S.E.C. Real Estate Observer

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Editor’s note: The Observer recently interviewed Society member, Harry Kennerk, S.E.C. regarding a real estate investment opportunity in a specialized market niche, University Housing and the Private Sector.

The Observer: Harry, I understand you represent an investment opportunity in a unique market niche, university housing provided by the private sector. Tell us about it.

Harry Kennerk, S.E.C.:

I have a developer client who is currently under construction building 128 student apartments. The property is adjacent to the University of Southern Indiana in Evansville Indiana, with a student population of 10,000 students and growing 3% a year. This is also the fastest growing University in Indiana. There is a very strong demand for these units. It’s believed the units will be filled upon completion. These are all 4 bedroom, 2 bath units, within walking distance to class and university services and is scheduled to be open in time to meet the fall semester enrollment.

Observer: Is the University involved in any formal manner in the project? For example, does the developer have a working relationship with the university’s student housing department, where students will be referred to this facility by the University as an approved or preferred student housing facility or is this strictly a private apartment complex catering to the student population?

Kennerk:

This is strictly a private apartment complex catering to the student population. The university apparently has a limited capability to provide housing due to a trust agreement structured by the original land donor placing certain limited use restrictions for other than educational buildings. In the property information package I have created, you will note that the university received funding for a $50 million dollar educational facility recently but still has a serious housing shortage. This is a somewhat typical situation for many older universities that are now experiencing substantial growth without modern residential facilities for students.

The developer of this project has a good relationship with the university but not a formal contractual agreement. The University has been outspoken in support of the development and considers it an important component to their student housing needs. For example, in the last three years the university has taken approximately 300 beds out of service for remodeling and has built two only small apartment buildings that do not begin to meet the demand. The University recognizes the opportunity for the private sector to provide student housing and has discussed providing a variety of services including transportation to campus, etc. for this project.

In addition, my client will be hiring the same management company that manages some of the universities housing facilities. Pre-leasing activity has already begun for fall units

Observer: What are your client’s goals in taking this investment opportunity to the marketplace?

Kennerk:

My client’s primary objective is to build and sell the property upon completion and lease-up. He has broken ground on the project and has strong construction financing. He has a permanent lender in place subject to securing certain additional financing requirements.

We are offering a variety of opportunities for an astute investor to participate in this project with my client. Perhaps via a construction joint venture and subsequent sale when completed, or a presale purchase agreement and close upon completion of the property. We are open to any other idea’s you may have and encourage your creativity in discussion options and alternatives for your clients and mine.

Observer: Thanks Harry. These are very viable transactions for both universities and the private sector investors and developers. It also sounds like a solid investment opportunity. How can Observer readers get more information about this project?

Kennerk:

Information on property is available on this web site: http://sale.svn.com/studenthousing.

I also have a complete package available. I can be contacted via e-mail at: harry.kennerk@sycamorecapital.com