Rising Interest Rates Won't Harm Student Housing

Some people are concerned an increase in interest rates could slow acquisition and development. But Walker & Dunlop SVP of multifamily finance Will Baker--whose team financed $157M in off-campus student housing last year--isnt one of them. (Above, hes supporting Bama against Notre Dame with Capstone Collegiate Communities Rob Howland and TSB Capital Advisors Tim Bradley at the BCS National Championship.) He thinks investors like the product type so much that the 10-year treasury could increase 25 to 50 bps without significantly hurting activity. Hes been surprised by cap rates these days; at low-6% (and occasionally in the 5% range), theyre comparable to core conventional multifamily deals.

This was taken from a college geography class when we asked them to color in Texas. We kid. It's actually the areas Will intends to watch closely.He thinks development will be particularly hot in Arizona, Texas, and Florida, because enrollment is increasing and theyre low-barrier-to-entry areas. He expects well see more partnerships like EdRs with the University of Kentucky--in which universities bring in private developers--and he doubts the cottage trend will slow. Lenders, especially Fannie and Freddie, will get cautious about financing deals in markets with lots of new development and will look hard at the borrower. (They particularly want to see management expertise.) On the acquisitions front, he foresees more large portfolio sales and more Class-A developments with no operating history trading hands this year.

We waited up all night to see where the sun went. Then it dawned on us. Email news to Catie Dixon ([email protected]) or Tonie Auer ([email protected]).