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Comments by:Christopher Merrill Founder, Managing DirectorHarrison Street Real Estate CapitalChicago

Still being squeezed out of those trophy office acquisitions? The alternative investment choices are just that–viable alternatives to the feeding frenzy driven by this capital rich market. Last week’s Feedback Poll took a measure of those alternative plays that promise the best yields, and our respondents told us that student housing (38%) offer the best revenue upside for 2007. This was followed by healthcare (25%); seniors housing (16%); self-storage (11%); and education (6%) with “other” garnering the remainder. Commentator Merrill is happy about those results, given the mission of Harrison Street. He explains:

“I’m pleased with the results. We were set up to invest in sectors we think will outperform, and the sectors we’ve chosen are student housing, seniors housing, self-storage and medical office. So from that standpoint, I’m not surprised that these are the sectors chosen. We see great opportunities in all of them.

“Let’s look at student housing, for instance. It’s so attractive because enrollment is up nationwide, and the echo-boom will continue to drive that. If you look at the largest universities across the country only about 23% of the students live on campus.

“Furthermore, where are universities and hospitals going to put capital expenditures in the future? We think, in order to drive demand at their locations, they’re going to put it into those things that attract students or patients, and not into campus real estate. So more real estate growth will take place off campus.

“You can look at all of these sectors as defensive plays. It’s going to be tough for the economy to continue to grow at the pace it’s been growing. Student housing, seniors housing, medical office, even self-storage are all defensive plays if the economy slows or interest rates rise If it does slow, you can feel comfortable not only that kids will still go to school but more may go to school. Certain things, like education and healthcare, and are-recession proof.

“Finally, all of these sectors are very fragmented, very local. In self-storage, the top owners own maybe 9% of the overall business. That’s true for all of these sectors, and we think over the coming year all of them should outperform the traditional asset classes.”

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