Scale is relative.
Large scale by some measures may amount to a blip for others.
Monday’s announcement of an agreement for Charleston, S.C.–based Greystar to acquire the EdR student housing portfolio of 75 communities in 25 states among 50 name-brand universities, in a deal valued at $4.6 billion, may strike some as a mega deal. Strategically, EdR checks three boxes that make it fit “like a hole in the donut” into multifamily’s still-growing behemoth: talent; a well-positioned, best-of-breed real estate platform and operations process; and deeper, stronger domestic and worldwide exposure to the student housing business arena, in which Greystar already has a major presence, with beds in 150 markets, and where it views plenty of room to grow.
Further, thanks to financial market gyrations, volatility, and jitters, REIT stocks have tended recently to trade below their net asset valuations, making it an opportune moment for a buyer.
Ranking as America’s top multifamily apartment manager by more than double the number of managed units as the nation’s second-biggest enterprise—with upward of 435,000 units in the current portfolio—and nearly as formidable a developer and builder, as well, Greystar may look like the epitome of scale among its peers.
That’s not how Greystar CEO Bob Faith views it, however. For Faith—a visionary who’s set the enterprise he founded in 1993 on a path of cycle-resilient world domination when it comes to touching the lives of renters, from their tenderest pre-adult college years through the rest of their lives along the arc of their careers and beyond—Greystar’s scale is on a different level. The clout its size confers in the areas it pays for finite resources in real estate, materials, management talent, labor, and myriad other hard assets and soft services is only math and measurement. It’s not so much a matter of capturing cost efficiency as it is a matter of capturing the ability to generate and regenerate value.
Want a glimpse at how Faith right-sizes his own perspective on how big and powerful Greystar is, and why he thinks 435,000 units under management might be miniscule compared with the big, wide world of opportunity still out there?
“That’s in a market of, what, 26 million institutional apartments in the U.S.?” he says. “So, when you think of market share, it’s tiny compared to companies like Coke or Pepsi.”
There’s some relativity for you, and a sharp sense of both the humility and ambition in Faith’s take on what he needs to motivate his strategic team, and the sprawling global multifamily empire they lead, to accomplish in the weeks, months, and years ahead.
“We love the student housing sector, as our activities in the U.S., Spain, and the U.K. reflect,” Faith says. “We found that student housing doesn’t have as pronounced a cyclical risk. As we saw during the last downturn, it was resilient as an asset class through the most adverse of business conditions. What’s more, the fundamental demographics are there for solid, sustainable growth, especially among prestigious colleges and universities like those in the EdR portfolio.
“It fits right into the plan, and, the fact is, for what we’re paying, we couldn’t have gone out and replicated this by buying into such a fantastic portfolio of assets if we assembled them one at a time. Our skill and disciplines in acquisition and integration are proven, and this is a truly talent-rich organization we’re combining with now. Our history is that we’ve tapped into an extremely deep, capable, and important corps of our organization’s leaders through acquisitions, and we expect this one to add another great group of team members at every level,” he adds.
For Faith, it’s about how a blue-chip, investment-grade, multiplatform, integrated residential community maker and manager takes shape as a strategic whole, avails of opportunity, mitigates risk, and future-proofs its reason for being as tidal forces of capital, demographics, construction trends, policy, consumer trends around livability, and technology all evolve the meaning of value in residential rental real estate. It’s about strong people attracting a fresh stream of strong people.
“In student housing, like in the market as a whole, fundamental demand is there, and it’s important, even as enrollment growth remains strong, that colleges and universities distinguish themselves from one another, delivering tremendous experiences, differentiated by the cultures, their programs, the impression they make during students’ rite of passage through an important time, ” Faith observes. “We want to get to these people from the time they graduate from high school to when they set up their first households early in their careers to when they’re ready to move into the penthouse apartment as they succeed through to the time they’re active adults.”
So, there’s scale and then there’s scale. And while Greystar’s plan to add EdR to its dynamic mix of broad-ranging platforms and areas of business focus is a big idea, one gets the sense that Greystar’s ultimate scale—in geography, market segments, and community types—is still unfolding.
It’s not so much about size, clout, and getting the best price for what Greystar pays for; it’s about creating the most value for resources of time, money, materials, and talent invested.
