Preferred Apartment Communities has entered into an agreement to sell its student housing portfolio to TPG Real Estate Partners for USD 478.7 million. The transaction is expected to close in the fourth quarter.
The portfolio marketed by CBRE includes eight high quality student housing communities in Arizona, Florida, Georgia, North Carolina and Texas. The communities have more than 6,000 beds with a range of amenities.
The move supports a shift in the goals of Preferred Apartment Communities, CEO Joel Murphy said in prepared remarks. "This is in line with our previously set goals to move out of student accommodation, simplify our focus on our core Sunbelt apartment building business, and improve our bottom line."
Preferred's decision to leave the dormitory may come at a steep time, according to new data. RealPage will be released on Tuesday in a webcast. It turned out that the fall semester started with the weakest lease in ten years to cover the sector. The share of beds rented at the end of August was 87.7%. According to RealPage, this is almost 4 percentage points less than in August 2019 [91.4%]. In addition, the occupancy rate in two thirds of the schools recorded has declined year-on-year.
Current research from Zillow also casts some shadows on this asset class. It turned out that apartment rents in the higher education sub-markets fell by 0.5% in August compared to the previous year. This is the first time since 2017 that rents in university areas have fallen. According to Zillow, online education has fueled the decline in housing rents and demand for housing in university cities.
TREP keeps its Ty Newell said the buy will bring new markets with assets he believes are strong. “This transaction is a scaled entry for TPG Real Estate into the US student housing sector and an extension of our student housing initiatives in Europe. We believe the assets in this portfolio will benefit from their proximity to quality academic institutions that are well positioned to address the challenges posed by the Covid-19 pandemic. "
Despite these short-term challenges, these student housing communities face a combination of strong regional demographics and favorable supply momentum that should continue to support performance, he added.
Some data from RealPage supports Newell's optimism. Conventional projects on campus are still showing slight rental growth. The prices rose by 1.5% compared to the previous year. This corresponds to an annual rent change of -1.4% on the market as a whole.