December 1, 2020

Corona-Proof

The pandemic hasn't slowed down Florida dorm-building by private companies

Mike Vogel | 10/28/2020

‘A Win-Win for Everybody’

In August, five days early and under budget, developer Pembroke Student Housing finished an eight-story, 510-bed dorm for Palm Beach Atlantic University, a small, Christian college on the waterfront in West Palm Beach. It was the first student housing development for Pembroke, a firm founded by Dale Hedrick, whose West Palm Beach-based Hedrick Brothers Construction also was the project’s general contractor.

The 163,000-sq.-ft. building has collaborative spaces, the latest in security cameras and secure entries, solid-core doors — “better than a lot of apartments,” Hedrick says — and individual units with stoves and refrigerators. Laundry machines send texts to students when their clothes are done. There’s a bathroom for every bedroom — no gang bathroom down the hall. Palm Beach Atlantic and Hedrick’s Pembroke developed the dorm in a partnership. Pembroke was responsible for financing and construction. “A win-win for everybody,” Hedrick says.

The project was financed with tax-exempt bonds. The university retains ownership of the land, receives excess revenue from the project, and the building will revert to the school when the bonds are repaid. Provident Resources Group, based in Baton Rouge, owns the dorm. Pembroke profited on a development fee.

Hedrick says he views an economy as the movement of money in society: “We always look at where the money is going and where there is a need.”

Private Dorm Development in Florida

Fred Pierce, CEO of San Diego-based Pierce Education Properties, an owner of off-campus student apartments in Gainesville and Tampa, had an e-mail exchange with FLORIDA TREND about the private student housing sector.

FLORIDA TREND: Is Florida of interest for new investment?

Fred Pierce: We have been looking at other assets in Gainesville, as well as in Boca Raton (FAU).

FT: What brought you to invest in Florida?

FP: Our acquisition criteria includes purchasing properties at large (20,000+ undergraduates or 25,000+ total students) public universities that play Division 1 (FBS) football that participate in the Power Five athletic conferences or in the “Group of Five” athletic conferences if located in major metropolitan markets. Universities meeting those criteria in Florida include the University of Florida, Florida State University, the University of South Florida, the University of Central Florida, Florida Atlantic University and Florida International University. Florida also has a growing population that translates to increasing college enrollments.

FT: How does Florida compare to other markets?

FP: Our current markets — Gainesville and Tampa — have performed strongly in terms of occupancy and rent growth. However, the barriers to entry are lower in Florida than most other states, so investors and operators should be mindful of asset selection and positioning in the context of likely future supply.

FT: Is overbuilding a concern?

FP: We closely monitor market supply and demand in all of our target markets. By way of example, while Tallahassee meets our primary acquisition criteria, we are currently not pursuing acquisitions in that market due to the current state of overbuilding.

FT: What’s been the impact of COVID-19?

FP: Our portfolio pre-leasing for fall 2020 ended down 3% vs. fall 2019 — pretty good performance during a global pandemic. The move-in was very strong, and our portfolio “no show” rate was consistent with past years. Fall 2020 occupancies have been more impacted by new supply than by COVID-19. A lesson this year has been that, irrespective of educational delivery method, university students want to live at school for the full college experience.

FT: What’s the long-term outlook in Florida?

FP: Florida’s flagship public universities are very large, and enrollment demand continues to grow. Performance should be enhanced with a reduction in future new development, as many markets are near their saturation point in terms of total supply. The demand for future new student housing development at Florida’s flagship public universities will be highly correlated with increases in enrollment.

 

Read more in Florida Trend's November issue.
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