(Bloomberg)—Morgan Stanley’s real estate investing arm has formed a joint venture with Global Student Accommodation with ambitions to tackle the fragmented U.S. student housing industry.
GSA is contributing a $1.6 billion portfolio that includes almost 15,000 beds across 21 states and 29 cities, GSA Chairman Alec Burger said in an interview. Almost two-thirds of the portfolio features so-called Power Five schools, a reference to athletic conferences, and it will be operated by GSA’s brand Yugo.
“After careful study of the student housing market, we looked for a scalable opportunity and a best-in-class partner for our entry point – this venture achieves both,” John Klopp, Global Head of Real Assets at Morgan Stanley Investment Management, said in an emailed statement.
“We think there’s a tremendous opportunity to grow in the coming years” and become a market leader within the next three to five years, said Burger. The joint venture has a strong acquisition pipeline and will seek to bolster its market share in the U.S., the largest student housing market in the world at an estimated aggregate size of $400 billion, he added.
The initial portfolio includes properties in cities including Cincinnati; Raleigh, North Carolina; Tempe, Arizona; and Lexington, Kentucky.
Thanks to vaccine requirements, relaxed admission policies and demand for a return to in-person classes after lockdowns due to the Covid-19 pandemic, the sector is experiencing record occupancy of about 94% in the current academic year, Burger said. He referenced the property class’s historically consistent returns and an entry point that is more compelling than traditional multifamily properties.
Morgan Stanley’s foray means it joins institutional investors such as Canada Pension Plan Investment Board, Singapore’s GIC Pte and Greystar Real Estate Partners as active investors in the U.S. student housing sector.
© 2021 Bloomberg L.P.
