With more than 80 million young adults reaching college age nationwide, real estate developers and investors are cashing in on a shortage of campus housing.
They’re building apartments designed for a captive market – students interested in rental housing who are not being served by traditional college-funded dormitories.
Three such projects already are in the works for students at Denver’s Auraria campus.
“There currently is a good opportunity for an investor to get good, current cash flow with buildings that are 100 percent occupied,” said Michael Zaransky, chief executive of Prime Property Investors Ltd., a Chicago real estate investment firm.
“You don’t see that with traditional apartment buildings,” said Zaransky, author of “Profit by Investing in Student Housing: Cash In On the Campus Housing Shortage” (Kaplan Publishing, $18.95).
Most lenders already view them as highly secured and good assets, he said. “The reality is that these buildings are going to be worth a lot more 10 years from now.”
Robert Salazar’s Regency project, a repositioned hotel west of Interstate 25, opened in the fall. It will be followed by Campus Village, a project adjacent to the Auraria campus that will house 685 students, and the Executive Towers, a combination of student housing and hotel rooms near the Denver Performing Arts Complex.
“The Denver downtown market was ready for student housing,” Salazar said. “The Regency is the first to open its doors. Whenever you can be first, it’s a huge advantage.”
Salazar said he thinks the current demand will be satisfied when the other two projects open in the fall.
Denver developer Susan Powers is building Campus Village. Her firm, Urban Ventures LLC, initially planned to own the project but relinquished control of the project to the University of Colorado Real Estate Foundation. It now is acting as a fee developer.
The CU foundation was established in 2002 to create, manage and build an income-producing real estate portfolio for the university and to help the university implement master plans at five primary campus locations. Developing student housing is one of those income-producing strategies.
“Neighborhoods are gentrifying and really don’t want four or five students in a single-family home,” said Byron Koste, who runs the foundation and serves as director of CU’s real estate center. “If there is a reasonable alternative, people will take it.”
Urban Ventures is now looking for other opportunities to develop student housing throughout the state.
“It’s kind of a newly identified niche in the industry because universities generally have built their own housing,” Powers said. “Campuses are looking for more updated housing.”
Many have added campus housing but not enough to keep up with rising enrollment.
Colorado State University in Fort Collins has about 25,000 students, but just 5,000 university-owned beds. The University of Colorado in Boulder has about 29,000 students and 7,000 beds.
Zaransky calls Fort Collins “a market for a serious investor to look at more closely,” especially because a city ordinance prohibits more than three unrelated people from living in the same residence.
“Students are obviously a fantastic market in a college town, providing a steady supply of renters,” said Dan Urquhart, a broker associate with Aggie Properties LLC in Fort Collins.
Boulder has a similar ordinance, but its student housing market isn’t as attractive because it is overbuilt, Zaransky said.
CU projects enrollment will decline to 27,000 students by 2010, yet administrators plan to add another 2,500 dorm beds in the next decade.
“That’s not what you like to see given the size of the population growth,” said Zaransky. “There are good deals out there for students, but not for investors.”
Staff writer Margaret Jackson can be reached at 303-820-1473 or mjackson@denverpost.com.
