ACC reached 96.8% occupancy in its portfolio, including the Block in Austin, TX.

NEW YORK CITY—MLV & Co. isn’t buying into worries about a glut of supply in student housing. The locally based research firm said in its weekly equity research tracker that the sector, which will be the focal point of next month’s RealShare Student Housing conference in Las Vegas, would end up proving the naysayers to be mistaken.

“We believe concerns surrounding supply growth and the potential for occupancy and rent growth under-performance have resulted in a valuation discount across the sector,” according to MLV’s Student Housing Tracker. “As we believe depressed 2013 operating results were a function of challenges that were largely one-time in nature, operational execution inclusive of solid leasing results and expense controls will get investors more comfortable with the supply growth dynamics across the sector.”

Accordingly, MLV predicts that student housing stocks “will outperform the broader REIT indices in the coming months as the ‘show me’ story plays out. We believe the positive rent growth seen in our Tracker is indicative of occupancy and rent growth that will exceed expectations for the 2014/15 school year.”

MLV’s top picks among student housing REITs are American Campus Communities and Campus Crest Communities. Year to date, ACC’s average asking rents reflected a 2.4% increase over the same period last year, exceeding both MLV’s forecast for 2.0% growth and the Austin, TX-based REIT’s guidance of 2.1% growth in the ‘14/’15 school year.

ACC in late April reported that modified funds from operations from the first quarter grew 3.7% year-over-year to $70.9 million or $0.66 per fully diluted share. It achieved same-store occupancy of 96.8% during the three months ended March 31, while NOI for the total wholly-owned portfolio increased 11.7% to $97 million for the quarter from $86.8 million the year prior.

CCG’s FFO growth on a 12-month basis was even more impressive on a percentage basis: up 29.1% to $10.8 million, the Charlotte, NC-based REIT said in its Q1 filing last Tuesday. Although MGV doesn’t have data for the REIT’s properties specifically, the research firm noted that average asking rents for ‘14/’15 across the 735 student housing data points it covers reflect a 2.2% increase Y-O-Y. That’s ahead of MGV’s forecast for CCG rent growth during the school year (1.5%) and compares favorably to the midpoint of CCG’s guidance of 1% to 2% growth.

Both ACC and CCG have active development pipelines. ACC said last month that it’s progressing on its $618-million owned and mezzanine development pipeline, with expected delivery in fall of this year and ‘15. CCG said it expects to deliver eight new development projects, totaling 5,213 beds, for the next school year. At a total cost of about $384.9 million, of which $214.5 million is the company’s share.