Student Housing: Student Housing Holds Up, Perks Like Tanning Help

Student Housing: Student Housing Holds Up, Perks Like Tanning Help

NEW YORK (Dow Jones)–For college housing operators nationwide, the back-to-school period is key – beds empty now may stay that way all year.

While some feared the economic crisis that started last autumn would sink a typically recession-resilient sector, those concerns so far appear overblown.

“There’s no significant drop off, and business is flat year-over-year,” said Paul Bower, chairman and chief executive of Memphis-based Education Realty Trust Inc. (EDR), owner and operator of more than 38,000 student beds nationwide.

With the nation digging out from the worst economic downturn in generations, it’s no surprise that students would seek shelter studying, instead of tackling a challenging job market. And there’s plenty of potential to fill classrooms as the Echo Boomers – children of the Baby Boomers – become adults. It’s a massive demographic that some estimates put at 80 million.

That’s why, for investors willing to gamble on that short leasing window and overlook the sector’s party-house reputation, analysts consider student housing a growth spot that could see more IPOs. The top eight operators, including public American Campus Communities Inc. (ACC) and Education Realty, control less than 5% of the non university-owned market, while colleges nationwide are looking to remake dated cinder-block towers with communal showers and wooden bunk beds stacking students like sardines.

State budget woes, meanwhile, make working with private-sector groups more likely.

These days, dorms – now called student housing – include resort-style amenities such as pools, basketball courts and private bathrooms. Tanning, it turns out, is also a key offering, even at schools with a warm environment and plenty of sunshine.

On the “all important” tanning front, stand-up machines are out, while beds are back, says Alexander Goldfarb, an analyst with Sandler O’Neill + Partners, L.P. Students, he explains, want to relax horizontally, instead of standing up, while adding color.

But Campus Apartments, which says it is the nation’s oldest and largest private student-housing company with 24,000 resident beds in 17 states, says it’s taking a different approach, phasing out tanning beds in favor of the stand-up product, which costs 50% more to acquire and maintain.

Students consider standing up more sanitary and, more importantly, they can be twice as fast.

“They want to be able to tan in between classes,” joked Chief Executive David Adelman.

-By Dawn Wotapka for Dow Jones Newswires


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