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Student housing market targeted by investors

The National Multifamily Housing Council projects the U.S. student housing market will see a sharp increase in demand over the next decade, from 8.5 million beds in 2020 to 9.2 million by 2031. As evidence, the Blackstone investment firm has announced its purchase of Austin-based American Campus Communities.

The nearly $13 billion deal is one of the largest acquisitions of a Central Texas company. Blackstone says it will pay $12.8 billion in cash. At $65.47 per share the company’s purchase is roughly 14% higher than American Campus’s last closing stock value.

The company claims to be the largest owner and developer of upscale student housing communities. As of Dec. 31, American Campus reported 166 housing properties totaling just under 112,000 beds, located across the country, including the University of Texas, Florida State University and Arizona State.

Private equity firms target large housing complexes

The Blackstone Group, Inc. is the largest private equity firm globally. The American Campus acquisition is the most significant student housing deal by the Blackstone Real Estate Income Trust (BREIT). Last year, the $97 billion fund invested in student housing in partnership with Landmark Properties on a $784 million deal.

Experts say Blackstone and other private equity firms are increasingly interested in student housing complexes. Many believe they offer higher returns compared to different types of residential assets, such as apartments. Student dorms serve as a hedge against inflation as their rates reset every year.

American Campus’ board of directors has already approved the Blackstone transaction, and the deal is expected to close after July 1. The company says with Blackstone’s resources and access to capital, American Campus expects to expand its core business and pursue outside opportunities.