Like most asset classes, student housing transactions have come to a near halt as a result of the pandemic. Pierce Education Properties says that doing a deal in the next 90 days is highly unlikely due to the shelter-in-place and social distancing restrictions. To get a deal done in that time, owners should expect a serious discount—but those pricing adjustments will be temporary.
“If a prospective seller were to expect to achieve a closing in the next 90 days, it would most certainly require a lower price than would have been achieved prior to the escalation of the coronavirus,” Fred Pierce, president and CEO of Pierce Education Properties, tells GlobeSt.com. “That being said, we believe that pricing will return to pre-virus levels once the pandemic is fully under control and universities are back in session. In fact, we believe that collections and rents for student housing will prove to have been stronger than conventional multi-family during this pandemic.”
The recent CARES Act, which includes stimulus money and an expanded unemployment package, will certainly help to achieve those rent collections. “That will result from the credit enhancement that parental guarantees provide, as compared to the reliance of conventional renter households on their personal jobs and income,” says Pierce.
As of now, Pierce is continuing to see stability in his portfolio, with strong occupancy and rent collections in April. “As most all of our nearby universities have closed their campuses to classes and also closed their residence halls and food service programs, there is confusion amongst students residing off-campus as to whether or not they should also return home,” says Pierce. “Despite that confusion, the majority of our student residents remain living at our properties and have paid their rent.”
Pierce, who is deemed an essential provider, is continuing to operate his assets through the pandemic and work with occupants as necessary. “Student housing operators, like multi-family companies, are deemed essential service providers,” he says. “We have more than 15,000 residents, and therefore have legal and moral obligations to keep our properties safe and operational to support our tenants during this pandemic.”