Key Highlights

  • Pre-pandemic, 30% of public/private colleges and universities running deficits, according to Moody’s Investors Service
  • Colleges/universities looking to sell real estate or other hard assets to bail out ballooning debts
  • Developers looking to buy student housing and make conversions to apartments for white-collar workers

The coronavirus and its subsequent lockdowns have added fuel to the financial fires of colleges and universities across this country. Pre-pandemic, Moody’s investors Service reported that 30% of all public/private colleges and universities were running huge deficits due to spiraling costs and decreasing enrollments. Now, students on the whole are only attending classes virtually, let alone living in college/university housing, eating in campus/off-campus restaurants, buying “school supplies” and books in campus stores or attending campus sporting/cultural events.

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Just as now-empty malls are being repurposed as affordable housing and warehouse spaces, college/university dormitories are being repurposed as housing options for next generation workers.

Real estate partnerships have been purchasing campus real estate since 2016. “It’s not just students who want this sort of product,” said James Jago, the managing director of Pebb Capital.   Pebb and its partner TriArch Real Estate have already doubled their money on a dormitory they bought in Manhattan formerly used as student housing for students attending Yeshiva’s Cardozo Law School. The partnership gutted the building and turned it into furnished apartments that now houses both young professionals and graduate students.

Michael Jerbich, president of B. Riley Real Estate Solutions, said, “It is absolutely a perfect storm. The only thing (indebted colleges/universities) can do is turn to real estate or other hard assets.”

According to the National Apartment Association, America has the world’s largest student housing market with an estimated worth of some $11B in real estate investments. The more colleges and universities experience heightened cash crunches and mounting debts, the more colleges and universities face the same realities as corporate office towers, believes Patrick J. Sentner, an executive vice president for CBRE, a commercial real estate services firm.

Sentner thinks that developers who market repurposed student housing to young professionals are using their creativity realistically. “You have people who can afford to pay the rent, who aren’t going to hurt the facilities, and you’re able to continue the cash flow being generated from the units.”

Any light bulbs going off in the brains of agents/brokers/real estate investors reading this post? Already the Benjamin Franklin Institute of Technology in Boston has announced its South End campus will become a mixed-use site anchored by a nursing home and Pebb Capital is partnering with Coastal Ridge Real Estate to convert a once-student dormitory into studios and one- and two-bedroom apartments in Tucson AZ.

 

Thanks to The New York Times

Also read: What Might Happen in New York Real Estate in A Year of Two?, Trends Shaping Real Estate in 2021, Any Reason to Live in Central Cities Without Restaurants & Bars?