Champion Real Estate Exits Student Housing Investment Early

Champion Real Estate Company has sold Victory on Ellendale, a 96-bed student housing property in Los Angeles for $20.5 million. The firm exited the investment early as a result of strong fundamentals and cap rate compression, according to Garrett Champion, an SVP at the firm.

Campion acquired the property in 2018 for $12.5 million with the intention to hold for the long term. In 2019, it executed a value-add business plan, improving the interior units with new stainless steel appliances, quartz countertops, cabinetry, hardware, lighting, window coverings, vinyl plank flooring, bathroom upgrades and paint. Victory on Ellendale is located at 2652-2656 Ellendale Place near USC. Champion owns five other properties in the area.

Student housing assets performed well throughout the pandemic, outperforming market-rate multifamily. According to a new report from the National Multifamily Housing Council, the US institutional student housing market is poised to remain a steady option for real estate investors, even with tepid enrollment figures for post-secondary schools. Most of that growth, according to NMHC, will occur in public four-year universities.  Demand in public four-year universities will likely be concentrated on the undergraduate side, while private colleges will see demand focus on graduate student housing.

Owners of existing properties will find favorable supply-demand dynamics as a result, with demand forecasted to outpace supply for the next decade. NMHC estimates the student housing market will grow from 8.5 million beds last year to 9.2 million by 2031, accounting for an average annual increase of 0.8% per year, while enrollment in post-secondary schools will increase annually by 1.1% on average.

This academic year illustrated the market’s resilience. Looking at the national level, the student housing sector showed significant growth during the Fall 2021-Fall 2022 school year. The sector saw vacancies drop 200 basis points for properties that rent by the unit to 500 basis points for properties that rent by the bed. While asking rents grew by 2.9% for properties that rent by the bed and grew 4.2% for properties that rent by the unit.

As a result of the strong fundamentals, many investors are responding like Champion and deciding to sell. At the end of last year, for example, Harrison Street 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. 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.

In the Champion deal, Arthur Arejian and Jon Tran of Vanguard Investments represented the buyer and seller.