News Feb 01, 2021

Arcapita Acquires $120 Million In US Student Housing Properties

  • High quality purpose-built student housing properties serving Tier 1 public universities saw resilient performance during the COVID-19 crisis due to enrollment growth
  • Arcapita intends to aggregate a sizable portfolio of student housing assets across the Southeast, Southwest, and Midwestern regions of the US over the near term

Manama, Kingdom of Bahrain, February 1, 2021 – Arcapita Group Holdings (“Arcapita”), the global alternative investments firm, today announced the acquisition of Clemson Lofts, a student housing property at Clemson University in South Carolina, United States. The acquisition represents the latest addition to Arcapita’s growing student housing portfolio following its acquisition of Quarry Trail, a student housing property at The University of Tennessee earlier last year. These acquisitions represent a combined transaction value of approximately $120 million and bring approximately 1,500 student housing beds under Arcapita’s ownership.

Clemson Lofts is a 640-bed student housing property located approximately one mile away from Clemson University, the second largest university in South Carolina and one of the top 30 public universities in the United States. Reflecting its attractive location and affordable rents, the property maintained an average occupancy rate of 99% over the past five years and is currently 100% occupied. Arcapita completed a similar acquisition in January 2020 when it acquired Quarry Trail, a stabilized 840-bed student housing portfolio serving the University of Tennessee at Knoxville, the largest university in the state of Tennessee and a member of the Power Five sports conference.

Arcapita believes the US student housing market for well-located properties that serve large public universities is poised to experience healthy growth due to their more affordable tuition levels, stable enrollment, and generally, a limited supply of undeveloped land in close proximity to campus. In addition, the US student housing industry has historically shown to be recession resilient with sustained and high occupancy levels during economic downturns. College enrollment grew through the last three US recessions partly due to the lower opportunity cost of attending college when employment prospects are less attractive.

Purpose-built student housing properties serving tier 1 public universities have also demonstrated resilience during the COVID-19 pandemic. Students have generally preferred to stay on campus despite classes moving online, and this allowed properties to maintain their pre-COVID occupancy and rent collection levels. In addition, garden-style properties such as those acquired by Arcapita are likely to help facilitate social distancing measures given the lack of enclosed hallways, direct open-air access to units, and the availability of private bathrooms for each resident.

Brian Hebb, Managing Director at Arcapita, commented, “These acquisitions mark our foray into US student housing – a rental housing subsector with great potential. We target assets that serve large public universities with undergraduate enrollment of over 10,000 students and are located approximately 1-3 miles away from campus. Such properties are generally priced at the middle range of the market and have demonstrated a level of acceptance among the student body due to their value-for-money proposition. The demand for purpose-built student housing has grown over the past few years due to the provision of amenities that are valued by students such as direct shuttles to campus, group study facilities, and activity centers. Purpose-built student housing currently represents less than 25% of the overall student housing market and we expect this ratio to increase over time to cater to evolving student preferences.”

Martin Tan, Chief Investment Officer at Arcapita, commented, “Our investments in student housing are a further extension of our focus on defensive sectors that are supported by long-term trends. With over 20 million university students and less than one million purpose-built student housing beds, the US student housing industry is in its early stages of supply and has the potential for considerable growth. We look forward to working closely with our operating partners to build a sizable and diversified student housing portfolio across the US.”