Message from the CEO, 2016 Quarter 4


PEG enjoyed an active and robust 2016. Six new projects were completed (five hotels and one multifamily) valued at nearly $90 million.

As we look to 2017, opportunities in the student housing market continue to surface, and PEG is “in the mix.” Because of PEG’s track-record and reputation, some of these opportunities are finding us. The local and regional demand for student housing is significant, and we are currently engaged in two student housing projects: UVU Student Housing and Dixie State Student Housing. Both of these projects are in our active investment portfolio.

So, what is the outlook for student housing going forward and what can we expect? Here is what some of the experts are saying.

“While year-to-year numbers may vary, the number of people enrolling in higher education continues to rise, driving up demand for housing options and ensuring landlords will have a stable base of renters far into the future. The National Center for Education Statistics predicts college enrollment in the U.S. will reach 19.8 million students by 2025, an increase of 14 percent from its 2014 enrollment of 17.3 million.” (Thornsby, Devon. “Want to invest in real estate? Consider student housing,” US News & World Report. April 2016.)

 

“It would be pretty hard to overbuild in most markets. There is such strong demand. In most markets you could double the amount and not overbuild.” (Nate Kunes, VP Product Management at AppFolio Inc. Anderson, Bendix. “Demand for Student Housing Looks Strong for 2017,” National Real Estate Investor, 11 November 2016.)

“The student housing sector is in the sixth inning and there is still a lot of opportunity out there…Institutional investors, including sovereign wealth funds and pension funds, remain interested in the student housing sector due to their ability to achieve higher returns than they otherwise would through conventional multifamily housing.” (JJ Smith, President of CAStudentLiving. Bell, Diana. “What to Expect from Student Housing in 2017,” National Real Estate Investor, 5 January 2017.)

“People are getting comfortable that they can get returns in tier-3 markets…But investors should be wary—the reward of higher investment yields always comes with risks. During the current cycle, we’ve seen and increase in development at smaller schools.” (Dorothy Jackman, Managing Director of Student Housing Services Colliers International. Anderson, Bendix. “Smaller Schools Draw Student Housing Investors, but Bring Higher Risk,” National Real Estate Investor, 3 October 2016.)

“Students continue to favor buildings with smaller unit floor plans offset by amenity offerings. Every property must program substantial study space for hitting the books, but there’s also a need to balance work and play with recreational spaces where residents can unwind and socialize. Well-appointed game rooms, lounges and outdoor spaces are wildly popular, while sports simulators give residents a change to hone their skills depending on popular regional pastimes.” (JJ Smith, President of CAStudentLiving. Bell, Diana. “What to Expect from Student Housing in 2017,” National Real Estate Investor, 5 January 2017.)

We at PEG are excited about our student housing projects. The UVU project will go a long way to providing quality housing that is literally “on campus” for the first time. As the State’s fastest growing institution of higher education, we are proud to be part of UVU’s ability to grow and attract top tier students. Much the same can be said for Dixie State University. Dixie State is well positioned to grow and draw students from southern California and Nevada, but that growth is constrained by the availability of student housing. We can help drive that growth by providing a quality housing product that will help recruit and retain students.

As you have a chance to review the rest of the newsletter, we hope you get a feel for the growth that PEG is experiencing. We continue to evaluate a constant flow of opportunities, of which only the best and most attractive end up going forward. We are confident that you will find something in the portfolio that will pique your interest. Don’t hesitate to reach out if you have questions. We’d love to hear from you.