Ladera Ranch-based SmartStop Asset Management LLC, one of the country’s most active investors in the self-storage industry, is looking to tackle a new sector of the real estate market: student housing properties next to schools with big football programs.
The company last month announced plans to raise up to $1.1 billion from investors to buy student housing and senior housing properties, through a new nontraded real estate investment trust.
A preliminary registration statement for the Strategic Student & Senior Housing Trust Inc. REIT was filed last month. A time frame for the offering taking effect has not been disclosed.
As of last month, the REIT had raised nearly $29 million through a private offering.
More than $2 billion worth of properties could be acquired if the REIT raises as much money as it aims to; the offering’s paperwork said it plans to buy real estate using a fair amount of debt, with a typical 55% to 60% loan to purchase price.
The new company extended itself a little further on the first two student housing properties it bought at a combined investment of $104.5 million. Late last month, it closed on the $47.5 million buy of The Domain at Tallahassee, a 125-unit student housing facility near Florida State University. It opened this year, and has 434 beds.
The purchase worked out to $380,000 per unit, or $109,000 per bed.
The property “is a purpose-built, newly constructed and 100% leased student housing community located just a short walk away from Florida State University, which has more than 41,000 students,” said H. Michael Schwartz, chief executive of Strategic Student & Senior Housing Trust.
Its first purchase was a 198-unit, 592-bed property next to the University of Arkansas in Fayetteville, Ark.
The District complex was acquired in June for $57 million, or nearly $288,000 per unit and $96,000 per bed.
A smaller investment in another student housing property in the $500,000 to $1.7 million range is also being considered for a site next to the University of Nevada-Reno, according to the prospective REIT’s registration statement.
The REIT said it plans to invest in high-end “income-producing student housing properties and related student housing real estate investments that are generally amenities rich, newer construction and located adjacent to or within a one mile radius of campus.”
It intends to primarily target medium- to large-size colleges and established university markets, which typically have 15,000 to 40,000 students, if not more, according to the filing. Deals are likely to be in the $15 million to $100 million range, according to the company’s website.
“We believe some of these markets are both supply constrained and are generally experiencing steady enrollment growth,” the company said.
In addition, the company’s registration statement notes its specific university focus will “tend toward Tier 1 schools with established Division I football programs.”
There are about 130 schools in the NCAA Division I Football Bowl Subdivision, which is the top level of college football in the U.S.
Strategic Student & Senior Housing Trust hasn’t disclosed potential investments for its latter target sector, but said it plans to focus more on independent living communities that often contain units licensed for assisted living, rather than skilled nursing homes and other acute healthcare properties.
Senior housing deals are likely to range from $15 million to $75 million, the company said.
$1.3B Under Management
The potential investments in student housing properties next to schools with big football programs wouldn’t be the first sports-related investments for SmartStop and affiliated ventures.
Its headquarters were built alongside the Ladera Sports Center, a multisport athletic facility off Antonio Parkway that runs about 63,000 square feet.
The center opened last year and is owned by SmartStop, which spent nearly $35 million to build the facility. It also includes self-storage space, in addition to offices and the sports facility.
SmartStop and affiliates have about $1.3 billion in real estate assets under management, including 108 self-storage facilities with some 68,000 units totaling nearly 8 million square feet.
It runs three nontraded REITs that focus on self-storage facilities; in 2015 it sold another collection of self-storage assets for about $1.4 billion to Extra Space Storage Inc.
Each of the Ladera Ranch investor’s nontraded REITs are run by Schwartz, a real estate executive with more than 20 years of experience.
Before SmartStop, he was managing director of private structured offerings for Santa Ana-based Triple Net Properties LLC.
Last year, SmartStop added John Strockis—the former executive managing director of Newport Beach-based brokerage Voit Real Estate Services—to head acquisitions of commercial property types outside the self-storage sector.
