Five years ago, the off-campus student housing sector presented an incredible opportunity. At Kayne Anderson Real Estate Advisors (KAREA), we saw compelling dynamics such as strong college enrollment growth. At the same time, the sector was highly fragmented, with significant capital constraints resulting from the Great Recession of 2008.
From 2009-2013 we established ourselves as the top private buyer - and second largest overall buyer - of student housing assets in the U.S., according to Real Capital Analytics. During this period, KAREA completed more than $3 billion in transactions to acquire, develop or sell student housing properties totaling more than 50,000 beds in markets serving 43 universities.
So what do I see over the next five years? I firmly believe that we have already planted the seeds for the next economic and real estate bubble and that this cycle will end with some pain as all other cycles have.
We are now an opportunistic seller, as demonstrated by our portfolio sale of 21 assets in late 2012 for $863 million, which remains the largest sale of privately held student housing assets in the U.S. We will continue to take advantage of increased capital availability through strategic dispositions to institutional investors, sponsor groups and real estate investment trusts. Having invested through the prior real estate downturns in 1988, 1998 and 2008, my guess is that that we still have a few years remaining of low interest rates, which will help provide capital to the buyers of our properties.
That said, the dynamics of student housing remain compelling. We also continue to be an opportunistic buyer, selectively investing in the space. As in 2008, the bursting of the economic and real estate bubble will impact student housing far less than most other sectors. Like all bursting bubbles, it will materially constrain capital and liquidity, which will present a significant opportunity for us and a few others who are strategically positioned with long-term oriented capital sources and who are able to execute nimbly.
Al Rabil is the CEO & Managing Partner at Kayne Anderson Real Estate Advisors.