MIAMI—Student housing is finding its way onto more investor radar screens, and some say it may be a safer bet than multifamily. Although the demand for student housing will never outpace traditional multifamily from a occupant’s perspective, it may from an investor’s mindset. caught up with Judd Bobilin, CEO & co-founder of Chance Partners, a integrated real estate firm that develops and manages residential and mixed-use communities, to get his thoughts on the latest trends in student housing development, as well as the opportunities and challenges, in part one of this exclusive interview. Be sure to return to this afternoon’s Miami edition, where he will discuss the issue of overbuilding.  What are the latest trends in student housing development? 

Bobilin: Infill is the biggest trend in student housing these days. All of the public companies are taking a stronger interest in understanding the walkable, higher-density product. The idea of building a project that is one or two miles from campus is a very short-term focus and doesn’t take into account the long-term effects it might have on the communities that we build and own.

For the merchant builder, they will continue to strive for any deals, but the major institutions who end up buying and holding these properties for years think much more about longevity of the asset. We operate on the concept of “connected capitalism” in each of the markets we invest and develop in. Where are the opportunities in the student housing sector?

Bobilin: The student housing sector has performed better, on an operational basis, than multifamily over the five-year period. During the last downturn, student housing wasn’t immune to the effects but withstood the impact in greater proportion than strictly conventional product. What are the challenges in the student housing sector?

Bobilin: As in many real estate sectors, the concerns include an over-supply of product, access to capital and a healthy buyer population. How do you get around those challenges? 

Bobilin: Focus on product and longevity of markets. When we underwrite deals, we don’t assume a sale in year one or two. We underwrite assuming a 5-year hold. If the focus is more on the longer-term effectiveness of the market, rather than just that particular deal, good choices will be made. What are student housing investors really after?

Bobilin: As in all real estate, student housing investors are interested in returns and value. The correlation of returns for student housing is better suited to institutional investors who want to diversify their portfolio.

Student housing is a subset to conventional market-rate apartments but doesn’t have as high a correlation to their volatility. Institutional investors are interested in the long-term cash-on-cash yield the property generates, while developers—and their associated investors—are primarily interested in the highest IRR and equity multiple they can generate.