsche Bank Securities Inc. to acquire the property. The loan offered a sub-6% interest rate and 75% LTV. HFF arranged the loan for PEP.
HFF’s Managing Director Brian Kelly and Co-Head of the national multi-housing investment sales group Sean Deasy marketed the property. HFF Senior Managing Director Tim Wright and Associate Director Zack Holderman represented PEP
Pierce Property Management, a division of PEP, will manage the Block 1949.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
