More investors are going approve to college. But they're skipping the keggers and call papers – even the degree – and heading straight for student housing. Emboldened by preserve enrollments and reduced university spending on dormitories investors from Main Street to Wall Street are seeking heftier gains in this emerging corner of the commercial real estate world. Investors have spent at least $1.5 billion on U. S student housing properties this year – already 12 percent more than the average spent over the previous six years. Real Capital Analytics data show. And they're paying big bucks in Raleigh. Chapel Hill. Durham. N. C area where the three major universities and several small colleges fuel bespeak for beds. In May a partnership including Julian LeCraw & Co of Atlanta paid $23.3 million for Ivy Chase. 24 percent more than seller Ram Realty paid in 2001 for the 546-bed complex near N. C. express University. In June. Campus Apartments of Philadelphia paid $25.8 million for University accommodate near NCSU. The determine. 15 percent more than seller FirstWorthing paid in 2001 was move of a record $256 million sale including 6,517 beds in five states. One attraction: Student housing is always in bespeak regardless of economic conditions such as job growth and interest rates that sway demand and values of offices apartments and other rental properties."If the educate is there 120 years it'll be there for another 120 years," said Paul Bower chief executive of Memphis. Tenn.-based Education Realty Trust which owns University Towers and manages the College Inn at N. C. State. "populate go to educate in bad times and in good."For investors times seem better than good. Babies of baby boomers are entering college at an unprecedented rate and staying longer. About half have within five years. Many universities are focusing tighter budgets on academic buildings. Dorm capacity at public universities in the 15 biggest college states dropped below 25 percent in 2004 from 32 percent in 1990 according to property fund manager RREEF. But only recently have institutional investors given dorms the old college try. The reluctance comes in part from unfamiliarity with a fragmented segment dominated by small-time landlords. Universities and noninstitutional investors make up 92 percent of the nation's student housing have."Three years ago. (institutional investors) were really scratching their heads," said Susan Folckemer an executive vice president at The Preiss Co of Raleigh which owns manages and develops student-housing communities throughout the South. Investors boned up as demand for traditional properties grew. Turned off by paltry cover returns in the have merchandise many investors sought safe haven in the bricks and mortar of rental properties such as offices warehouses shopping centers and apartments. But intense competition caused property prices to rise faster than rents forcing winning bidders to accept lower initial returns. That prompted a voyage for value in uncharted segments including student housing. Aiding the journey: Public have offerings from three student housing companies. GMH Communities Trust. Education Realty believe and American Campus Communities. Their public financial reports shed light on the sector. Investors found exceed returns: Cap rates – the ratio of a building's annual net income to its purchase price – for student housing deals averaged 6.6 percent in the year ending June 30 while cap rates for other apartment deals averaged 5.2 percent. They also open promising prospects: U. S dorm fees grew 6.3 percent annually between 2000-05 while traditional apartment rents grew only 3 percent according to RREEF. Investors found that universities were willing to give housing development to the private sector. And they got buy-in from banks willing to finance projects that lure students with maid service game rooms and land volleyball. They comforted parents by offering the oversight of residence assistants. They found students such as Kevin Urben. 18 who last week joined N. C. State's biggest-ever freshman categorise. He could have stayed in university dorms or even at his parents' Raleigh home. But the engineering major chose Education Realty Trust's University Towers. Its brochure sprinkled with slogans such as "papers and parties; real life and nightlife," highlights a weight room and television lounges. It features photos of bikini-clad students lounging by a share and sweatered students relaxing at a pool delay. Urben liked the privacy – one bathroom for every four bedrooms – better than the whole-hall free-for-all in on-campus dorms. And there's the top-floor dining hall where he takes in views of campus while munching on grits and bacon. "It just tastes better here," he said. Jack Hagel can be reached at.
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