Student rates

PE deals target billions of student accommodations amid shortages and rising costs

Private equity firms and asset managers are pumping billions into the student and college housing sector as they seek to capitalize more on rising property values ​​and an unprecedented global housing shortage for students.

Led by Blackstone’s April deal to privatize US college communities for $12.8 billion –biggest deal in the industry according to data from PitchBook, private equity firms committed $20.3 billion to student housing in 2022 alone. This total exceeds the previous five years combined.

At the center of the private equity spending spree is a global shortage of college housing, a problem exacerbated by a surge in property values ​​and the cost of living. As the dust of the COVID-19 pandemic begins to settle, students return to campuses to find housing is scarce.

The shortage is particularly prevalent in California, where the average cost of campus living, including housing and food, is $17,259 on University of California campuses and $14,401 on California campuses. California State University per year, according to the California Legislative Analyst’s Office 2022-23 budget.

Soaring housing prices have been blamed for a commensurate increase in student homelessness. According to a UCLA report, the rate of homeless students has increased in recent years, affecting one in 10 students at California State University.

No private equity firm has tackled student housing assets quite like Blackstone. The investor’s the industry leading real estate war chest is well knownbut within that vault is a multi-billion dollar student housing portfolio.

Including Blackstone’s American Campus Communities deal — a portfolio that includes 166 properties in 71 college markets, including the University of California, Berkeley, Arizona State University and Florida State University — the company has processed more transactions and has blown away other asset managers in terms of transaction value invested in student accommodation over the past five years.

Another major player is Singapore’s sovereign wealth fund GIC, which has announced around $6 billion in student accommodation deals in the UK so far this year, according to PitchBook data. In May, GIC and Greystar Real Estate Partners won a £3.3 billion (about $3.9 billion) bid for Student Roost, a portfolio comprising more than 23,000 student accommodation beds, according to reports.

In June, GIC and Dutch pension manager APG agreed to acquire a stake in The Student Hotel, valuing the student accommodation specialist at 2.1 billion euros.

Related reading: Private Markets Real Estate Fundamentals

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