Real Estate - Residential

Raleigh Firm Enters Local Student Housing Market

By J. Elias O'Neal, posted Dec 20, 2013
More than $1 million in upgrades are slated for two student-centered Wilmington properties recently acquired by Preiss Company, a Raleigh-based off-campus student housing firm.

But the company’s footprint in the Wilmington student-housing market may just be the beginning.

John Preiss, chief investment officer with the Preiss Company, said his firm is in the market to purchase and build student-centered apartment and multifamily developments in Wilmington because of its growing demand for off-campus housing.

“There is a lot of room in the market,” Preiss said. “Even with the new inventory coming on board, there is still not a lot of student housing in the area.” 
The firm, which mostly acquires student-focused properties, earlier this month purchased two student-centered developments roughly half a mile from the University North Carolina Wilmington campus. The company bought Wilshire Landing and Camden Forest for $29 million.

Preiss Company is the fifth-largest privately held operator of off-campus student housing in the U.S. with more than 16,000 beds in developments across nine states, including the Carolinas and Georgia.

Much of the firm’s footprint is in Raleigh and Austin, Texas – markets with large flagship universities. But the Preiss Company also operates in small- to mid-size communities with universities such Elon with Elon University, and now in Wilmington.  

Camden Forest, constructed this summer at 206 Cedar Branch, sold for $17 million, or roughly $160,000 per unit; and Wilshire Landing, a community at 4013 Wilshire Blvd. that was constructed in 2011, sold for $12 million, or for $125,000 per unit, according to New Hanover County tax records.

Adam Sosne, managing partner and developer of Wilmington-based MFH Construction, was the seller.

MFH Construction specializes in multifamily and student housing developments and currently has a number of projects pending across New Hanover County.

As part of the transaction, Preiss Company will own and manage the two properties.

With the transaction completed, Preiss Company now has one of the largest footprints in Wilmington for student-centered housing with new apartments geared toward UNCW’s growing student population.

“We’re really excited to finally be in that market,” Preiss said. “It’s been a hard market to break into because there is not a whole lot of raw land in the area to develop.”

Preiss originally hoped to emerge in Wilmington’s growing student housing market last year, when it had its sights set on purchasing Campus Walk and Brookstone Village.

As part of the sale, the firm would have had access to 413 apartment units between the two complexes, representing a total of 560 beds.

But the deal never materialized, and the properties were sold to another group of investors for more than $26.5 million – leaving Preiss Company to draw out their search for property and properties in the area.

That all changed when Richard Cotton, managing director of Wilmington-based Multifamily Realty Advisors LLC who had recently brokered the Campus Walk and Brookstone Village transaction, approached Preiss this summer about the prospect of buying MFH Construction’s student-centered apartment developments.

After a long and intensive research period, the Preiss Company decided to move forward with the purchase of Camden Forest and Wilshire Landing.

“When we looked at purchasing Campus Walk and Brookstone Village, the cap rate was not that different, and these were newer properties,” Preiss said.

The cap rate – the ratio between the asset’s net operating income and its capital costs – for Camden Forest and Wilshire Landing was 6.8 percent, Preiss said, meaning the transaction carried very little risk for the firm and was ripe for purchasing. He added another bonus was the fact that both properties are also fully occupied. 
“These are really nice properties,” Preiss said of the two apartment communities his firm recently acquired. “And at the price we paid, we feel we got a good deal.”

Despite the apartment communities’ young age, Preiss officials plan to upgrade the facilities – particularly at Wilshire Landing.

“We’re planning some upgrades to the clubhouse and plan to update its amenities,” Preiss said. “Camden Forest was all furnished, and only half of Wilshire Landing is furnished, so we plan to completely furnish the community.”

Preiss said officials plan to expand Wilshire Landing’s clubhouse to include a new game room, a study and workroom room. The firm also plans to “dress up” the pool area with new chairs and pillows. 

No official timeline for the updates has been released, but Preiss said his firm hopes to complete the updates before the start of UNCW’s fall 2014 semester.

Preiss said while the firm is mostly an acquisitions company, it also develops new projects. And Wilmington, if the demand continues, could be slated for such development.

“We like to do only one development project a year,” Preiss said. “If we find the right location and deal for such a project we may consider it.”
As for Sosne and his firm, the recent transaction will allow his company to transition and focus on a number of pending projects in the region and Southeast.

Construction is pending on Stephens Pointe – a 192-unit, $20 million project slated for the Porters Neck area; and Ellington Farms – an $8 million, 84-unit townhome development scheduled to break ground in early January along Gordon Road. Construction is also ongoing at his Jordan Lane Townhomes, an 18-unit development on Wrightsville Avenue. The firm also has plans to develop properties in Charlotte, Nashville, Tenn., Greenville, S.C., Spartanburg, S.C. and Charleston, S.C.
Sosne said he does not plan to stray away from his successful model of developing student housing, but he added there are no new plans for similar developments in the area. 

He said selling off his student housing portfolio was tough, but he realized the extra capital was  going to help make his firm stronger in a multifamily market that appears to be gaining even more momentum.

“This is a great opportunity for us to take this new capital and focus on new projects,” Sosne said. “The Preiss Company is a first-class company that will take the student housing market here in Wilmington to a whole new level.”

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