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What impact does the U.S. credit rating down grade have on the student housing industry?


What impact does the U.S. credit rating down grade, European bank crisis and widespread fears of a double-dip recession have on the student housing industry, specifically financing for student housing investment and development deals?


“This was already one of the busiest times of the year for financing student deals, given that we are so close to the start of school, but it just got a whole lot busier given the huge drop in Treasuries after the downgrade. I think we were all a bit surprised to see T-Bills fall so much after the downgrade, but what was not surprising was the subsequent increase in Fannie/Freddie spreads over the past week or so. I think if borrowers ignore the spread for the time being and just focus on their all-in rate, they will be pretty happy to lock in these rates for the next 10 years.”


— Will Baker, vice president, multifamily finance, Walker & Dunlop


"As always in turbulent times, higher education and related housing remains a calmer port of call. The larger and more prestigious the institution, the more stable the local housing market, which is why The Collier Companies has always focused on major institutions and eschewed tertiary universities in smaller states."


— Nathan Collier, founder, The Collier Companies


We’re not sure how much credibility S&P has as a ratings agency given their role in the 2008 collapse. That said — the domestic and global issues have all market participants searching for stability. We believe that among all real estate asset classes, the demographics for student housing provide some of the greatest stability and so will remain an attractive option for both debt and equity. While lending had improved, it was still limited to the most experienced groups. While spreads may widen or LTVs adjust, availability of debt for those companies with strong balance sheets and track records record will remain readily available.”


— Dorothy Jackman and Travis Prince, Marcus & Millichap Student Housing Group
 


“The recent issues in the financial markets have actually had a positive impact on our business, in the short run, as Treasury yields have been driven to historic lows. We’re in the processing of refinancing nearly $100 million of our construction loans with GSE debt. With Treasuries hovering around 2.25 percent, we’re looking at locking in 10-year money well below 5 percent. In the medium term, I’m hopeful the impact will be a restriction of new supply as construction lenders and equity providers continue being cautious.”


Wes Rogers, president and chief executive officer, Landmark Properties, Inc.

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