DURHAM, NH-Gaining admission to a niche where they see strong potential, an affiliate of Varsity Capital Advisors has acquired a 13-building block of student housing near the University of New Hampshire’s flagship campus. Varsity Durham LLC paid Sumner Properties $20.2 million for the complex in a deal that marks the beginning of a buying/development spree in small- and mid-sized college towns, says VCA principal John Buttarazzi.

“Those communities hold up very well,” Buttarazzi tells GlobeSt.com in explaining why the Virginia-based investment firm is targeting that demographic. Although cities like Boston, New York or Washington, DC sporting multiple schools might be considered for investments, Buttarazzi says he and VCA co-founder David Arthur expect the real gold will be in cities and towns dominated by higher education, as in UNH’s case. The Sumner package, concentrated within walking distance of UNH, is the largest privately held student-housing enclave in Durham. “It’s a tight market up there,” says Buttarazzi. “We like the fundamentals a lot.”

VCA is not limiting the investment program to just housing, with retail and office buildings also seen as prime opportunities. The student population and a resilient local economy can hedge against regional and national economic trends, says Buttarazzi. Also, he notes, such ancillary commercial space is often needed to support university functions, or to serve the student consumer.

As for VCA’s preferred deal size and characteristics, Buttarazzi says the northeast and mid-Atlantic states will garner the greatest attention at first, although assets in the southeast will be considered. There is no set price range, with Buttarazzi noting that transactions as low as $2 million can often produce solid returns. VCA will consider value-added plays that promise additional profit through capital investment or redevelopment, but Buttarazzi says the asset “still has to perform financially” on its own merit.

In the New Hampshire transaction, Varsity secured non-recourse debt financing from ABN AMRO Bank NV/LaSalle, funds arranged with assistance from Boston-based mortgage broker Goedecke & Co. Zuckerberg Investment Partners and VCA supplied the equity portion. Legal counsel was given by Kaufman & Canoles of Virginia and Wyskiel, Boc Tillinghast & Bolduc of New Hampshire, while Kane Co. of Portsmouth, NH provided real estate services for the seller.

Buttarazzi would not discuss specifics, but says there is potential to reap additional value from the New Hampshire real estate just acquired. With Arthur and he having worked on an eclectic array of projects over the years, including government facilities, infrastructure and transit-related development, Buttarazzi further says he is confident that the newest challenge will produce positive results as well. “We sometimes ask people if they ever think back to their college days and wish they had invested in the real estate” in the town, Buttarazzi says, adding, “We think it’s a good market.”

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