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Deal Analysis: Realty Shares Binghamton University Student Housing Deal

Started by Atlninja, September 16, 2018, 07:10:25 AM

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Atlninja

What do you all make of the Realty Shares Binghamton University Student Housing Deal?

Sub Market: Binghamton, NY
Multi-Unity Student Housing (371 units)
14.0% Target IRR
Plan is to return occupancy to previous levels and sell for a 6% cap rate

sivaraju.pramod@gmail.com

Student housing looks great to me, as I anticipate a slowdown in the coming months. I want to hear from the experts here.

swbluedevil

What are your thoughts on the University of Missouri deal? Also student housing, Min is only 15K, but it's a 5 year hold.

Hayden

I can just say from what I have gathered is do some research on the surrounding area to see if it makes sense for students. I know that my college tried to start this by buying a complex right next to campus. The idea was great, with a new pool, gated access, renovated rooms, and free parking. However, after it was built, students realized that living directly off campus was a terrible idea. The surrounding area was crime infested and did not cater to the needs of young college groups. Not only that, but there was only a 10% difference in price to student housing which was infinity more safe and convenient. Now the complex is basically begging students to live there and will eventually open it to the public if they cannot fill rooms.

Student housing works some of the time, but not all of the time. I would say do your own due diligence before investing into the deal.
Very Respectfully,
Hayden

Jsmith

Quote from: swbluedevil on September 17, 2018, 06:40:01 AM
What are your thoughts on the University of Missouri deal? Also student housing, Min is only 15K, but it's a 5 year hold.

Funny enough, I just graduated from the University of Missouri in May so I could probably offer some insight on the area / answer any questions if anyone has them! I'll go try to find the posting on it now.

RageCage


foundationfarmhouse

I actually lived in Binghamton for quite some time (19 years). If I had not been married and whisked away to my wifes family in North Carolina, I would of been doing exactly that. Student housing in Binghamton is very common even in the old victorian homes all over the older parts of the city. In the older homes students paid (7 years ago+) 500-700 for a single room with common kitchen and bathrooms, so Id think they would jump on such a deal.

I know in the last few years there have been quite a few student housing's built in the area. The university is the best state run one as Ive always heard, and is one of the main industries Binghamton has going for it. So its actually in my opinion a College Town.

That being said, I did notice before I left in 2013 that there was a good bit of revitalization going on in the downtown. (Finally!!) However Binghamton does flood sometimes in the downtown so make some research in the FEMA maps and make sure the new project is not near the river!

swbluedevil

Thanks! The property name is Cross Creek Villas and here is the address: 4912 Alpine Ridge Dr, Columbia, MO 65202, USA

It doesn't look walkable from campus and the complex is going to offer a shuttle service to campus, but I'm not sure if there is ample on-campus parking for those that want to drive? Perhaps there is a grad department that is nearby the complex? Do students tend to live ~5 miles from campus?

Also, are the protests from 2015 still having a damper on the reputation of the school / interest from prospective students?



Quote from: Jsmith on September 17, 2018, 09:58:10 AM
Quote from: swbluedevil on September 17, 2018, 06:40:01 AM
What are your thoughts on the University of Missouri deal? Also student housing, Min is only 15K, but it's a 5 year hold.

Funny enough, I just graduated from the University of Missouri in May so I could probably offer some insight on the area / answer any questions if anyone has them! I'll go try to find the posting on it now.

Jsmith

Quote from: swbluedevil on September 18, 2018, 06:40:08 AM
Thanks! The property name is Cross Creek Villas and here is the address: 4912 Alpine Ridge Dr, Columbia, MO 65202, USA

It doesn't look walkable from campus and the complex is going to offer a shuttle service to campus, but I'm not sure if there is ample on-campus parking for those that want to drive? Perhaps there is a grad department that is nearby the complex? Do students tend to live ~5 miles from campus?

Also, are the protests from 2015 still having a damper on the reputation of the school / interest from prospective students?



Quote from: Jsmith on September 17, 2018, 09:58:10 AM
Quote from: swbluedevil on September 17, 2018, 06:40:01 AM
What are your thoughts on the University of Missouri deal? Also student housing, Min is only 15K, but it's a 5 year hold.

Funny enough, I just graduated from the University of Missouri in May so I could probably offer some insight on the area / answer any questions if anyone has them! I'll go try to find the posting on it now.

I just plugged it into google maps and to be completely honest, it is well outside of the range a majority of students live and outside what is considered a "desirable location". It is located more in the north suburbs, which is considered a less nice part of town. The location is definitely not walkable and on-campus parking is very limited, so it's nice (and almost necessary) that they are offering a shuttle service. A majority of on-campus parking consists of parking about a mile north of campus at our basketball stadium and taking a shuttle from there (this is what I did my sophomore/junior year), and it's honestly not that bad so driving from these apartments for undergrads is still definitely doable.

