EdR’s CEO on Standing Out in Student Housing

Randy Churchey details how his REIT leverages public-private partnerships with universities seeking to expand accommodations and control costs. Featuring a slideshow!

Randy Churchey, CEO of EdR, leads one of the largest publicly traded owners, developers and managers of collegiate housing in the U.S, with 81 communities of more than 42,900 beds serving 51 universities in 25 states. By developing first-rate, multi-use housing that supports academic collaboration, his firm helps universities meet the space needs brought on by persistent increases in enrollment.

MHN: How does EdR distinguish itself within the increasingly competitive student housing space?

Randy Churchey: We’ve got a great reputation as a pioneer in the industry, based on our 50-plus years of experience in the ownership, development and management of on- and off-campus student housing assets. For instance, we were the first company to introduce the concept of a student hotel at the University of North Carolina at Chapel Hill, with the development over fifty years ago of Granville Towers, a 1,300-bed high-rise that we still manage today. We were also the first to introduce individual leases, which everyone has adopted.

EdR’s size—as well as it being public and one of the oldest companies in the business—makes it transparent, with a large balance sheet. We’re one of the few go-to partners for universities when they’re looking to build on-campus housing under our ownership model. That continues to set us apart from most other firms in the industry. It works for us and our shareholders and is a great way for a university to grow its housing stock without taxing its resources.

MHN: How has EdR’s growth strategy developed over time?

Churchey: The public-private-partnership environment really has exploded over the last 10 years. For instance, in 2009, we were the first to have an on-campus asset in a P3 environment, where we owned the asset, and that was at Syracuse University. University of Texas and Cornell University have some of the largest endowments in the country, and they both decided to do a P3 with us. Today, we have 15 of these, so the marketplace has acknowledged the P3 model as something that is acceptable.

More recently, we’ve been focused on the on-campus ownership model, where we own the asset under a ground lease. We’re really one of the pioneers of that. Universities use our financial resources and expertise to have us build state-of-the-art, on-campus housing, while the university gets to retain its financial resources and capacity to deliver other benefits such as infrastructure and educational endeavors.

We construct the ground lease so that the university receives a percentage of our revenue as ground lease payment. We do this because we want alignment with the university, so that they have an interest in the property doing well. We own assets under that model on several campuses: two at Syracuse, one at Texas Christian University and eight at the University of Kentucky. This model has been widely accepted by the university community, and we’re seeing more of these opportunities every day.

MHN: What are some examples of notable P3s in which EdR has been involved?

Churchey: Back in 2012, the president of the University of Kentucky decided that, in order to compete with its peers, the school would need new housing. Since the housing was on average 42 years old, the university decided the best way to revamp it would be to hire another company in a public-private partnership to expedite planning and construction, and also to use someone else’s financial resources. EdR was hired and had the first building open in 2013. We delivered brand-new housing in 2013, 2014, 2015, 2016 and 2017, for a total of 6,850 beds. Over that time frame, enrollment has increased, on average, 4-5 percent each year. They’ve replaced all of their on-campus housing and actually expanded the number of beds to meet the goal of having great accommodations for students. And they’ve done this all without using their own financial resources.

MHN: What criteria does EdR consider when pursuing opportunities?

Churchey: What we try to look for are universities that can set their enrollment. We make that assessment based on the proportion of applications they receive to students they admit. Take the University of Michigan: the ratio is at least 4:1. The rationale is that, if enrollment across the country starts to dip, the university has a large margin of error to withstand that.

MHN: What’s in store for the next few quarters?

Churchey: Today, we have $1 billion in on- and off- campus developments to be delivered this fall in 2017 and next fall in 2018. Our 2017 deliveries of owned assets are going to be at Boise State University, University of Kentucky, Michigan State University, Texas State University and an initial phase at Northern Michigan University. In 2018, we will deliver assets at Arizona State University, Colorado State University, Cornell University, Florida State University, Iowa State University, University of Minnesota, University of Pittsburgh, Oklahoma State University, the University of Hawaii and subsequent phases at Northern Michigan University.

MHN: What trends have you observed in student housing, and how do you expect those to change in coming years?

Churchey: The trend nationwide is that 25 percent of student housing are campus dorms, another 25 percent are purpose-built student housing owned by EdR or companies like us. The other 50 percent are the single-family homes and duplexes that are not particularly well maintained, but because of their location, they get a pretty high price. What we’re seeing is that those single-family homes are where some of our students are coming from, while those homes are being converted back to homes for young professionals. This added tailwind from cannibalizing the non-purpose-built student housing market has provided most of the growth for us and others.

When we survey students, the two things most important to them are privacy and wireless connectivity. What we do is add that degree of privacy. On campus, that means a bedroom that locks with its own bathroom. We call that bed-bath parity. Off campus, we incorporate privacy, but to a lesser extent.

As for technology, EdR’s off-campus communities are very advanced, with robust Wi-Fi in every room. The security in our communities is also top of the line. We have cameras in the common areas and by the doors, as well as key fobs. These are things that you don’t have in the places where 50 percent of students live. More often, students have been requesting spaces for group studying, so our properties feature common areas for that and for socializing. And comparable to apartments across the U.S., our buildings have amenities such as pools and other recreational facilities. 

MHN: How would EdR adjust its strategy if enrollment trends reversed?

Churchey: A recession would have the impact of a temporary rise in enrollment. What we’re now seeing is that the increase in high school graduates is leveling off, but because of our knowledge-based economy, a higher percentage of high school graduates are going to college each year. And due to the requirements of employers, they’re spending more time in school to get advanced degrees. If there were to be a recession, we’ve considered, then potential students who can’t find jobs would go back to school and get additional degrees. Taking this data into account, the National Center for Education Statistics estimates a 1.4 percent annual growth rate through 2023.

We don’t predict enrollment trends reversing, and we think our portfolio is well positioned. The model that has worked for us is to have a portfolio of assets we consider best in class, within walking distance to campuses that are robust. The average distance to campus of our assets is 0.1 miles, while enrollment averages 27,700. The average age of our portfolio is eight years, which also means the physical structure and amenities are up to date. There’s not much difference between our purpose-built student housing and the apartments students move in to after they graduate.

Images courtesy of EdR