Greystar Real Estate Partners has sold a university residential complex at the University of California at Davis to an investor consortium powered by Korea Investment & Securities in the largest ever trade of a single US student housing asset.
California-based Ocean West Capital said in an announcement that it had teamed up with the Seoul-based brokerage – together with US student housing developer Landmark Properties and South Korea’s Tiger Alternative Investors – to buy the 663-unit Sol at West Village from Greystar for an undisclosed sum.
In a separate announcement, commercial real estate debt provider Walker and Dunlop said that it had structured $292.7 million in financing for the deal.
While the consortium has not revealed the transaction price for Sol at West Village, CBRE – which represented the seller – said that the price beats the previous record for the most expensive student housing transaction in the US, which was set in 2018 when Greystar and Rockpoint sold the 573-bed University View complex near the University of Maryland for $235 million.
The UC Davis acquisition marks the third time in six months that Korea Investment & Securities and its consortium partners have acquired student housing assets in the US, following a pair of US acquisitions last September. The partners paid a combined $250 million for those assets, with local Korean media reporting at the time that the Korea Investment & Securities-led consortium had taken a 95 percent stake in the portfolios, while Landmark had taken the remaining 5 percent.
Investing in Upscale Student Digs
Located at 1580 Jade Street in Davis, Sol at West Village comprises 2,289 beds spread across 51 three-story buildings a few minutes’ walk from the third-largest university in California by student enrollment. campus of University of California, Davis, the third largest university by enrollment in California. Often overshadowed by the Berkeley and UCLA campuses, UC Davis is located around 120 kilometres east of San Francisco in a city of 70,000 people.
“We at Ocean West are proud to have closed this large, complex transaction with our partners, and we are excited to continue working with the University to provide much needed housing for its students,” said Russ Allegrette, principal of Ocean West Capital Partners.
Russ added that the acquisition is in line with the firm’s strategy of investing in student housing near top-tier public universities where enrolments are growing and there is a need for purpose-built accommodation.
Amenities at the upscale community include resort-style pools, conference rooms, a clubhouse and a fitness centre. The zero net energy complex was built with recycled building materials and incorporates solar panels, which gives it additional draw with investors as well as students, according to CBRE, which advised on the sale of the asset.
A 790 square foot (73 square metre) one bedroom apartment – which comes with quartz countertops, stainless steel appliances and bamboo flooring – costs $2,265 per month.
Demand Outstripping Supply
The Korean consortium has targeted Sol at West Village at a time when demand for accommodation at the university is outstripping supply, according to CBRE.
Phil Choi, principal of Ocean West Capital Partners, noted that while student numbers have continued to grow at UC Davis, student housing development has not kept pace.
“As a result, it can be difficult for students to find housing close to campus, and many are forced to live in older, non-institutional product far from campus,” Choi said.
With student residences undersupplied, the Sol at West Village complex averaged 98 percent occupancy over the last three years, according to CBRE.
“These fundamentals position Sol at West Village to provide strong long-term returns for the buyer,” said William Vonderfecht, a senior vice president with CBRE’s National Student Housing Team.
Enticing Investors with High Cap Rates
Lured by average cap rates of 6.1 percent in the US and market demand driven by outdated facilities, investors have been piling into the student accommodation sector, according to CBRE.
“Sol at West Village received incredible global investor interest, driving pricing to record-breaking levels,” said Jaclyn Fitts, an executive vice president with the property consultancy.