Morgan Stanley targeting student housing rebound with joint venture

Morgan Stanley is the latest major player to dip its toes into the rebounding student housing market.

The bank formed a joint venture with Global Student Accommodation, which put forth a $1.6 billion portfolio for the partners to snag a piece of the recovering student housing sector, Bloomberg reported.

The starting portfolio accounts for nearly 15,000 beds spanning 21 states and 29 cities, according to Bloomberg. Cities included in the initial portfolio include Cincinnati, Raleigh, Tempe and Lexington, Kentucky.

About two-thirds of the portfolio reportedly resides at “Power Five” schools, or those that are homes to major players in top U.S. athletic conferences and typically larger student populations.

GSA’s Yugo brand will operate the properties.

Global Head of Real Assets at Morgan Stanley Investment Management John Klopp said in an emailed statement to Bloomberg the deal provides “a scalable opportunity and a best-in-class partner.”

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GSA Chairman Alec Burger told Bloomberg the joint venture will have a strong pipeline to acquire properties. The goal of the venture is to increase the partners’ market share of student housing, a sector estimated to be worth approximately $400 billion in the United States.

According to Burger, this academic year has brought student housing occupancy to a record 94 percent as students and universities take advantage of widespread vaccinations and return to in-person classes at some academic institutions.

As a result, the market for student housing deals has picked back up from its pandemic lull. In the first half of 2021, JLL reported $2.5 billion worth of deals in the sector. The figure marked an increase from $1.7 billion in the first half of 2020, but down from the almost $3 billion spent in the first half of 2019.

Morgan Stanley has institutional competition in the sector. In August, Blackstone Real Estate Income Trust announced a $784 million joint venture with Landmark Properties to acquire and recapitalize a 5,400-bed portfolio. Brookfield Asset Management has also engaged Scion Group about a potential $1 billion student housing venture.

[Bloomberg] — Holden Walter-Warner