West Palm Beach, Fla. — The three entities of the joint venture plan to focus on NOI growth at the assets, which are mostly the only purpose-built products in their markets.
West Palm Beach, Fla. — Calidus Holdings has acquired four Grove properties from Campus Crest Communities for approximately $50 million. Calidus, an investor and operator of U.S.–based commercial real estate, is one of three entities that comprise the buyer. The other two are BMOC (Best Management Onward Campus), which manages 6,000 beds according to its website, and an institutional equity partner.
The properties are in Jacksonville, Ala., Jonesboro, Ark., Wichita, Kan., and Wichita Falls, Texas. The deal, which closed at the end of December 2013, is reported to be one of the largest in numbers of beds purchased by a non-REIT in 2013, according to the joint venture.
Benjamin Shibe Macfarland III, chief investment officer with Calidus Holdings, says the new ownership will focus on growing NOI and the assets' market position, noting that except for the Jacsksonville, Ala., asset, the three former Grove properties are the only purpose-built, leased by-the-bed communities in each of their markets. "As a REIT, you tend to be more focused on occupancy than you are on NOI in these smaller markets," he says. "These markets were outside the bubble of the operations of a REIT. In our underwriting, we think there's another four or five points of value added in occupancy by reducing collection loss. We bought 2008-built assets at half of what it would cost to build them today."
Macfarland says a few minor renovations and upgrades toward energy efficiencies are planned, as well as rebranding each of the communities with more of the local universities' images involved. They will primarily be named after the university mascots in their corresponding markets. BMOC will manage the properties. William Levy BMOC president says he sees great value in putting in place student programming and reaching out to the universities to build relationships.
"We see these as Tier 2 markets with four-year public universities, where there's been at least six percent enrollment growth on average year over year," Macfarland says. "As the only purpose-built product off-campus in the market, you're primarily competing with mom-and-pops. Campus Crest is a great company that broke the concept in these markets, so a lot of our work will be educating the marketplace. As REITs continue to grow, we hope to be there for them as they dispose of nonstrategic assets."