Student housing is an interesting niche market and a growth market in the United States.

The Edge at the University of West Florida

The development of ‘The Edge, located directly at the main entrance of the University of West Florida, offers clients of REALIANCE the opportunity to participate in an investment with a relatively short expected investment term. The interesting thing about the present proposition is that the academic year will start immediately after delivery of the 84 apartments (344 bedrooms) in the summer of 2017 and the complex is expected to be fully leased immediately. The proposition offers the option of paying quarterly from the second year onwards. The preparation of the ground works has already started in August 2016.

The development is being carried out by Campus Realty, an Atlanta based company in the southeastern United States. Campus Realty has extensive experience in both the development and management of student housing. With a receding university, Campus Realty is meeting the needs of students by developing projects at locations right next to the university campus. The Edge at the University of West Florida is an excellent example of this. With rents that are in line with the market and affordable for students, this will lead to stable rental income. In addition to payment from year 2 (from 7.7% increasing to more than 11% in year 5), these provide a good opportunity to sell the project at the end of the third year.

Assuming a conservative cap rate of 6.5% on sale, a projected gross return of 61.5% is expected after a three-year term.

The placement of the equity capital of REALIANCE relations in The Edge Capital LP amounts to US$ 2,250.000, in which REALIANCE’s managers will also participate for a minimum of US$ 50,000. This gives the Capital LP a 40% stake in the American project Limited Partnership. The participation is US$ 25,000 with a minimum purchase of two participations. The General Partner Campus Realty of the project LP contributes 20% of the capital. In addition, 40% of the equity is contributed by a fund of the American investor T2 Investments from Chicago. An additional advantage is that T2 will fill in any unplaced part of REALIANCE so that the project will certainly go ahead.

Key data

Project name
The Edge at the University of West Florida

Location
University Parkway, Pensacola, Florida, USA

Initiator
REALIANCE USA B.V.

Local partner
Campus Realty

Property manager
Peak Campus peakcampus.com or Asset Campus Housing

Category
Student housing

Expected investment term
36 months

Exit strategy
Sale to an (end) investor

Participation
Minimum of US$ 50,000 excl. 3% emission costs
(90 participations of US$ 25,000)

Structure
Participation in The Edge UWF Capital LP

Equity
– Dutch and German investors US$ 2,250,000
– American investor T2 US$ 2,200,000
– Campus Realty US$ 1,100,000

Distribution in year 2 and 3
Average 8.5% per annum

Projected capital growth
61.5% after 3 years

Projected gross return (ROI)
20.5% per year

Unique selling points

Student housing is a growth market and an interesting alternative to traditional rental apartments given the good performance also during the financial crisis.

The University of West Florida is a growing medium university with an ambition of 12,800 students to grow to 14,500 students by 2018.

Perfect location right at the entrance of the university and thus better positioned than its direct
competitors.

Pre-development risks minimized by already obtained permits, GMAX contract and ‘term sheet’ bank loan.

Construction time and ‘lease-up’ allow offer the possibility to distribute from the second year.

Local partner has extensive experience in development and management of student housing.

There is a cooperation with T2 Investments, which, in addition to a role in the GP, contributes half of the equity and is prepared to absorb any shortfall of the Dutch and German investors.

The local partner participates with US$ 1.1 million in the required equity.

Location

For more information you can reach REALIANCE at +31 (0) 20 21 03 180 or invest@realiance.nl