For the past decade, student housing properties have become a competition in high end amenities – dripping with the latest bling in the multifamily housing arena.
John Isakson, chief capital officer at Preferred Apartment Communities talks about how this phenomenon is shaping multifamily housing now and how it will translate into the future.
Isakson says that not only are students getting used to lavish amenities, parents are getting used to it as well. These high end properties are great at creating the feel of security and professionalism. He says also that is why it’s an attractive investment to Preferred Apartment Communities.
He also wonders what students will be willing to accept after living in these high amenity student properties. Isakson predicts a big change in the next three to five years. Students will start moving out of student housing and finding out that they can’t afford the same living standard. This new round of tenants will be more demanding after they had everything at their fingertips during school.
Isakson says that companies will need to focus on resident retention to be successful as the tenant becomes more demanding. He believes success will be in good assets and good property management, even in a tightening market.
Right now Isakson says Preferred Apartment Communities is focusing on value add because it’s harder to see development deals to pencil. He attributes that to the stricter regulatory environment for banks.
Isakson identified the company’s best investment markets in Florida – Orlando, Tampa, and South Florida – and says the company is focusing on markets in Texas as well. He says that business continues doing well in Houston compared to others and even says that Preferred will be a first mover in that market when it does pick up. He also says that business will be targeted to markets with solid job growth not solely based on government and where housing tends to be more rental.
Isakson says that Preferred remains diversified, raising money through a private, non-traded REIT and also has preferred stock in a publicly traded company that performs well. The company raised $1 billion in 3.5 years and its sales pace will increase in the next couple years. Because of the diversification strategy, Isakson says if there is a blip, it can move to the publicly traded market.