Not Your Parents' College Dorm
April 7, 2016
Resort-style pools with half-submerged deck chairs, BBQ grills, theatre, billiards and gaming rooms, a tanning facility, a business center and a dog park. This doesn’t sound like a typical college dorm in the 1980s when amenities amounted to a coin-operated washer and dryer in the basement and sharing your bathroom with only three people instead of the entire floor.
Student housing has come a long way. That’s one reason why investors are going back to school. They are seeing strong fundamentals and positive growth in this previously-labelled niche market. Amenities, which require additional funds for upgrading, are essential to stay competitive in today’s market.
Putting Funds Back into a Growing Market
Student housing is a hot market that is seeing both robust demand and new growth in housing stock. And with more Millennials entering college, enrollment at tier-one and tier-two schools is in a growth mode. By expanding our offerings to student housing, we help channel more funding into the market for new construction, rehabilitation and preservation of existing properties. Below are two examples.
The Grove State College
Opening in the fall of 2014, The Grove State College apartments provide homes for 584 Penn State University students. With an overall occupancy rate of more than 95 percent, the borrower saw unlimited potential in the future of this property. With the help of a dedicated Seller/Servicer, the borrower purchased the property for $42.25 million, borrowing about $31 million. Freddie Mac then bought the loan from the Seller/Servicer, putting the funds back into the market.
The pet-friendly Grove State College apartments offer premium cable, walk-in closets, in-unit washers, dryers and dishwashers, plus a downtown clubhouse with study rooms and other amenities. Now leasing for the 2016-2017 school year, the property shows promising growth for the purchaser.
Domain at Waco Apartments
Baylor University in Waco, Texas is experiencing expansion much like other larger universities across the country. Last year, we partnered with a Seller/Servicer to fund the acquisition of LL Sams Historic Lofts, a 126-unit student apartment complex within walking distance of Baylor. The borrower’s and Seller/Servicer’s positive experience resulted in a second deal this year, a $26 million loan to buy Domain at Waco Apartments, also near Baylor.
Domain at Waco is a newly-built Class A project providing a variety of amenities catering to today’s students. It consists of seven, three-story apartment buildings with 100 percent student occupancy. Its residents enjoy a basketball court, sports field, dog park, fire pit and gazebo area next to a large pool, study rooms, a tanning facility and more.
Baylor’s 15,000-student population is growing quickly. Being there for the borrower and Seller/Servicer with a custom solution was key to the deal’s success.
Last year Freddie Mac Multifamily’s student housing had a record year originating roughly $1.8 billion in loans. Freddie Mac remains committed to providing liquidity in this space.