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IRVING, TX-The words “student housing” might have once conjured up the vision of a sheet-clad John Belushi yelling “Toga! Toga!” in the movie “Animal House.” But today, student housing is considered a viable investment.

Nearly 400 professionals attended yesterday’s inaugural RealShare Student Housing Conference. In his keynote talk, William C. Bayless Jr., president and CEO of Austin-based American Campus Communities Inc., explained investor and development interest in student housing came about during 2004, partly because of a flood of capital to the market. Until then, he said “student housing was the best-kept secret in real estate. It was pretty much ignored.”

Since the 2007 credit crunch, student housing has generated more interest from investors and developers, especially in light of flagging demand for multifamily properties. Bayless, whose company portfolio includes the University of Texas at Dallas complex, pointed out that there are vast differences between student housing and multifamily housing. “Most multifamily products operative in a continuous pattern,” he said. “But with student housing, everyone arrives on the same day, everyone leaves on the same day and there are two weeks to get everything turned around for it to happen again.”

As a result, Bayless indicated investing and developing student housing is not for the faint of heart nor should student housing be treated as an offshoot of traditional multifamily housing. Bayless’ sentiments were echoed by other industry experts throughout the two-day conference at Four Seasons Resort & Club at 4150 N. MacArthur Blvd. in Irving. Presentations included the state of the market, financing deals in the current capital markets and who is buying. The RealShare Conference Series is produced by New York City-based Real Estate Media, which also publishes Real Estate Forum and GlobeSt.com.

When it comes to getting financing to acquire or build, the pros pointed out that projects with proven management experience and close to campuses are likely to be favored by lenders. “This will be the year of the operator. Lenders are really focusing on third-party management,” said Donna Preiss, founder and CEO of the Preiss Co. in Raleigh, NC. “If you’re new to the business, you might want to consider partnering with someone who has longer legs in the industry.”

Although conduit loans have all but vanished, Fannie Mae, Freddie Mac and even local banks are stepping in to fill the gap. John Buttarazzi, principal of McLean, VA-based Varsity Capital Advisors LLC, praised local banks as a viable source, especially for smaller deals.

Michael Bell, vice president with San Mateo, CA-based Capmark Finance Inc., reported life companies are making their way into student housing finance. And not to be discounted, added Lance Wright, the Southwest regional director for Norwalk, CT-based GE Real Estate, are large lending firms because they can offer more flexibility and higher leverage.

But all the financial experts were unanimous about what lenders are looking for–a close location to campus, product quality and operating experience. “The more you can communicate the fundamentals of the deal to the lender, the more comfortable the lender will be with the deal,” said Paul Geyer, managing director with Prudential Mortgage Capital Co. in McLean, VA.

An established track record also is very important, said Marty Kearny, senior director of investments with Chicago-based Wrightwood Capital. “It’s easy to lease up a complex in the first year. Students like newer buildings,” he said. But, consistency in the second year and beyond is going to be what impresses lenders. “It shows the sign of a strong operation,” he added.

The panels of experts stressed student housing, particularly on-campus student housing, needs to tie into missions of colleges and universities. Michael Coakley, associate vice president of student affairs and executive director of university housing for Arizona State University in Tempe, AZ, said it’s a constant struggle between what students want and expect and the school’s mission.

“Students indicate they want private space. But the selling point for an institution isn’t private space, but social interaction,” Coakley said. “There’s a delicate tension in balancing those two, in how to best develop a space incorporating those two scenarios.”

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