An Avon company that’s made a niche business of investing in housing for college students says it wants not just to buy student apartments, it wants to start developing them.
To do that, Corridor Ventures took a big step forward last week, snagging the executive vice president and chief operating officer of West Hartford-based Konover Properties.
Plenty of real estate investment companies say “no thanks” to student housing.
Students move in and out faster than tenants in the workforce and — so the belief goes — they tend to trash the apartments and condos, anyway.
But the duo — and now trio — who comprise Corridor Ventures is going after those very properties, buying up student housing around the country and discussing the possibility of developing their own properties in the future.
Hagan Brown and Dan Joseph, the company principals, last week added the top executive from Konover to their partnership. David Siegel, who announced his resignation from Konover on May 21, said he will leave the prominent real estate development organization on May 31 because he sensed Brown and Joseph had found a good strategy.
“I really wasn’t looking for a new position,” he said. But Corridor Ventures “is well-capitalized and it will become, I think, the leader in student housing.”
Seeing Opportunity
Many investment companies focus on the potential burdens that come along with student housing but ignore the benefits, Brown and Joseph say. Yes, student housing usually has about a 50 percent turnover rate each year. But that means owners are more free to raise rents more quickly, and in greater increments, than do most owners of traditional apartment buildings who are trying to keep long-term tenants.
Corridor Ventures currently owns properties in five communities, but it plans to grow considerably, especially with the addition of Siegel’s real estate know-how.
“It took us about four and a half years to accumulate a $35 million portfolio. We will more than triple that this year — in 12 months,” Joseph said, adding that they expect to own and manage more than 2,500 units by the end of 2007.
Brown said the expansion is being fueled by a pool of money provided by a group of California investors.
Corridor Ventures is casting a pretty wide net, geographically speaking, looking to close a deal in Iowa this month and with potential deals in Illinois and New Jersey, in addition to current properties in places such as Athens, Georgia, and Toledo, Ohio.
But Corridor got its start much closer to home, when Brown began buying properties around the University of Connecticut, with Joseph as an investor and then fellow buyer. Australia-based ING Real Estate bought those properties, which comprised half of a $100 million deal for 1,100 units around UConn’s campuses.
With some student housing experience under their belts, Hagan and Joseph made their forays into Georgia, Ohio, Indiana and other states. Originally Corridor’s transactions were in the $3-$10 million range, but Joseph said now they do transactions of anywhere from $10-$100 million for 150 to 1,000 units.
And with Siegel on board, the plan is eventually to develop student-friendly apartments of its own down the line.
Corridor so far has mostly purchased and packaged existing apartment buildings near colleges. The strategy has paid off in large measure because of the high demand for student housing. Most colleges provide only up to about a quarter of the dorm rooms necessary for enrollees, leaving the rest of the student body to find affordable, nearby housing on their own. That pushes up the call for such units.
But not every college has enough apartment stock near it to make Corridor’s plans work. So the company wants to find ways to develop that housing, perhaps in partnership with cash-strapped colleges and universities who would welcome a private partner.
In such a case, the college might provide land on which Corridor could build a student housing complex, and the college might take a master lease on the building for 15 years, with Corridor managing the property.
It’s the ability to make those kinds of deals, and to oversee the rest of the development details, that drew Brown and Hagan to Konover’s Siegel. The trio had worked together previously when Konover was an investor in a Corridor project.
Konover Changes
With Siegel stepping out of Konover, the company will begin a search for his replacement, said company founder and CEO Simon Konover. “We wish him well, we appreciate what he did for us,” said Konover.
Konover Properties is a multi-million dollar real estate development and management company. It is also one of the largest hotel franchisees in the nation. It has nearly 1,000 employees throughout the country.
The company recently promoted its chief development officer to also oversee all of Konover’s investments. That executive, working with the Konover family and with other Konover vice presidents, will supervise the firm’s day-to-day operations until a new top executive is hired.
“This is very amicable,” said Siegel.
At Konover, Siegel was in charge of growing the company into retail, hotel and apartment developments. Now he’ll be working to build a brand for student housing.
In order to operate student housing across the country, Corridor Ventures has to be aware of the nuances of such a specialized market. Building that brand name among students requires extras such as tailgating or back-to-school parties, or property managers willing to go the extra mile for young, inexperienced tenants. Hagan and Brown said they keep regular contact with their managers and make frequent trips out to the properties to maintain good relationships.
Because word travels fast among students. With the help of online apartment ratings, a few strong testimonials can have a lasting effect on the property’s reputation.
“If you screw up your reputation once, you’ll spend years making that up,” Joseph said.
