NEW YORK CITY-As the student housing sector continues to heat up, Armonk, NY-based private equity firm Kayne Anderson Real Estate Advisors has made the grade. In under one year, the firm has closed on its second fund, Kayne Anderson Real Estate Partners II, at $575 million, exceeding its initial target of $350 million, GlobeSt.com has learned exclusively.
The fund is comprised of nine portfolio investments that account for approximately $130 million of equity. It includes the 161-unit, 392-bed West 27th Place student housing complex at the University of Southern California; the 683-bed Lodges of East Lansing at Michigan State and the Cottages of College Station at Texas A&M; the 740-bed 5 Twenty Four Angliana at the University of Kentucky; the 1290-bed Cottages at Baton Rouge at Louisiana State University; and the 803-bed Lofts at Kennesaw at Kennesaw State.
“We see it as a great niche for the next few years,” Al Rabil, managing partner of Kayne Anderson Real Estate Advisors, tells GlobeSt.com. He says the strong response to KAREP II correlates directly to the strength of student housing sector, which has approximately $275 billion in total value. “The primary reason is because of capital flows. From a cap rate perspective, you can generate a much higher cash yield than in any other real estate asset classes.”
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Rabil says the firm has been purchasing properties at close to 8% cap rates in fully stabilized new properties. “Our fund is much more opportunistic rather than value-add,” he says. “We can see a continuation of those opportunities coming our way.”
The firm also invests in other niche asset classes, like self-storage. The fund recently purchased 18 self-storage properties from publicly traded REIT U-Store-It, which is located throughout Indiana and Ohio. “U-Store-It is in the middle of a repositioning process, so we were able to acquire those assets at what we believe to be a very attractive price.”
The fund held a first close on December 9, 2010, and investors included high net worth individuals, family offices, foundations, endowments and institutions.
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