Student housing: real estate’s unlikely kingmaker
“It’s kind of the darling at the dance right now”
Wes Rogers needed more than a plunger to fix the mess at his Florida development.
It was a month into the semester, and pipes were regurgitating poop into units at the Cloisters, the luxury student housing complex near the University of Miami in Coral Gables.
The sewage crisis was the metaphorical salt in the wound of a rough opening season. Move-in had already been delayed for the 296-bed project, missing the bell for the start of school. It cost Rogers’ firm, Atlanta-based Landmark Properties, millions.
After alerting the hundreds of residents that their units would not be ready, Landmark booked them into four-star hotels nearby, but the kids didn’t feel much like Eloise at the Plaza. Belongings went into storage, and hotels kept waitlists for microwaves and mini-fridges.
Parents — often the lease guarantors —wrung their hands and demanded answers. The university declined to intervene, as it technically had no involvement or relationship with Landmark. UM also had nowhere to put the students, with just 4,000 on-campus beds for its population of more than 19,000.
Rogers, cool-mannered and analytical, flatly laid blame on the Cloisters’ contractor.
“Every time we hire a third party general contractor, there’s timeline or budget issues,” he remarked. Despite the expense these issues incurred, he said this without venom — them’s the breaks.
Sewage-spewing pipes and delayed projects are not the norm for Rogers. Landmark was born from a plan he wrote in business school and is now a billion-dollar firm, and the largest student housing developer in the country, according to the publication Student Housing Business. In 2021, it launched a $784 million joint venture with Blackstone, and in 2022 announced a $2 billion joint venture with the Abu Dhabi Investment Authority, its most frequent partner.
“The largest real estate investors in the world are invested in our space, which was not the case 10 or 15 years ago.”
Rogers saw the early-days potential for the asset. Now, in student housing’s top markets, supply is so tight and demand so high that a construction fiasco here and there doesn’t matter, so long as the firm keeps building.
Everyone wants these apartments. Developers want to build them. Banks want to finance them. Students want to live in them. And universities, whose ever-growing enrollments far outstrip their ability to house students, need them.
“It’s kind of the darling at the dance right now,” said Marc Lifshin, co-founder and CEO of Chicago-based student housing developer Core Spaces.
Student housing has become real estate’s unlikely kingmaker, emerging over the past two decades as a recession-proof cash cow and a reliable asset at a time when multifamily and commercial are unappealing.
Don’t let the name fool you — this isn’t your dad’s Animal House. There are no punched-out windows or beer-soaked floorboards. These buildings are crisp luxury apartment towers with study rooms, rooftop pools and fitness centers.
It’s not the biggest sector of real estate. The top 25 student housing owners have just under 660,000 beds across 1,142 properties, according to Student Housing Business, which covers the field. But real estate’s biggest investors are here: Blackstone’s $12.8 billion acquisition in 2022 of American Campus Communities gave the newly anointed asset class some gravitas.
The new ivory tower
Student housing was still on the fringe when Rogers launched Landmark in 2004, the Monday after he graduated with his MBA. As a student crafting his business plan, he wanted a real estate asset free from the boom-and-bust cycle that frequently ensnares commercial real estate developers.
“I consider myself a relatively risk-averse person to be a real estate developer,” Rogers explained.
The clean-shaven Southern gentleman and father of five now has salt-and-pepper hair and the titles of CEO and president. If Landmark is his kingdom, his $40 million Aspen ski chalet is the castle. He was born and raised in the home of the University of Georgia, Athens, where he earned both of his degrees. He is fast-talking, pragmatic and ambitious.
As an undergraduate, he lived in single-family rental homes in the Five Points area, a neighborhood near the campus.
“We had back decks and we would have keg parties,” Rogers said. “I always thought there was a need, a desire, to live in a house for college kids.”
Back then, strained town-gown relations turned into a push to boot students from Five Points, he said. For Rogers, this planted the idea of building “cottage-style complexes” just for students near campus. The concept found quick success.
“We did a series of small student housing deals, and they were very, very profitable,” Rogers said of Landmark’s beginnings. He quickly reinvested the firm’s profits into several cottage projects in Athens, then Columbia, South Carolina; Knoxville, Tennessee; and Tuscaloosa, Alabama. When the Financial Crisis hit, student housing was still a safe bet. The number of college students grew. Landmark kept building.
“We scraped together just barely enough money to get a construction loan for our 2008 deal,” he said. Until then, Rogers had made do with Landmark’s homegrown capital. “That was when we started to call the private equity firms back.”
Chicago-based Harrison Street Real Estate Capital was one of their first calls. Motorola heirs Bob, Christopher and Michael Galvin launched the firm in 2005, focusing on “demographic-driven real estate,” and have since invested in 118,300 beds, according to a rundown of investments on the company’s website.
After that call to Harrison Street, the firm recapitalized Landmark’s Retreat at Lake Tamaha, a complex of student cottages in Tuscaloosa near the University of Alabama, Rogers said. Things grew from there.
