00:00Rob, the new partnership will focus on acquiring these off-campus buildings. They're near the top universities, growing enrollments. Other
00:07markets where you purchase these properties, Tempe, Arizona, Binghamton, New York. Where else are you looking that you haven't bought?
00:15Sure. Well, I have to say as a University of Michigan grad, I'm not thrilled that you're calling the University
00:20of Notre Dame and Ohio State top universities, but we go with that.
00:23Well, my wife went to the Ohio State University, so some might say I'm a smart man for saying that.
00:29Yeah. You know what? We really like flagship state universities, particularly in growing Sunbelt states, and even more so where
00:38they have a STEM focus.
00:39So, for example, some of our largest campuses would be Texas A&M, University of Florida, Florida State, Purdue University.
00:48We're at about 90 campuses now. There's probably another 20 to 30 that would fit our investment thesis.
00:55And by and large, they fall within that theme of large, I would say, at least 20,000 students, typically
01:0230, 40, 50,000 students. We tend to prefer public over private, but it's situational. And again, schools that we
01:09think really represent a strong return on investment as far as the tuition dollar.
01:14Yeah. Talk a little bit about how the return in student housing compares to other commercial real estate sectors. How
01:22do you actually generate a return here?
01:25Well, we actually, we've been at it for 26 years. We've been ever refining the skills and the capabilities we
01:32have. We think we've built, you know, really the premier operating platform for student housing.
01:39It has certainly similarities to other types of commercial real estate, particularly multifamily, senior housing, but there are a lot
01:47of nuances that are specific.
01:49Some of them include the fact that we're dealing with 18 to 24-year-old consumers who are tip of
01:54the spear as far as technology adaptation, the fact that they're often looking for a different experience as they matriculate
02:00in their sophomore, junior, and senior year.
02:02And things just move at a really, really fast clip within student housing. That certainly, and we talk to people
02:08in other areas of commercial real estate, that's their observation as students.
02:12And again, I think it's the age and the stage of life that our customers are at.
02:16One of the reasons why we and others have found the sector to be so resilient is because of just
02:23how much families prioritize higher education for their children.
02:29A great story I like to tell is our chief operating officer came from Disney, and he said, you know,
02:34families like to save for four to five years for a Disney vacation.
02:39I said, that's great. Families save for 18 years to get a college degree, and maybe even before the kid
02:44is born in this country.
02:45And that's really what makes it so strong and so resilient is the importance that we as a society place
02:51on being able to give this to our children, our grandchildren.
02:54Rob, how are you thinking about demographic shifts, affordability pressures, and just broadly changing enrollment patterns right now?
03:03You know what? I feel gratified that we've been focused on this for a decade.
03:07Since I'd say about 2015 or 2016, we've been extremely focused on the schools and then the properties within those
03:16schools that represent the greatest values.
03:18So, you know, the 105,000 beds that we own and operate across the country, and this new acquisition fits
03:25squarely within that, is in the 50th to I'd say the 75th percentile in rent price.
03:30And we think that casts a very wide net as far as value and affordability.
03:36I think that people are absolutely right to be concerned about some of the highest-end product that is being
03:43added with just ever more amenities and ever more costs.
03:45That's not where we play. That's not where this portfolio is.
03:48So I think you want to look first and foremost to a university that represents a good value.
03:53And so getting an engineering degree from a public university, for example, is about as strong as value could be.
03:59And then once we're at a school like that, if we can cast a wide net of product locations and
04:05floor plans and price points that across the board deliver value,
04:09that's where, you know, we feel really comfortable for us and our investors being.
04:12How do you think about the idea of fewer foreign students really impacting the pull of potential renters when it
04:19comes to student housing?
04:20You know, across our portfolio, it's typically in the low single-digit percentages.
04:26It's 1%, 2%, 3%.
04:27And by and large, those are graduate students.
04:30Our portfolio is predominantly undergrads.
04:34I will tell you, compared to other international markets, where students coming from overseas are a very, very large component.
04:45If you look at Australia or if you look at the U.K. and Spain, for example, those are heavily
04:50dependent on students coming from the U.S., coming from Korea, coming from China.
04:54That's not been the case in the United States, never been the case in the United States.
04:59What's really unique, I think, about the U.S. compared to other markets is just not only how much, first
05:05of all, we're by far and away the largest market for higher education in the world with over 20 million
05:10students.
05:12But on top of that, the lifestyle for undergrads in the United States is to often travel dozens or, excuse
05:21me, hundreds or thousands of miles away and have a true residential experience.
05:26That's not as much of a phenomenon as you go around the globe.
05:30And so for our portfolio, again, we may have certain assets that might be 5% to 10% international
05:37students.
05:38But by and large and across our portfolio, it's around 1% to 2%.
05:42And I don't really see that changing.
05:44Just in the last, like, 45 seconds here, Rob, I know, you know, some might not agree that these are
05:49top universities.
05:50But the universities that you, I mean, I would, but I don't know how Rob feels.
05:55These are really competitive schools, though.
05:57I'm still not happy about Notre Dame, but we're making sure that they're fine.
06:01These are really popular.
06:02There's a ton of demand for students to go to these schools.
06:07Some, you know, smaller regional schools are actually losing enrollment, though.
06:11So I'm wondering how much is this really a bet on these elite universities continuing to consolidate demand versus, like,
06:18a bet on, you know, student housing in general?
06:19You are 100% right that a long overdue consolidation is occurring in U.S. higher education.
06:27I think that smaller liberal arts colleges and lower tier public universities are going to continue to be under pressure.
06:34Fortunately, this portfolio and our overall 161 community portfolio has long been actually has solely been focused on larger, typically
06:46public universities.
06:47So that trend is happening.
06:50It's not going to reverse.
06:51I think when you look at other sectors of the economy, like health care, for example, I think higher education
06:56is undergoing a similar type of consolidation.
06:59And absolutely, the winners will be the largest, most resourced school, and particularly the ones that I think that families
07:05can really, it's a no-brainer that they're getting a lot of return on their tuition dollar investment.
07:10Thank you very much.
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