Student Housing REITs To Score Well With On-Campus Makeover
Zacks Investment Research | Dec 01, 2016 04:56AM ET
Student housing REITs like EdR (NYSE:EDR) and American Campus Communities (NYSE:ACC) have decent opportunities to excel in the upcoming years. This is because demand is emanating for on-campus developments from universities facing state budget cuts and low funds. This is hindering the capability of universities to develop or renovate their ageing housing properties before offering these to new students. And on-campus housing usually enjoy full occupancy.
In fact, as per American Campus Begins Berkeley University Project )
This public-private partnership deal is structured under the American Campus Equity (ACE) program. This program gives universities the scope to enhance their student housing portfolio without using its financial resources, while the student housing REIT makes accommodations at lower development costs and operating expenses, with affordable rents. In fact, from such assets, American Campus earns long-term cash flows and enjoys the benefit of ownership.
Unlike residential REITs, including AvalonBay Communities, Inc. (NYSE:AVB) and Equity Residential (NYSE:EQR) , whose rental units are open for leasing to all, student housing REITs lease their real estates to students. Hence, such real estates are generally required to be set up within or in places close to colleges and universities.
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undergraduate enrollment in the U.S. is projected to reach 19.8 million students by 2025, representing a surge of 14% from the 2014 enrollment figure of 17.3 million. Moreover, total undergraduate enrollment in degree-granting postsecondary institutions climbed 31% to 17.3 million in 2014 from 13.2 million in 2000. Such trends point to higher demand for properties from student housing REITs.
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