Student Living With Tuscany Flair -

Student dormitories are really not a new type of property, but so far they are hardly represented in the portfolios of real estate funds. However, I think that will change in the future. Because the subject of “student living” is becoming more and more interesting for our industry due to the latest developments in the field of education.

According to data from the Federal Statistical Office , the number of students in Germany has risen continuously in recent years. But not only here, but also internationally, attractive universities attract more and more students from all over the world. This is also noticeable on the real estate market, because the demand for student living space is increasing in university cities. For us, this means that we increasingly have to rethink the portfolio management of our real estate funds. That is why we have now also acquired the Tuscany Apartments dormitory in Los Angeles for one of our funds, which otherwise relies heavily on commercial real estate.

DORMITORY WITH A HOTEL CHARACTER

However, the Tuscany Apartments don't have much in common with the German student dormitories, which are mostly run by the local student unions and look rather dreary inside and out. Instead, the residential complex in sunny LA conveys the flair of Tuscany through greenery, flowers and palm trees. In addition to cozy common areas, fully equipped kitchens and a laundry room, students can also use a modern fitness center, several swimming pools and a terrace with sun loungers, for example to relax after exams.

Another plus: The Tuscany Apartments are located in close proximity to the University of Southern California (USC). The university is the oldest private university in California and is ranked in the university ranking of “Times Higher Education”currently ranked 60th out of 981 universities examined. The popular university even points out the dormitory on its website - as an alternative for students who no longer have a room on campus. For us as a portfolio manager, this is an important point that increases the attractiveness of the property, as we can easily find tenants for the 120 residential units. Because unlike commercial real estate, which we usually rely on for our funds, there are no long-term leases for Tuscany Apartments. Instead, the rooms are rented for a period of one year, as is customary in the USA. This, of course, ensures a high turnover: every year around 40 percent of the residents no longer renew their lease,

THE ADMINISTRATIVE BURDEN FOR STUDENT DORMITORIES SHOULD BE WORTHWHILE

Due to the frequent change of tenants, properties like the Tuscany Apartments naturally require more active management than long-term rented commercial properties, which can be bought as funds and then put on the shelf for years. A student dormitory needs more attention, both in terms of rental and maintenance. Because only if the property is always in top condition will it remain attractive for new tenants. Rating agencies therefore generally classify such administrative-intensive assets as more risky than commercial properties. However, I believe that the risk is worth it and that student dormitories will pay off better than commercial real estate in the future. You and similar properties will therefore increasingly be represented in the real estate funds in the future.