In the last five years, the housing market has seen an increased trend of high-end luxury apartments for students in college towns across the country. That is according to Michael Rothstein, a member of Dykema's Chicago office, who practices in the real estate department focusing on acquisitions, dispositions and finance. “One of the causes of this trend stems from colleges and universities experiencing budget constraints looking for more involvement by private developers in order to focus their funds on academic programs.”
Another reason, he says, is the mere popularity and convenience to college students of having amenities, such as game rooms, pools and fitness centers, all within their apartment building. “Institutions seeking to finance such projects should consider factors such as whether the developer has experience in these types of developments, the subject market (including trends in student enrollment) and the proximity of the location to the university campus.”
In the exclusive commentary below, Rothstein takes a closer look at the subject. The views expressed below are the author's own.
A number of developers have already tapped into the rising trend in high-end student housing developments and growing demands of the new millennial market to reap the benefits of a greater return. Lenders need to identify these developers and management teams that have become reputable as specializing in luxury student housing projects, which is key to the successful completion and management of the such housing projects. It is imperative for the project to be completed, with certificates of occupancy issued and leases in place, before the commencement of the school year, otherwise, no revenue will be generated until the start of the following school year, which could be disastrous for the developer and lender. Having an experienced property management team in place will be essential in leasing the project before the school year begins.
Another consideration is the trend in student enrollment. It is important that the university in which the project is located has an upward trend in enrollment as opposed to a decreasing or a static enrollment rate. In striving to increase enrollments, some colleges and universities seek to attract international students that tend to be able to afford the escalating tuition rates as well as high-end housing accommodations. Note that many international students prefer to prepay six or more months of housing costs, which can create issues for secured lenders. Therefore, lenders should consider having such prepaid rents pledged as additional collateral for its loan.
A convenient location within close proximity to the target college or university campus should also be a key factor for those looking to finance a successful luxury student housing project. Lenders should consider the availability of land adjacent to the campus to evaluate the expansion and development of such projects and potential competing projects which may be brought to market in the future. Developing a housing project within more than a short or comfortable walking distance will be a difficult sell to many millennials, who focus on comfort and convenience.
While there are many factors that lenders should consider before financing luxury student housing projects, lenders should always remember to involve sophisticated development and management teams having experience in such high-end projects, require the project to be completed before the beginning of the school year, evaluate the market and student enrollment levels of the targeted college or university, and make sure the location is ideal in terms of proximity to the targeted campus and the presence of competitive projects.
In the last five years, the housing market has seen an increased trend of high-end luxury apartments for students in college towns across the country. That is according to Michael Rothstein, a member of
Another reason, he says, is the mere popularity and convenience to college students of having amenities, such as game rooms, pools and fitness centers, all within their apartment building. “Institutions seeking to finance such projects should consider factors such as whether the developer has experience in these types of developments, the subject market (including trends in student enrollment) and the proximity of the location to the university campus.”
In the exclusive commentary below, Rothstein takes a closer look at the subject. The views expressed below are the author's own.
A number of developers have already tapped into the rising trend in high-end student housing developments and growing demands of the new millennial market to reap the benefits of a greater return. Lenders need to identify these developers and management teams that have become reputable as specializing in luxury student housing projects, which is key to the successful completion and management of the such housing projects. It is imperative for the project to be completed, with certificates of occupancy issued and leases in place, before the commencement of the school year, otherwise, no revenue will be generated until the start of the following school year, which could be disastrous for the developer and lender. Having an experienced property management team in place will be essential in leasing the project before the school year begins.
Another consideration is the trend in student enrollment. It is important that the university in which the project is located has an upward trend in enrollment as opposed to a decreasing or a static enrollment rate. In striving to increase enrollments, some colleges and universities seek to attract international students that tend to be able to afford the escalating tuition rates as well as high-end housing accommodations. Note that many international students prefer to prepay six or more months of housing costs, which can create issues for secured lenders. Therefore, lenders should consider having such prepaid rents pledged as additional collateral for its loan.
A convenient location within close proximity to the target college or university campus should also be a key factor for those looking to finance a successful luxury student housing project. Lenders should consider the availability of land adjacent to the campus to evaluate the expansion and development of such projects and potential competing projects which may be brought to market in the future. Developing a housing project within more than a short or comfortable walking distance will be a difficult sell to many millennials, who focus on comfort and convenience.
While there are many factors that lenders should consider before financing luxury student housing projects, lenders should always remember to involve sophisticated development and management teams having experience in such high-end projects, require the project to be completed before the beginning of the school year, evaluate the market and student enrollment levels of the targeted college or university, and make sure the location is ideal in terms of proximity to the targeted campus and the presence of competitive projects.
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