College Football Is Big money for Landlords, Too

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The smell of fresh-cut grass on an autumn afternoon. A marching band belting out its fight ballad. The stadium creaking under the weight of 100, 000 beer-soaked fans. The stimuli of college football seem, voice, and smell like big money to television networks, apparel manufacturers, and vendors of all kinds. Now landlords have joined video games as well.

Over the last two decades, property directors have discovered that renting off-campus beds to college student can be a great business. It builds sense: College enrollments have boomed, but funding for on-campus housing hasnt. Private landlords stepped into the void, developing new, luxurious divisions, complete with golf simulators and resort-style swimming pools.

More recently, investors have come to see student housing as a hedge against a recession. It’s a safe place to park capital, the theory runs, since young people go to college whether the economy is good or bad. The safest student housing, from an investors’ perspective, is observed near big-time college football schools, which enjoy broader brand recognition than other universities.

Theres a perceived valueand probably a real value, said Jeanette Rice, head of investment research for the Americas at commercial real estate firm CBRE Group.

According to CBRE data, 50 out of 68 1 off-campus student housing complexes that changed hands during the first half of 2016 served students whose schools field football teams in the NCAAs Division Ithe highest level of competition. Thirty-four of those asset sales involved apartments near schools that belong to the so-called power meetings, which generally have the top-ranked teams.

Investors also paid higher prices for apartments located close to these football powerhouses, based on the average capitalization rates, which represent expected rental income as a ratio of buy cost. The cap rate for student housing complexes near non-Division I schools was 6.4 percent; the cap rate for apartments near schools participating in Division I power conferences was 5.5 percent. In layman’s words, investors paid more and earned lower yields for the privilege of renting to Gators, Longhorns, and Wolverines.

A good football team isnt the only reason such schools enjoy strong reputations, stable enrollment, and therefore, a steady furnish of renters for off-campus housing. In most nation university systems, schools with large athletic departments are also those with stronger academic reputations and research facilities. But CBRE discovered that being close to a top football program definitely helps.

Those schools are getting students from a broader geography, and theyre getting better students, Rice said. That entails more overall demand for housing and most likely, a student body with greater ability to pay higher rents.

The same operating principle has long resulted single-family landowners to target properties within strolling distance to big, public universities, said Dennis Cisterna, chief revenue officer at Investability Real Estate, a marketplace for buying and selling rental homes. Compared to older tenants, college student can be transient and prone to destructive behavior. The trade-off for exposure to collegiate hijinks is that proximity to campus lets landowners access a steady supply of new renters.

“If someone fells out of Ohio State or decides to go to a new school, there’s always going to be a flock of new students, ” Cisterna said.

Small landlords, like large property administrators, relish turning on the television on Saturday afternoon and insuring a stadium full of tenants.

Read more: www.bloomberg.com

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