Prime Property Investors’ Strategy of Starting with Student Housing and Diversifying with Traditional Communities

MHN talks to Babara Gaffen, CEO of Prime Property Investors.

Chicago—As the driver of Prime Property Investors LLC, co-CEO Babara Gaffen, decided to take the road less traveled when it came to her portfolio strategy. The Chicago-based property management company started by acquiring student-housing properties and then later went on to add traditional Class-A communities (or, as she calls it, she took the “reverse commute”). MHN speaks to Gaffen about her property management strategy and why this was a good decision for her company.

MHN: You’ve had a bit of an unconventional path in multifamily—you started with student housing and then added conventional apartments to your portfolio. Why this path?

Gaffen: Our total portfolio is about $175 million. About $100 million of that is student housing, and we are still active and very involved with student housing. What we found in the last three years was that it was evident that you had students moving to, say, the city of Chicago for jobs, as well as the number of foreclosures and the number of people that had to sell their homes because of the whole mortgage mess. We saw a great opportunity to invest in Class-A apartments, and we started doing that in the Chicago. So we’re not exiting student housing—we’re active—but we’re growing our portfolio in Class-A multifamily properties as well.

MHN: How has this helped grow your company?

Gaffen: It’s been a great way to add more units that are close to our office. We built a portfolio that included seven different campuses and 4,000 beds, and we only built close-to-campus properties. We did some strategic sales and lightened that portfolio a little bit in the last year and a half, and then over the last two years, we diversified into traditional Class-A, and we want to grow that portfolio as well. At one point our student housing portfolio was probably about $150 million. Right now we’re about $100 million student, and $75 million conventional, and we’re looking to get into more markets and more opportunities in the Chicago area as well.

MHN: How do student renters differ from your traditional renters?

Gaffen: Students are students—they know they have to pay rent, they know they have to live on campus, whether it’s through loans or their own funds. The population for Class-A properties is working people. It can be teachers or nurses, white collar or blue collar. We have people all over the spectrum. We do tend to buy in what we call “corporate quarters,” and we like to buy properties that are close to where big companies are. We do tend to have a lot of tenants that are employed by those companies.

MHN: And once your students graduate they can still rent with you.

Gaffen: We’ve had a couple of instances where that happens. But we’ve had even more instances where they didn’t necessarily live with us in college, but I’ll get a call that there is a grad who is going to work for a major company, and they apply and we take them. The purpose of the Class-A, garden-style apartment is to appeal to the young professional. We also have families—we have three-bedroom units. We have playgrounds, we have indoor pools, we have tennis courts. So we go from single people—young, right out of college—to families.

MHN: Any plans to get into seniors housing and capture the entire spectrum of renters?

Gaffen: Not seniors housing, but we’re looking to expand—we’re looking at some properties in Texas because it’s such a growing state with so much going on.

MHN: Have you learned anything about Gen-Y renters?

Gaffen: There definitely is a desire that students have for the higher-end, more expensive, brand new complexes or buildings. But our rents are more geared toward middle of the road. We don’t want to be at the high end. We’re not developers, so we don’t build new products. We haven’t acquired anything that’s brand new, where you’re talking about, “Oh they have a pool table room and big screen TVs and lounges and Wifi.” We don’t own that kind of property as of yet. Our rents are more middle of the road. We try to always be very affordable, and the key for us is we always try to buy as close to campus as possible. We only buy if you can walk to campus, because a lot of kids don’t have a car, and so they want to be close to campus and town where all the stores are. And a lot of the kids, if they go to a further-out property that has a lot of amenities, they have to take a bus, and that can get old after awhile. We run 100 percent full in our student housing, so I think a lot of that is proximity to campus, great locations and affordable.

MHN: Is there anything you’d like to add?

Gaffen: Just that we still remain bullish on the student housing market and its long-term prospects. You can always have an over-built market, and it’s the owners’ and buyers’ responsibility to do their due diligence and find out. It’s just that over the last few years we’ve done what we call the ‘reverse commute’ and diversified to conventional multifamily.