Why Adam America is entering the student housing market

Adam America Real Estate launched its first project in 2009, at the depths of the Great Recession. Although it was not an ideal time to build housing, the New York City-based company carved out a niche in its first decade by building apartments and condominiums.

However, about a decade later, the company pivoted to a new sector: student housing. CEO David Brickman told Multifamily Dive: "Over the past five years, we have really invested heavily in student housing. Historically, it leaned more toward traditional multifamily, and we simply viewed student housing as a subset of multifamily."

During this period, Adam America has completed the Terrazul project in Sweetwater, Florida (1,200 beds, serving Florida International University students), The Hudson & Hudson Suites project in Albany, New York (690 beds, serving University at Albany students), and the Olive & Wooster project in New Haven, Connecticut (299 units, 557 beds). According to a press release shared with Multifamily Dive, the Olive & Wooster project, which serves Yale University, has 172 fully furnished beds designed specifically for students and is the company's first student project. Additionally, Adam America is planning to build a 30-story student housing tower with over 1,000 beds in West Campus, Austin, Texas, near the University of Texas at Austin.

During a period of low turnover in traditional apartments, Brickman said student housing has provided a boost for Adam America.

Brickman said: "Our move-in and move-out volumes are not what they used to be, which is challenging. In student housing, there is inherent turnover. Yes, there are renewals, but every year there are new students. This drives rent growth during a period when traditional asset portfolios face challenges."

Here, Brickman discusses with Multifamily Dive how to choose the right universities, financing for student projects, and the amenities arms race.

This interview has been edited for brevity and clarity.

MULTIFAMILY DIVE: How does student housing fit into your portfolio?

DAVID BRICKMAN: We view student housing as part of the company's continued evolution in the residential sector toward more specialized housing categories. We have traditional multifamily, we are building build-to-rent projects, and we are also building student housing. We aim to have a presence across the broader residential sector, focusing on areas with strong demand drivers.

Therefore, incorporating student housing into our broader residential portfolio makes sense. But the trends we see in student housing, from an investment perspective, are that certain universities truly have winners and losers. We believe that, from an investment standpoint, top-tier universities—those with supply constraints—will be stronger than ever.

The large millennial cohort has long passed college age. How do you adapt to the smaller cohorts entering college?

We are indeed more selective in our choice of schools. In student housing, just like in multifamily, supply and demand drive our business plan. So, what will drive demand for student housing? Clearly, it is the demand for the school and its enrollment growth. You must have both conditions, and we are screening very, very carefully. Yes, more broadly, the national college-age population is expected to decline, which is exactly why we are more selective.

How do you do that?

We are making strategic decisions about which schools in which states will truly benefit. Therefore, not all states will see a decline in their college-age population. In fact, some states are expected to see increases. So we focus on those states.

The key is understanding supply and demand. We believe some schools will benefit more, and there are certain schools in certain states that we might pass on.

Are you seeking larger schools?

We do focus on flagship state universities, for reasons similar to why other investors focus on them. We obviously look at application growth at the university, but it is not just application growth. We have to delve into the university's future growth plans and where they believe enrollment will grow. So, there are many variables involved in deciding where to locate.

Is financing student projects easier than multifamily construction?

I think yes. Obviously, the economics and yields must be viable, but there are specific strategies around student housing and capital specifically dedicated to students. It has to be at the right university, in the right location, close to campus, and with the right sponsorship team.

On the equity side, we believe there is targeted capital. On the debt side, whether it is student housing or traditional multifamily, there is ample liquidity.

We believe one characteristic of student housing is that it is not strongly correlated with U.S. GDP growth. Whether your student project succeeds does not depend on U.S. GDP growth, so this low correlation feels very good right now.

Has the amenities arms race ended at top schools?

The answer is that it depends. Among top assets chasing the highest rents in the market, there is still an amenities arms race. These amenities exist in those assets, so any new product hoping to compete with them must compete on amenities.

But at the same time, location is as important as ever, if not more so. In some ways, just like with universities, affordability is king. If you can offer high-quality student housing in a prime location, and possibly at a discount, there will certainly be students willing to forgo top-tier amenities for the right price. So, it is a balance, and it really depends on the product type, the university, and student expectations.

Click hereto subscribe and receive multifamily and apartment news like this article every business day.