Sub-Institutional Assets Are the Biggest Opportunity in Student Housing

Last week, Ashland Pacific and Integrated Capital Management announced the launch of a $150 million joint venture to acquire student-housing properties on the West Coast. The joint venture sees the biggest opportunity in sub-institutional, middle market assets run by family operators.

“Sub-institutional, mid-market assets comprise more than 50% of the student housing supply, which is where we see tremendous opportunity and value,” says Julio Davila, CEO & President of Ashland Pacific. “Most of that supply is owned by families or local operators and it’s less attractive to the larger firms. We built Ashland with a particular focus to manage and drive value out of these types of properties and markets.”

The joint venture will specifically focus on properties in urban markets with high barriers to entry. “Universities in the West Coast, especially those in urban or core markets like USC and Downtown L.A., also have barriers to entry that limit dense student housing projects,” says Davila. “Enrollment rates in these west coast markets also continue to be high, which sets the background for strong, consistent demand for student housing.”

In addition, these markets have universities with strong enrollment. “Our venture with Ashland specifically targets existing assets in urban in-fill markets on the West Coast at schools that show consistent enrollment demand and growth combined with extremely challenging land use zoning and entitlements,” Robert Lindner, managing principal of Integrated Capital Management, tells GlobeSt.com.

The joint venture has already started. It acquired a nine-property student housing portfolio near USC for $18 million. It has a total of 84 beds and is 94% occupied. The portfolio brings Ashland’s USC portfolio to 40 properties valued at nearly $70 million and is a prime example of the joint venture’s strategy. “At USC, portfolio sales rarely come to market, especially for the type of assets we are targeting,” says Davila. “So, this particular portfolio was a good fit for us and allowed us to expand our existing market share at USC.  It also had attractive investment traits we look for in student housing: close to campus and the need for capital and management improvements to drive leasing and rent growth.”