Campus Advantage in the Austin Business Journal

Taking Advantage of Building Boom

September 15 , 2006 | Article printed in the Austin Business Journal
Jenny Robertson

If your ideas of student housing consist of bunkbeds and communal bathrooms, throw them all out the window. Today's college living - both on and off campus - involves resort-like spas and pools, private bedrooms with cable TV and fully stocked kitchens.

With as many as 70 million college students expected to go to college in the next decade, a growing number of investors are building such properties. As the student housing generates buzz as the next hot real estate arena, one local company has piggybacked on its explosive growth by managing the properties.

Campus Advantage, Inc started in 2003 by intentionally avoiding investment in - or construction of - the projects themselves. Instead, the firm chose to specialize in the management of student housing, which differs from traditional apartment housing. Student properties tend to have unique lease situations, more social atmospheres and more people coming and going at different hours of the day.

"It's the part of the business that no one's particularly good ad, that no one wants to do," says Mike Peter, Campus Advantage CEO. "It's the 'washing the dishes' kind of stuff... but it's opened huge opportunities for us."

In three years, the company's staff has quietly grown to 479 - 110 of them in Austin - and it expects to employ as many as 650 people next year. With $900 million in real estate assets under its management, the Austin based firm has 36 locations around the country. Though Peter declines to give specific numbers, he says the privately held company's revenues have doubled each year since it started.

This month, the company hired Mark Hager as its new chief financial officer. Hager previously held the same position at American Campus Communities Inc. (NYSE: ACC), an Austin-based student housing behemoth that has properties in nearly 20 states.

For its part, Campus Advantage is eyeing other growth opportunities. It wasnts to provide consulting to help clients decide which markets are ripe for housing or work on due diligence projects. With that relationship on the front end, Hager expects more investors would then choose Campus Advantage.

Student housing has changed dramatically since the days of cramped dorm rooms and cafeterias. And with what experts are calling the "echo boom" of future college students, it's likely to continue.

According to Jim Arbury, senior vice president at the Washington, D.C. - based National Multi Housing Council, many universities don't have the money or the inclination to build big dormitories anymore. And a study that the council conducted a year ago showed that most universities only had room to house their freshman classes.

Meanwhile, off-campus apartments have gone from a smattering of spare room or mom-and-pop arrangements to large, expensive complexes. This secmester, for instance, American Campus opened an almost $40 million project in Colelge Station with three-story apartment unities, stat-of-the-art soundproofing technology and a gym that rivals those of resorts.

"Now, just about any major campus you go to, you'd see it completely surrounded for a mile or two by apartments," Aurbury says.

At the same time, companies have adapted tot he changing market. The student housing industry has launched several national, publicly traded companies. It captured the commercial real estate market's attention in the last two or three years, says Ryan Reid, national director of student housing investment at CB Richard Ellis.

Because some investors consider the projects a little riskier than more traditional real estate, he says, financial returns are generally higher. Both Arbury and Reid say that property management can mean the difference between a successful and unsuccessful investment.

"If you're a management company with expertise in student housing," Arbury says, "that's a big plus."