FIRST PERSON: SmartStop Asset Management’s John Strockis on Student Housing Investments
November 12, 2018 | SmartStop Asset Management
John Strockis, as Chief Investment Officer – Student and Senior Housing for SmartStop Asset Management (SmartStop), is directly responsible for SmartStop’s overall strategic direction and oversight of all acquisitions and asset management functions related to student housing and senior housing throughout the United States. He has more than 30 years of commercial real estate experience.
Strockis’ experience includes 24 years at CBRE as a top producing commercial real estate broker, award winning brokerage manager and highly productive senior director of west coast acquisitions. Strockis also spent time as executive managing director with Voit Real Estate Services, where he oversaw the asset services business group. He also ultimately served as CEO of MarWest Commercial Real Estate Services prior to joining SmartStop in 2016.
Strockis graduated from the University of California, Los Angeles with a bachelor’s degree in economics.
What attracted SmartStop to student housing as an asset class?
We wanted to leverage our existing SmartStop resources, relationships and capital to expand our alternative asset class investing strategy. After closely examining all market-related research and risk/return fundamentals, we decided to invest in Class “A” income-producing student housing properties located at Tier 1 Universities.
We’ve found most major college campus communities can be fairly resistant to business cycle fluctuation due to a consistent number of students, faculty, and employees who live and spend money in the area. This consistent demand can lead to increased operating income and fuel the growth potential for long-term appreciation. A recent study from the National Center for Education Statistics revealed that undergraduate enrollment is projected to increase by 14 percent (from 17.0 million to 19.3 million students) between 2015 and 2026.
The other factors that contributed to our determination to invest in student housing included aging on-campus dormitories and the opportunity to create a geographically diverse portfolio to mitigate risk. In addition, the majority of our leases are guaranteed by parents who co-sign for their kids. Further, when economic conditions soften, jobs can be scarce and college age adults will seek to further their education until the economy recovers.
In May 2018, we launched our YOUnion® Student Living brand to increase our visibility and connectedness with the Generation Z student cohort. The YOUnion branding highlighted on our website and within our social media is vibrant, offers meaningful content and engages prospective students to our communities. Students better understand how benefits such as private bedrooms/bathrooms, dedicated study/social areas, 24/7 gyms, and proximity to campus will increase their productivity as a student.
What top traits does SmartStop look for in student housing property before investing?
We seek out pedestrian-to-campus communities that are anchored by major Tier 1 universities with Division I (FBS) football programs. We define Tier 1 schools as those with a published numerical ranking on the U.S. News & World Report’s most recent Best Colleges – National Universities list. In general, we favor medium- to large-sized colleges and markets located in or near U.S. cities that have schools with overall enrollment of 15,000 to 40,000 students or greater.
Further, we look for newly constructed, purpose-built properties in high barrier to entry locations. We pursue core, stabilized or core-plus properties conveniently located within a one-mile radius of campus. Ubiquitous and blazing-fast Wi-Fi is essential to satisfy these students’ voracious appetite for information and technology. SmartStop keeps these properties in first-class condition, managed by best-in-class operators.
What makes pedestrian-to-campus student housing properties stand out?
Today’s students are much more discerning. They want it all – purpose-built environments with ample co-studying and social engagement space. They prefer to live a short distance from campus to save time, remain engaged with university activities, and avoid the need for a car or public transportation. So, our YOUnion properties are less than a mile from campus. They give students the ability to study, socialize, relax and exercise under one roof. These desirable student living spaces offer private bedrooms and bathrooms as well as rich in-suite and community amenities. Our YOUnion properties are not only the ideal environment for learning and living, but many are designed with eco-friendly construction and features.
What is driving the demand for private student housing across the nation?
Historically, private student housing has been significantly driven by steadily rising student enrollments and the combination of woefully outdated on-campus dorms with the desire for rent-by-the-bed housing with enhanced privacy and bed/bath parity.
Student housing at major universities is more driven by college readiness than impacted by business cycles. With the current and anticipated population growth, more undergraduate students are enrolling in major universities for the prestige, overall college experience, or to follow in their parents’ footsteps.
Following the completion of their freshman year, outdated dorms often fall short of their future needs. Research shows that between 2008-2016, state spending per student for new dorms and enhancements at public two- and four-year colleges decreased 17 percent. As a result, university-provided dormitories tend to lack modern conveniences such as high-speed Wi-Fi and private bedrooms and may experience maintenance issues due to out-of-date plumbing and HVAC systems, among others. Our rent-by-the-bed YOUnion properties model bridges this gap in student housing.
Lastly, the markets for student housing tend to be supply-constrained. The areas around most major universities – on-campus and off-campus – are already developed.
We view student housing as a highly fragmented sector with numerous consolidation opportunities. The two largest student housing ownership groups collectively have only an estimated 2.1 percent market share in top university markets. The top 25 student housing companies own just 8 percent according to the Axio175 report which tracks the student housing market across 175 leading colleges and universities.
How does SmartStop utilize brand-based investing for student housing?
We are leveraging the power of a strong brand to help student residents better understand the benefits of living in a YOUnion student housing community. Our YOUnion brand coupled with relevant, meaningful content posted on social media, can more easily communicate and share experiences of what it’s like to live in our student housing properties.
YOUnion properties allow students to discover their full potential in a comfortable and convenient atmosphere. They are equipped with amenities like high-speed Wi-Fi, business centers, state-of-the-art fitness centers, relaxation areas, co-study and private study areas, coffee areas, substantial bed-bath parity and more. Students enjoy our fully furnished living spaces that feel like home.
YOUnion @ University of Nevada, Reno, the brand’s first student housing community, is a prime example. It is two blocks from campus and features high-quality community amenities, including high-speed Wi-Fi, a two-story clubhouse with game lounge, state-of-the-art fitness studio, recreational pool, outdoor courtyards with barbeque area, community and private study rooms, computer lab, package concierge, climate-controlled shuttle stop, gated community with access control, covered parking and roommate matching.
About SmartStop Asset Management
SmartStop is a diversified real estate company focused on self storage, student housing and senior housing assets. The company has approximately $1.7 billion of real estate assets under management, including 126 self storage facilities located throughout the United States and Toronto, Canada, comprised of approximately 80,000 units and 9.3 million rentable square feet. SmartStop’s real estate portfolio also includes five student housing communities with approximately 2,800 beds and 1.1 million square feet of space, as well as four senior housing communities with approximately 650 beds and 500,000 rentable square feet of space. SmartStop is the sponsor of four public non-traded REITs: Strategic Storage Trust IV, Inc., Strategic Storage Trust II, Inc., and Strategic Storage Growth Trust, Inc., all focused on self storage assets, and Strategic Student & Senior Housing Trust, Inc., focused on student and senior housing assets. SmartStop is also a national sponsor of Section 1031 exchange offerings using the Delaware statutory trust structure. Additional information regarding SmartStop is available at www.SAM.com and more information regarding SmartStop® Self Storage in the United States and Canada is available at www.smartstopselfstorage.com.
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