I'm about 99% sure there are no grad departments up there, at least I've never heard of one. The one draw you're getting from this place is that it is super cheap. I lived about 2 miles from campus and paid $525/month for my room in a 4 bed, 4.5 bath townhouse. It looks like these Cross Creek Villas are going for around $300/month assuming you have your own roommates, which I can pretty confidently say is about as cheap as you will find around town. I'm thinking their target market for renters is going to have to be graduate students who no longer want to live downtown by the crazy college scene and would rather have more of a house feel. Or someone who is looking to save money on rent and is willing to sacrifice on location & distance from campus / social scene.

Apartment high-rises have blown up in downtown Columbia (supply is greater than demand currently due to the protests from 2015 still having an effect on enrollment). I would say 3 or 4 new buildings have gone up in the last 3 years alone that were likely in the works before the protests hit and enrollment fell, that are all downtown and walkable to campus and walkable to bars (what a majority of kids are looking for), so competition for new complexes to get students in their housing is at an all-time high in Columbia. The thing about the high rises is that you're paying at least $500/month to get downtown (this is the new low-end price due to the supply/demand mismatch I mentioned earlier). Generally downtown living ranges from ~$650-$900/month, so the $300 that Cross Creek Villas is offering is absurdly low, which I'd assume is a big plus.

The protests are definitely in the rearview mirror as far as things go in Columbia, and I think enrollment has hit the bottom and will only go up from here. In fact, they had their first increase in enrollment this year since the protests and I think it it likely to continue to rise from here on out.

Like I mentioned earlier, Cross Creek Villas target market is definitely going to have to be grad students or for college students who desire to be in a quiet neighborhood rather than in the downtown party scene. I would imagine this place also struggles with making students aware that they even exist because of the attractive location options that already exist and are well-known by a majority of students. I would personally be hesitant to lock up $15k in this project just based off the location and huge increase in supply for student housing over the last few years, but that is just one person's opinion.

Hopefully this gave you some insight and I'd be more than happy to answer any more questions from you or anyone else on this project!

Best of luck with whatever you choose!

swbluedevil

Thanks so much for the helpful analysis Jsmith - nothing beats the on-the-ground knowledge of someone who is familiar with the area and was part of the target segment!

Based on your recommendation, I decided not to invest in this deal - I was really attracted to the expected cash-on-cash return, but it seems that there is an oversupply situation in Columbia as you mentioned. Any maybe I've been out of college too long and anchored on Bay Area rents, but a $200 difference in monthly rent isn't enough for me to live way out in the suburbs as opposed to downtown / nicer part of town / close to campus.

Thank you again - this is a great example of the power of the Financial Samurai Forum in helping each other out! 

Jsmith

You're welcome! Happy to help. And who knows, it may end up being a successful project in the end but I definitely would have my reservations.

Sam

Great conversation about this new RS project folks! I JUST got the e-mail notification about this deal for some reason today, 9/19/2018.

In general, I like heartland real estate, I like student housing since it is an installed base, unless the university goes under (which Clay Christensen predicted 50% of universities will in 10 years), and pretty high net rental yields.

I found this to be interesting:

"OC Ventures, a repeat RealtyShares sponsor, intends to acquire Twin River Commons for $32,000,000. The property was recently appraised by JLL for $38,400,000, potentially providing an attractive acquisition basis."

I would say, DON'T FALL for this type of logic. Appraisal values are largely an opinion of one person, and is often extremely subjective. If RS can buy the property for $32M, then it is worth $32M, NOT $38.4M.

***********************



RealtyShares is excited to offer investors two new common equity investments: Binghamton University Student Housing and Remington Meadows Apartments.

Binghamton University Student Housing Investment Highlights:

$30,000 Minimum Investment
$3,000,000 Raise Amount
Repeat Sponsor
Student Housing
Binghamton, NY
OC Ventures, a repeat RealtyShares sponsor, intends to acquire Twin River Commons for $32,000,000. The property was recently appraised by JLL for $38,400,000, potentially providing an attractive acquisition basis.

OC Ventures and RealtyShares believe that the Property represents an opportunity to acquire an underperforming Class 'A' asset at an attractive basis with an opportunity to realize potential upside.

Remington Meadows Apartments Investment Highlights:

$15,000 Minimum Investment
$3,300,000 Raise Amount
Multifamily
Arlington, TX
Built in 1983, Remington Meadows Apartments is a 296-unit Class B apartment complex strategically located in the heart of the Dallas-Fort Worth metropolitan area. Upon acquisition, RedBridge Capital Partners intends to execute a comprehensive ~$1.2M renovation program involving exterior upgrades, common area improvements, and interior unit upgrades.

Founded in 2015, RedBridge Capital currently reports assets under management of $173MM and its founding principals report having closed a combined $17B of transactions between them.
Regards,

Sam

swbluedevil

Hey Sam, thanks for the heads up on the Binghamton deal. Is this a project that you plan on investing in or are your RealtyShares investments primarily through participation in their equity fund?