Harrison Street Sells Nearly $2B in Student Housing Assets

Harrison Street has sold two student housing portfolios for a combined $1.9 billion. 

One portfolio consisted of 12 properties and 8,182 beds across 12 universities, which was sold to Global Student Accommodation (GSA). The second portfolio consisted of 25 properties and 15,817 beds across 19 universities and it was sold to a joint venture affiliated with The Scion Group. 

“The two large-scale transactions reflect Harrison Street’s long standing strategy of acquiring or developing individual assets at leading universities, executing on defined business plans, and exiting via strategic portfolio sales,” Harrison Street CEO Christopher Merrill said in prepared remarks. 

Student Housing a Solid Alternate Product Type

The market is ripe for such transactions, Parker Champion, COO and partner, Champion Real Estate Company, tells GlobeSt. “As returns are squeezed for traditional multifamily, investors look to alternate product types for yield. Historically, student housing has outperformed other product types with the tradeoff being that student housing is much more operationally intensive. High turnover rates and costs with annual lease-up risk requires a skilled and attentive sponsor to navigate.”

Yet student housing has shown resilience in depressed macroeconomic environments, he continued. “Especially at Tier 1 universities, investors have noticed how muted the impact of COVID was on performance driving more interest to the product type,” Champion says. 

Strong Resurgence of Student Housing Deal Volume

To be sure, the sector is not without its share of distress, which has fueled some activity. “We have seen recapitalizations and other distressed transactions tied to student housing properties that struggled to perform well pre-pandemic due to their age or functional obsolescence, lack of common area amenities, declining enrollment or distance from campus,” Felix Gutnikov, principal and head of originations at Thorofare Capital, a Los Angeles-based national, vertically integrated commercial real estate debt manager, tells GlobeSt. 

But as the year ends, there has also been a surge of deal volume, he adds. “Acquisitions at a reset basis or refinances are being priced efficiently for well-located, purpose-built properties with floor plans better suited for pandemic-created distancing and bathroom-sharing preferences.”

Expect Decrease in Transaction Volatility

Also, universities are better prepared for the ongoing pandemic, notes Robert Lindner, co-founder and managing principal of Integrated Capital Management. “Going forward, most universities have a gameplan for at least a hybrid on/off campus program, which means that there should be far less transactional volatility,” he tells GlobeSt.

“During the pandemic, for-rent SFR portfolios transaction volume dramatically increased while student housing transactions stalled as owners really focused on preservation of income, controlling expenses and, when needed, working with lenders to adjust income covenants like DSCR ratios and cash sweeps in order to avoid defaulting,” Lindner said. 

Harrison Street: A Buying Spree in 2021

As of Sept. 30, 2021, Harrison Street has acquired nearly $1.4 billion in student housing assets this year at leading institutions such as Arizona State University, Cornell University, University of North Carolina and University of Calgary. 

Since inception, Harrison Street has invested approximately $17 billion across 357 properties in education and student housing assets. Additionally, the firm has sold more than 173 student housing properties for a gross transaction value of approximately $7 billion.