Landmark’s assets under management now total nearly $13 billion, and its portfolio spans 71,000 beds. Last year, it closed a record $2.9 billion in transactions, posted 9 percent rent growth and had 96 percent occupancy, the company said.
High rent growth and occupancy are foundational to student housing’s appeal. Rent growth across the industry averaged 4.9 percent year-over-year, according to data collected by property management software company Yardi.
“What’s driving the demand in student from an investment standpoint is rent growth,” said Jaclyn Fitts, director of CBRE’s national student housing group. “It’s become an in-demand asset class.”
“Basically, we all hung ourselves with their lease.”
Core Spaces’s Lifshin and Landmark’s Rogers are among the handful of student-housing developers who embarked on their first projects two decades ago, when building specifically for college kids was for small-time players.
Since then, the product has evolved from cottages to high-rises, from mimicking old ideas of American collegiate life to conceiving modern ivory towers.
“The winners have really figured out the strategy that you want to be at the right universities, at the right location,” Rogers said.
The right universities are America’s top 200 schools, typically large institutions with a housing shortage, and the right location is close to both campus and student social life — often, Greek Row.
The asset class has some quirks. Unlike generalized multifamily, projects are measured by beds rather than units. It is regarded by many as recession-proof, because more people tend to enroll in school during economic downturns. The tenants are also quite singular: typically funded by Mom and Dad, only on campus nine months a year and very sensitive to what’s cool.
“If you manage student housing like you do multi, you’ll get destroyed,” Lifshin said. “You have to be authentic in your voice, and you have to treat them like adults. You also have to protect the building.”
Pre-leasing is standard across the industry. Yardi found that as of December, 47.3 percent of beds were pre-leased for the 2024-2025 school year. The academic calendar is another idiosyncrasy of student housing and poses one of the few threats to developers who specialize in it.
“You have one date to hit if you’re delivering a new project,” Lifshin said.
First-day-of-school jitters
That’s the thing about student housing — it has a deadline. Tenants need to be moved in by the first day of classes, which for most schools is in late August.
“It’s a mad dash to the finish,” Rogers said. “The school doesn’t care if your building is done or not.”
Late delivery hurts both the brand and the bottom line, developers say.
Terminating leases is not good for the student housing owners, who are then left with an empty building for the year. Paying for a hotel, even for weeks, is better, despite a cost between $150,000 and $200,000 a day for a building like the Cloisters, Rogers estimated.
There were plenty of delayed projects this year, CBRE’s Fitts said. She summed up the cause as “materials being late, lack of labor, all those things” — a familiar post-pandemic story.
“We have a pretty good batting average, but still we don’t want any” delays, Lifshin said of Core Spaces, which had a late project near the University of Southern California. “It’s a bad experience and it’s terrible.”
The key to staying on schedule and on-budget is in-house construction teams, developers say. Third-party general contractors often have little experience with student housing.
“A lot of times, you have a compressed construction schedule. We know how to manage those timelines a lot better,” Rogers said. All of Landmark’s self-built projects finished on time and under budget last summer, while its two delayed complexes had third-party general contractors.
Should schedules and budgets make like a runaway train, developers keep an insurance policy tucked into their leases, something that surprised both students and parents at the Cloisters this fall.
No withdrawal
Jeff Buttrick, a parent of a would-be Cloisters tenant, didn’t mince words when it came to the lease he signed with Landmark.
“Basically, we all hung ourselves with their lease,” he said in September. At that point, Buttrick and his daughter were trying to find someone to take over her lease at the Cloisters. The apartment complex’s pool, gym and grounds remained under construction, and parents were lawyering up to break leases for units they say were not as advertised. Buttrick couldn’t find any takers for said lease.
What Buttrick, his daughter and so many other residents hadn’t understood about the contract when they signed it was a clause that stated the agreement could not be broken so long as the developer provided alternative accommodations while it worked to finish the units. It also required tenants to pay full rent for apartments they did not occupy.
The practice is standard across the student housing sector. Policymakers have started to push back against it. Minneapolis lawmakers took action after CA Ventures failed to complete a 573-bed project for University of Minnesota students. Following lawsuits and a state Senate hearing, city leaders passed a rent ordinance protecting students’ ability to end leases for incomplete units, according to published reports.
It remains to be seen whether other college towns will take up the “escape clause” ordinance for student tenants.
The developers, on the other hand, will carry on building. The rapid maturation of student housing as an asset class has flooded builders and managers with demand from investors.
“The largest real estate investors in the world are invested in our space, which was not the case 10 or 15 years ago,” Rogers said.
Lenders and investors love student housing, but they prefer tried-and-tested developers, those in the business say. The tailored skills and experience to build and manage these projects perpetuates a near “oligopoly” of student housing developers, Rogers said.
“There’s not a lot of operators for investors who are looking to place money,” Lifshin said. “The space has become so consolidated it’s like a game of musical chairs.”