According to ARA, 2012 was a record year in total sales volume and transactions.<@SM>This past year saw more operators, funds and REITs jumping back into the market, though private equity buyers were still out in force.<@SM>The potential fly in the ointment, will be maturities of non-performing loans, the bulk of which are coming due in the 2016-2017 time frame.

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AUSTIN-According to Apartment Realty Advisors’ Student Housing Year End Report, the sector emerged from 2012 in more-than-fine shape, chocking up a record sales volume of $3.7 billion, an increase in institutional funds and REITs diving into the market and stabilizing cap rates. Adding to the velocity is increased development across most areas of the country, with the southwest leading the pack.

This isn’t to say, however, that the entire student housing scenario is rosy. The report points out that CMBS loans are coming due in the next 48 months. Specifically, in 2016 and 2017, more than $2.4 billion in total loans will mature, requiring a close watch.

The sales transaction volume was partly fueled by American Campus Communities’ acquisition of the Kayne Anderson portfolio (consisting of 11,807 beds) and the Campus Acquisitions properties (6,579 beds).  The report indicates that a total of 47,785 beds were sold with sales jumping a whopping 94.7% over last year’s $1.9 billion total; also representing the highest total volume of student housing trades to occur in a single year.

“From the amount of transactions that occurred in 2012, you could feel it was a big year,” comments Chris Epp, co-director of ARA’s National Student Housing Group. “But stepping back and looking at the numbers, there’s the ‘oh, my gosh’ factor. We thought we wouldn’t be near the 2008 numbers for years, now suddenly, these numbers are popping.” By point of comparison, in 2008, transaction volume was $2.9 billion.

On the development side, approximately 39,803 beds are under construction, mostly in high-demand areas, typically adjacent to campuses.  Because of this, Epp says he doesn’t see the specter of overbuilding being a problem. Furthermore, once those developments are complete, there will be buyers looking for them.  Though private equity groups made up much of the buying pool in 2011, more institutional players dived in during 2012.  But Epp tells that the private equity folks aren’t going away any time soon.

“Certainly, your core, class A project, adjacent to campuses, is going to be dominated by REITs,” he notes. “But anything that falls even a hair outside of those parameters is attracting the high-equity, high-net-worth private buyers.”