Magazine article Journal of Property Management

Avoiding Animal House

Magazine article Journal of Property Management

Avoiding Animal House

Article excerpt

by Steve Bergsman

Thomas Trubiana remembers going to the annual meeting of college and university housing officers three years ago and speaking with executives from the other private companies involved in student housing-all two of them.

However, at the same time this year, there were over 30 companies represented at the annual meeting. Trubiana, who is president and chief executive of American Campus Communities, says multifamily residential companies involved in housing students either on campus in university dormitories or near to campus in apartments marketed to students are in a rapidly growing business. "Up until about five years ago there was probably one major player," he explains. "Mostly it was a lot of local developers. Now, there is an ever increasing number of national developers and managers entering the fray."

American Campus Communities, based in Austin, Texas, now manages or is currently developing nine properties in seven states. Some of the campuses where American Campus boasts a presence including Texas A&M and the State University of New York at Buffalo. Other companies, too, like Texas-based JPI Companies, are moving quickly to capitalize on student housing.

Conventional vs. Student

Student apartments are tied to the school year, which can be a frightening prospect to a conventional apartment manager. In conventional apartments, move-outs occur sporadically during the year, and hopefully, if the development is well managed, at a rate that represents just a small percentage of the total complex. On the other hand, it's not unusual in student apartments for 75 percent of the tenants to move-out in the spring when the school year is over. In conventional apartments, tenants may stay for years and years. In student apartments, most tenants arrive in the fall and leave in the spring.

With apartments approximate to universities and marketed to students, managers are tied to the semester system (or quarter system depending on the university), observes David Alkosser, president of DTI Investments, an Irvine, Calif., company that owns and manages 3,500 apartment units in Texas and California, most of them for students.

"You have to be attuned to the university, when students arrive and when it is time to market to them," Alkosser says. "Students move in and out quickly, and you have to be careful with the summers because vacancies go up significantly. The marketing of the development is critical in terms of certain calendar periods. If you miss that window of opportunity, you can actually destroy your cash flow for the following year."

However, one of the biggest differences between conventional apartment developments and those for students is that there is very little actual marketing for the latter. It's almost like the "field of dreams." Build it and they will come. "We almost do no marketing," says Rondetta Troutman, a senior vice president at Picerne Real Estate Group.

Students clue-in to desirable apartment communities. A good reputation is worth its weight in advertising dollars. "We are right across the street from the university. People know we are here," says Dana LeDroit, who manages University Properties' four apartment complexes. "Once in a while we will do some advertising with the university newspaper, but there really isn't much advertising required."

Lease Management

The Picerne Real Estate Group in Phoenix owns and manages 3,600 apartments in Arizona, two complexes of which are approximate to universities and mostly occupied by students. Acquiring and building the complexes was a lot easier than getting the management processes correct.

"We've always managed our lease expiration as if one-twelfth of the leases would expire each month. That way you don't have one month with a huge turnover," says Troutman. "That's very difficult with student properties."

Eventually Picerne developed a multi-tiered lease plan, but before that, the cost of turnover and vacancy during the summer months was hurting the company. …

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