DALLAS: Love the One You're With

Don't covet your neighbor's student housing project; it's best to worry about where you are and not what's going on nationwide, says Fountain Residential president Brent Little (here between Jonathan Clayton and Trevor Tollett). He's got three projects under construction in Houston, San Antonio, and Minneapolis, and he's not worried about overbuilding. There's 50,000 beds planned to deliver next year, up from about 40,000 the year before. But that's only 13% of enrollment growth across the US, and projections call for deliveries to scale back to 40,000, which is sustainable based on demand. However, Brent says he's more worried about what's happening at the campuses where he's building. There's nothing more important in student housing than checking every facet of your pro forma. Even increasing enrollment at a campus doesn't mean success.

Construction costs are increasing significantly, so you've got to have the rents to build the products. There are a lot of markets where a developer could get one to two acres across from a campus, but they may not bring the kinds of rents to be sustainable. The "if you build it, they will come" strategy doesn't always work, Brent says. One developer built at a Denver university and needed $1,200 to $1,400 a bed to make it work, but students couldn't afford it. He tells us that student housing is an annual cycle, and now is the time to look at the pipeline to sort the wheat from the chaff and pick projects. He has six prospective projects on the table: another in Houston plus Flagstaff, FIU, Boise State, Fayetteville, and Bozeman. His team is winnowing the list to the best three or so in the next 60 to 90 days.