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TEMPE, AZ-A 37-unit townhouse project, developed as for-sale product, has been converted into student housing for nearby Arizona State University. With the switch complete, developer Shafi Enterprise LLC of Paradise Valley, AZ has put Dolce Villagio Townhomes on the sales block as a rental for $9.95 million.

Sean Rosenzweig, associate with Colliers International’s Phoenix office, says the 95%-leased complex at 202 S. Hardy Dr. was completed in 2007 when condo sales hit rock bottom. “There were construction delays with that project,” explains Rosenzweig, who has the marketing assignment with Colliers senior vice president Jerry Tenge. “Though the developer had a lot of interest and some deposits rather than take the risk, especially with single-family residential having such trouble, he felt a safer play might be to keep the project intact and go with a rental.”

Rosenzweig tells GlobeSt.com that the developer found the student housing niche attractive because there isn’t much land left around the campus to develop. There also is huge demand due to growing enrollment. “Even though ASU has beds coming on line, there is still huge demand for student housing,” he says.

Rosenzweig is cautious, however, in suggesting desperate owners and developers can find a solution in converting condo projects to student housing complexes. The reason why it works in Dolce Villagio’s case, he says, is because the asset is about a mile away from campus.

Rosenzweig says the Dolce Villagio offering so far has attracted mainly private capital and some student housing operator interest, with the latter group interested in larger properties. Situated on 1.78 acres, Dolce Villagio has two- and three-bedroom units, ranging from 1,178 sf to 1,692 sf. Rents are $1,250 to $1,800 per month. Other interest, he says is coming from investors “looking at this as a townhome play for when the market gets back.”

Rue Bax, managing director at ICC Real Estate in Scottsdale, points out that converting a for-sale investment into rentals can be a viable exit strategy, but it requires caution and experience. “We’ve heard from several developers that have made this a focus, citing the huge number of students coming on board,” he says. “I don’t think this is a trend, but a specific focus from developers. Student housing has its own nuances and I don’t think you can just jump into this niche without the necessary experience behind you.”

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