Lender Appetite Strong for Student Housing

SAN DIEGO—Experts tell GlobeSt.com exclusively that lenders have been supportive of the student-housing sector, identifying it as one of their key segments for investment and learning from the last cycle's mistakes. We spoke with several industry experts about lenders' view of student-housing development, and this is what they told us. Stay tuned for an in-depth feature on the student-housing sector in the April issue of Globest.com's sister publication Real Estate Forum.

GlobeSt.com: How are lenders responding to financing student-housing development?

Justin Glasgow, senior managing director, DTZ: Overall, I don't think the debt picture gets much better for borrowers in terms of availability, cost, terms and flexibility. Agencies continue to be a huge lender to the residential space, including student, and the life companies and banks are also growing their portfolios. Right now is a great time to be borrowing money against cash flowing, well-located assets. The same holds true for student deals. Student housing has become a property type that all the major lender institutions have gotten comfortable with based on the track record of assets, terms of leases and, more importantly, the quality of the owners/operators.

Brian Dinerstein, president, the Dinerstein Cos.: Our lenders have been terrific to us over the years and continue to support our developments.

William Talbot, CIO, American Campus Communities: Lenders have really identified student housing as one of their key segments for investment. In 2014, Fannie and Freddie alone financed $2.1 billion worth of student-housing product, and all indications are that 2015 financing will be strong as well. In addition to the GSEs, both life companies and CMBS are very active in the sector. Lenders are attracted by the stable, defensive nature of the sector as evidenced by the low default rates of student-housing product. Specific to development, lenders approach student housing consistent with multifamily, and there is strong demand to place construction loans in the sector as student-housing developments are seen as less volatile than other real estate classes. Lenders are focusing on good locations, tier-one universities and strong sponsorship, and if those align, financing options can be greater than multifamily. Currently, we are seeing rates at 250 basis points over one-month LIBOR and leverage up to 70% to 75% of cost.

J. Wesley Rogers, president & CEO, Landmark Properties: For the right deal in the right market with the right sponsor, there is plenty of debt available on both the construction and permanent side. Lenders, too, have learned from the mistakes of the last cycle, and are keeping leverage much more modest than in the past.