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Back to School for Student Housing REITs

08/18/2011 | By Carisa Chappell

Back to School for Student Housing REITs
As the academic year begins, campus housing REITs will be opening their doors to swarms of students across the country.

Companies in this sector of the REIT market provide housing for college students. As space-challenged institutions of higher education grapple with more students than available dormitory rooms, industry observers say that more student housing options is a necessity.

Campus Crest Communities Inc. (NYSE: CCG) currently has 27 properties up and running, with seven in construction, and more than 25 in the development phase. The company opened six new housing facilities this year and plans to open between six and eight next year, according to Ted Rollins, co-chairman and CEO of Campus Crest.

"I would say that the demand has been steady, and there's been a lot of growth in this sector," Rollins said. That demand is coming from college enrollment growth, including an increase in the number of foreign students coming to the United States to study, according to Rollins.

He said the demographics of campus populations have also changed. Younger students are staying in college longer, and older students returning to college.

"Trend analysts have said this is the highest percentage of students attending higher education institutions full-time," Rollins said.

Campus Construction Abounds

It's been a busy summer for campus housing REITs, and plans are in the works for more developments to open in time for the 2012 school year. In July 2011, Campus Crest announced two new housing projects at Auburn University and the University of Maine. That same month, Education Realty Trust Inc. (NYSE: EDR) announced plans to begin construction on a second campus housing development at Syracuse University.

Randy Churchey, the company's president and chief executive officer, said the new development will be their second at the university and third in Syracuse.

American Campus Communities (NYSE: ACC) also announced the beginning of construction on several projects in July, stretching from Texas to New York to Wyoming.

"With 13 projects currently under construction and two additional scheduled to commence this quarter, our 2011 and 2012 combined deliveries represent nearly $500 million in development," said Bill Bayless, American Campus' president and CEO.

With many academic institutions strapped for cash, housing is one area they are starting to farm out to third parties, according to Bayless. Rollins said a constrained supply of housing for students coupled with the growing number of out-of-date buildings are putting a strain on higher education systems.

Much More than a Dorm Room

The new living areas are starting to offer much more than a bed and a desk. Instead, campus housing REITs are outfitting their spaces with a number of amenities to meet the demand of students looking for a specific lifestyle. Kitchens, private bathrooms, study lounges and social spaces used to be considered luxuries, but now they are thought to be necessities, according to Campus Crest's executives.

"We can afford to give our student customers large [12-foot-by-12-foot] bedrooms, private bathrooms and lifestyle programming that includes guest speakers, a tutoring program and food nights," said Mike Hartnett, co-chairman and chief investment officer at Campus Crest.

Some of the high-end amenities in Campus Crest's communities under construction include resort-style swimming pools, game rooms, fitness centers and libraries. American Campus' new facilities will offer wireless internet cafés, outdoor grills, gated parking garages and in-unit washers and dryers. In addition to in-room and building amenities, retail space, including a coffee café and convenience store, will play a large role in one of Education Realty Trust' new developments.