Consolidation Coming in Student Housing

The student housing sector is starting to achieve "critical mass" that should allow for greater consolidation going forward, according to Bill Bayless, president and CEO of American Campus Communities (NYSE: ACC).

In a video interview with REIT.com in New York at REITWorld 2012: NAREIT's Investor Forum, Bayless offered his thoughts on the state of the student housing sector and the role of his company in it. In the last year, American Campus has acquired seven properties worth a total of approximately $250 million.

"There are a large amount of opportunities down the road in our sector," Bayless said. "We've had a great amount of institutional investment come in. People are starting to put together larger portfolios."

Bayless said universities' budgets are feeling the pinch, which is affecting how they approach the development and management of student housing.

"When you think about the budget crisis that exists in many states, colleges and universities across America are looking to be more frugal with the limited funding they have," he said. "With the capital dollars they do have, they want to focus on their core academic facilities. Outsourcing of student housing is something that is becoming more prevalent."

One option that schools have in terms of financing new housing facilities is American Campus' equity investment and ownership of on-campus student housing. At Arizona State University, the company has already invested $350 million and privately owns the school's honors college, an on-campus dormitory and a student apartment complex.

Bayless described American Campus' current pipeline of projects as "excellent." Between the fall of 2011 and the fall of 2013, the company will have delivered $1.1 billion in new assets to market. That will include 28 properties. Bayless said cap rates should provide healthy value on those developments.