InFocus: Real Estate Investing

Student housing: an opportunity for investment?

Student housing: an opportunity for investment?

Student housing is already on the radar screen of Canadian investors, but a growing number are honing in on alternatives to playing landlord for a personal portfolio of properties.

“The real magic of making student housing work is buying where the market is affordable,” says Tim Collins, an investor using the traditional model of purchasing houses in college towns and renting out individual rooms at $450 to $500 a pop. “The rents are going to change massively based on where it is.”

Indeed, they are, say analysts and other investors in that space. Still the time expenditure required to collect and manager personals holdings of student rentals has traditionally limited interest.

But the easier, safer and often more-lucrative route of holding equity shares in large new-build projects or REITs is opening up that opportunity.

“Construction in new apartments is probably the biggest opportunity in our space for the next five- to 10 years,” Greg Romundt, president of Centurion Asset Management Inc., told WP. “If you look at how many purpose-built beds there are in Canada, off-campus student housing beds, they are probably in the range of 15,000 to 20,000.”

It is this potential for growth that has created an air of excitement in the field of REITs – but does require a knowledge of where that growth will occur.

“If you look in the U.S., they have one million. So if you use the same kind of ratio for Canada (a 10:1 ratio comparison) that suggests that we are going to get to 100,000. So that would suggest that in the next 10 years, we are going to build potentially 70,000 new beds. That’s a big number.”

Student housing was largely ignored by property developers up until the mid-1990s, as the opportunities to replace traditional dorms built during the 1950s, 1960s and 1970s were largely overlooked.

Predictions of opportunity back in 2008

The opportunity to invest was picked up on by Mark Schundler, the vice president of investments for Campus Apartments Inc., who observed back in 2008 that “this is a noteworthy time – the peak of the Baby Boom Echo is right around the corner. The student housing sector has matured, gained investor attention, and is now recognized as a distinct niche.”

Although anticipating a boom in off-campus housing beds, Romundt does temper that optimism with these words of caution.

“Some markets are getting a little saturated,” says Romundt, pointing to communities like Waterloo that have long-standing associations as a university town. “But there are locations where there is potential for growth, like Kingston, Toronto and Ottawa.”

The mix of public and private partnership for student residences is gaining popularity – even in on-campus situations.

One company – Knightstone Capital Management Inc. – is working with Centennial College to build a new residence for more than 700 students on that school’s Scarborough campus.

In place of dorm rooms, the residence would be divided into apartments of up to four bedrooms, each with a kitchen.

It is an attempt by universities and colleges across Canada to bring up enrolment numbers, with similar public-private partnerships being utilized in projects at three schools just in Toronto: Centennial College, Ryerson University and the University of Toronto.
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Centurion Asset Management Inc. is a Canadian asset management company offering a growing portfolio of real estate investment products.  Centurion Apartment REIT owns and operates multi-unit residential apartments and student housing properties in Canada.  Centurion Real Estate Opportunities Trust is a unique product that provides investors with exposure to a diversified portfolio of mortgages and real estate development.  Centurion has the expertise, infrastructure and resources to deliver end-to-end real estate solutions.  Centurion is opportunistic and innovative, using a value-oriented strategy to make responsible and intelligent investment choices with a goal of delivering monthly income, capital growth and capital preservation.