2021 Student Housing Market Overview and 2022 Outlook - Flipbook - Page 37
Blackstone’s Acquisition of ACC
Current State of the Market: 2022
On April 19th, the public announcement of Blackstone acquiring American Campus
As the student housing space continues to mature, activity is anticipated to remain
Communities (ACC) for $12.8 billion was made. The acquisition will be mainly through
robust. The metrics being reported for 1Q22 are evidence of continued interest in the
entities associated with Blackstone Real Estate Income Trust (BREIT) and Blackstone
student sector from new entrants, the pent-up capital needing to be deployed, and
Property Partners. Blackstone is paying $65.47 a share for the company, a 22 percent
the prevailing tailwinds from the dramatic rebound of national enrollment. Volume in
premium to the 90-calendar day volume-weighted average share price ending April 18,
1Q22 reached $2.3 billion, a 108 percent increase compared to 1Q21. Across the 67
2022. The transaction is expected to be complete in the third quarter of 2022. The sale will
properties that traded, the average price per unit was $256,728 - 13 percent higher
comprise 166 properties in 71 markets, of which are majority core-pedestrian. American
than 2021’s annual average. Private capital amounted to 70 percent of the acquisition
Campus Communities will retain its management arm for the assets. The estimated
volume, as well as 55 percent of the disposition volume. The first quarter of 2022 saw
economic cap rate on the transaction is 3.7 percent. American Campus Communities
a year-over-year compression in average cap rates of 38 basis points to 4.89 percent.
posted meaningful gains for the first quarter of 2022. Same-store wholly-owned revenues
Returning to historic trends, the spread between conventional and student housing
were up 10.3 percent and expenses increased 4.3 percent. Same-store occupancy was 95.6
cap rates narrowed to 19 basis points. The student sector is expected to see continued
percent in 1Q22 compared to 89.9 percent in 1Q21 and 96 percent in 4Q21. Blackstone
near-term cap rate compression, particularly with Blackstone’s acquisition of ACC at a
plans to continue investing in the existing assets as well as direct focus on new housing in
3.7 percent cap likely being accounted for in the third quarter of this year. Additionally,
high-demand university markets.
the performance of the sector should encourage continued demand from a variety of
capital sources looking to gain market share of the resilient asset class.
Large private equity firms like Blackstone have focused on perpetual capital strategies.
Through scaling up assets under management and longer hold periods, private equity
The overall health of the student space is at an all-time high with leasing metrics
firms can capitalize on the benefits of scale while gaining economies related to operations.
reaching historical records for the sector. Based on RealPage data from March 2022,
BREIT recently noted this in their $6 billion acquisition of Home Partners of America
pre-leasing metrics are at their highest point ever with 175 campuses 61.2 percent
(HPA), a single-family rental company of more than 17,000 units. As of late, Blackstone
leased for Fall 2022. 2022 year-to-date leasing velocity beats the last record of 59.5
has continued to scale under this mantra. In February, BREIT announced the $5.8 billion
percent in March of 2020. Moreover, effective rent growth is currently at a record
acquisition of 44 properties and 12,000 units from Preferred Apartment Communities. In
high of 5 percent when compared to March 2021 - essentially double the traditional
the same month, a joint venture between BREIT and Landmark Properties acquired a four-
rent growth of 2 to 3 percent commonly achieved throughout the last decade. The
property student housing portfolio with 2,248 beds in assets located in Tier-I markets. The
astounding performance of the student sector is driven by outsized enrollment growth
scaling is not only occurring domestically as investor appetite has been strong internationally
expected for the Fall 2022 semester, combined with a substantially tapered supply.
as well. In February, Brookfield, the Canadian private equity giant, publicly announced the
Many universities are experiencing record-setting application pools for the class of
potential movement of their £3.5 billion UK student accommodation business of 23,000
2026 and, to recoup costs incurred from the COVID-19 pandemic, increasing their first-
beds. In 2020, prior to the pandemic’s effect on the student housing space, Blackstone
year acceptance offers. Additionally, national enrollment at post-secondary schools is
bought student accommodation company IQ from Goldman Sachs and the Wellcome Trust
expected to increase by an average of 1.1 percent through the better part of the 2020-
for £4.7 billion – one of the largest-ever UK real estate deals.
2030 decade - fostering a dynamic environment for student housing investment.
The move from large private equity firms to scale in the student space has not only heightened
Student housing transactional activity is expected to be robust for the remainder of
the institutional status of the asset class but has also softened market transparency. With
2022 as institutional and private investors, both domestically and globally, recognize
the two largest public REITs in ACC and EdR taken private, investors will have to rely on
the growth potential and resiliency of the sector. While interest rates are expected to
sector relationships to decipher uncertainties related to industry performance. As typical
increase throughout the year, the deep pool of investors and abundance of low-cost
with investment transparency, the lack of investment knowledge of asset performance can
capital seeking to enter the space suggest cap rates will remain relatively low with
compress yields. However, the institutionalization of the student sector and the apparent
liquidity in the market remaining high. Newmark Student Housing expects several
demand to enter the space will bring a suite of Proptech service companies to alleviate
large portfolios to be marketed this year as sellers continue to recycle capital in the
the departure of public data from ACC. In many ways, the further institutionalization of
space and buyers consolidate ownership across Tier-I markets. With transparency
the multifamily subclass has caused a surge of advancement in technologies focused
within the sector decreasing, sector relationships will become increasingly more
specifically on student housing operations, in turn, assisting in hedging headwinds from
important. Newmark Student Housing currently holds the top market share of brokered
the lack of public information to maintain student housing’s attractive yield.
transactions, YTD 2022, with $750 million closed and an additional $1.2 billion slated
to close in 2Q22.
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