While student housing is facing its share of challenges in the COVID 19-era, one firm is placing a big bet on the sector.
W5 Group, a single-family investment office that makes investments across residential real estate sectors in Europe and the US, has launched a US student housing initiative.
In the student housing area, W5 Group will target equity, preferred equity or mezzanine investments of $20 million or greater in developments and existing assets near leading universities with strong enrollment and limited competing supply.
W5 is launching this new initiative with The Retreat at Orlando, a highly amenitized development near the University of Central Florida’s Orlando campus. Landmark Properties will develop and operate the property, which began construction in August 2020 and is slated for completion within 12 months.
W5 is entering the student housing market at a tenuous time. Even before COVID-19, the student housing market was facing challenges. In September 2019, Trepp’s Manus Clancy and Catherine Liu wrote that the student housing delinquency rate, which was 7.36% at the time, was “far above the post-crisis level for any major property category, including the much-scrutinized retail sector.”
COVID has created even more problems. In a May Q1 analysis of student housing, Reis analyst Keegan Kelly wrote that property vacancies by bed were expected to rise from 5.2% in fall 2019 to 7.4% in fall 2020.
As students returned to campus, cases have risen. The New York Times dozens of colleges have seen spikes in COVID-19 in recent weeks as classes have started.
Kelly did write that she expects student housing markets to recover once a vaccine becomes widely available. For W5, the hope is that the vaccine is here when The Retreat at Orlando opens.
“The Landmark development team will have the Retreat ready to welcome students for the 2021-22 school year,” said Raphael Sidelsky, W5’s chief investment officer in prepared remarks. “By then, we hope that social distancing requirements will have abated somewhat and that the threat of the global pandemic will have subsided. With that said, if that is not the case, our property is appropriately configured to maximize resident safety—our units afford each resident their own bedroom and bathroom and are spread over separate buildings to limit density.”