Student Housing Post Covid-19

[Pete Harper]

We came very close to buying student housing in mid-2019. I’m thinking with Covid-19 lock down and most of the University Campuses closed we might have dodged a bullet. What are your experiences in this space?

Did you see students moving back home during the lock down defaulting on their leases?

What is your outlook for this Fall? Are students pre-leasing for the Fall semester?

[Account Closed]

@Pete Harper 

To the question of how the "crises" is affecting student apartments (we have 67-units/167-beds of purpose-built student apartments):

1. Because of the hassle in withdrawing funds from their 529 accounts, roughly 80% of our tenants pre-pay rents for either the semester, or the entire school year.

2. Primarily as a result of #1, for the Spring 2020 semester we were at 100% collections.

3. About 60-65% of our residents stayed in their apartments, or returned to their units after going home for the initial week or so, of the "crises" (estimate based on utility usage for Mar/Apr). They are now doing their on-line courses from their apartments and with their friends/roommates.

4. Majority of off-campus residents are upper-classmen who are at the stage of their college experience where they place higher levels of value on their independence. While willing to return home for the short-term, the novelty of the situation wore off quick and these kids are demonstrating an eagerness to resume their independent life-styles.

5. We believe that while most parents understand the situation and are adapting to the abrupt change to their life-style, they are doing so with the belief the situation will be short-term (30-60 days). These same parents, like their kids, will most likely not be content to, or willing to, extend the situation long-term.

6. We are 90.2% pre-leased for Fall 2020 (ahead of this time last year – 88.0%) and will begin collecting rents for Fall 2020 in May (we require tenants to pay 1-month in advance and contracts commence in June). No one has tried to back out (yet) and we have parental guarantees as well as joint and several liability clauses.

7. Resumption of in-class instruction is of course the primary concern. If on-line instruction continues into the Fall 2020 semester, our guess is just that - a guess - as to how many of our residents will “stay and pay” or try and get out of their leases. Only time will provide an answer to this question.

8. A number of universities (including Purdue and Illinois State) released statements yesterday (Apr. 29) that they fully intend to hold in-class instruction for the Fall 2020 semester. Financial pressures are just too significant for the universities to do anything but. Yes, they will adjust for distancing and density type events, but they HAVE to move forward with in-class/in-dorm activities. Remember, they are paying for the operation of the dormitories whether occupied or not.