Boosting Student Housing Management to the Next Grade
- Jul 17, 2018
The student housing market continues to grow across the U.S. at an unprecedented rate. Between 2016 and 2017, developers added nearly 20,000 units to the nationwide inventory, with 15,521 units currently under construction, according to Yardi Matrix. Demand for off-campus housing remains strong and property management companies are working to set themselves—and their properties—apart in the competitive environment.
Julie Bonnin, COO of Asset Campus Housing, discusses how the company’s property management operations add value for both investors and residents alike. Bonnin possesses more than 30 years of asset management experience and, in her current role, she is overseeing all operations of the firm’s expanding student housing portfolio—currently comprising upwards of 121,500 beds.
Tell us about some of ACH’s operations which give it a competitive advantage in the student housing market.
Bonnin: We anticipate the need for new departments as the industry grows. With each new department, multiple processes are created to accommodate our clients, residents, employees and, in whole, the industry. A recent example of this is our transitions department which we established in 2016 after recognizing the need in the industry through our experience with the Campus Crest Communities’ portfolio transaction, consisting of 42,000 beds. Since 2016, we cultivated our transitions department to handle simultaneous acquisitions in as little as 48 hours.
How does the company improve its properties’ retention rates?
Bonnin: During the resident’s lease, we focus on speedy and successful maintenance requests, fun and effective resident events, and hiring and maintaining talented on-site employees who work together to run a successful property. In all, we do everything we can (to achieve) the highest retention rates so that it keeps costs lower for the property when it comes to move-outs and turnover.
How have the expectations of renters changed since ACH’s founding in 1998?
Bonnin: The true genesis of off-campus, purpose-built student housing occurred in the mid-90s. At that time, the notion of having just a modest pool, clubroom and units where there was one bathroom for every two bedrooms was thought to be cutting-edge. The notion of internet connectivity was a forethought for many developers at best. Everything from the first generation of student housing product and the demands of students residing with us has changed dramatically, many times over the past 20 years.
In general, proximity to campus, lightning-fast internet, superior cell service on property, mind-blowing resort amenities and boutique hotel-type customer service are the standards both desired and expected by our residents. Investors recognize this and therefore design properties that exceed expectations, while we drive customer service levels in a manner that our residents choose to call us their home throughout their college career.
What are the best ways for an investor to maximize its returns in student housing assets?
Bonnin: Student housing is an asset class that caters to varying investment theses from the global investment community. As such, a one-size-fits-all investment approach is not employed. Over the past few years, we’ve assisted our clients in maximizing their returns via both ensuring successful lease-ups on development properties and coordinating significant value-add capital and operating initiatives.
On the development front, tiered, first-year rental structures and creating significant leasing velocity through targeted marketing efforts have allowed our investors to outperform their initial year revenue projections. On the value-add side, unit revamps on first- and second-generation purpose-built properties, coupled with broad amenity enhancements, generally allow properties to move rates significantly, while still trailing new properties by several hundred dollars a bed per month. This approach allows the property to deliver a product and experience where the value proposition far outweighs the competition.
What are some of the biggest challenges in today’s student housing market?
Bonnin: Overbuilt markets—due to development companies’ need to build communities to feed their businesses. We have seen this repeatedly in markets where enrollment has been steady and/or increasing and where land is cheaper to purchase. For example, Texas A&M University. Additionally, some of these overbuilt markets are suffering from the delivery of new projects, outpacing even significant enrollment growth.
From an operating standpoint, utility expenses and payroll costs are beginning to place strain on net income. While many properties have utility caps wherein residents are billed for overages on a monthly basis—think Ratio Utility Billing System in conventional multifamily—there are times where the overage becomes so significant that it impacts the next year’s rental rate increases, thereby impacting year-over-year income performance. Similarly, with unemployment now reaching a state where most markets around the country are reporting less than 4 percent unemployment, this is causing a greater fight for on-site talent, thereby driving the cost of total payroll upwards at a faster pace than overall Consumer Price Index. These two events are certainly recent phenomena but likely to continue for a number of years.
What role does technology play in the management of student housing? How do you see this trend evolving?
Bonnin: We live in a world of technology and use advanced technology to deliver an unparalleled resident experience. Today, almost every resident lives off their smartphone, tablet and/or computer. We have to ensure we stay relevant and evolve with technology as it changes. For our prospects and residents, the entirety of what is needed related to leasing, paying rent, submitting work orders and generally seeing what events are available at the property is conveniently available online through the property website and the resident portal. Technology is ever-evolving and if you are not trying to stay ahead or, at a minimum, keep up with its ever-evolving systems, you will be left behind.
Image courtesy of Asset Campus Housing