The student housing sector is as robust as ever, with growing interest from investors, rising rental rates and continued demand for new supply. PEBB Capital — an opportunistic, multi-strategy real estate and private equity investment firm founded in 2014 — is one such investor looking to grow its stake in the industry.
The company’s student division — which previously ran under the name Collegium — has grown in the last few years, with the company investing nearly $200 million in the sector.
“In 2014, we bought a large, distressed portfolio in Tallahassee and from there, we went on a buying tear and accumulated over 6,000 beds in 10 properties across many different states,” says Todd Benson, managing director of development and asset management at PEBB Capital and leader of the company’s student housing division. “The original model was to acquire, rehabilitate and reposition properties and offer a value proposition to residents where they were able to get a newer feel for a better price than the new construction in the market.”
About two years ago, PEBB saw an opportunity in New York City to rehabilitate a property named The Alabama near Yeshiva University’s Cardozo School of Law, New York University and The New School in New York City. “We were able to acquire the community from Yeshiva, and took a property — which was in terrible condition — and grew it from 122 beds to 173 beds and really created a product that is in line with what students now expect,” says Benson. “We updated the technology, furnished the apartments and added study rooms, alongside other amenities. That project is now fully leased and has been a major success.”
The company has invested $25 million into renovations in properties in its portfolio, and plans for further expansion throughout the country. PEBB is currently working on a ground-up development in the Morningside Heights neighborhood of New York City, which broke ground in November 2018.
The property — built in collaboration with TriArch Real Estate Group — will offer 153 beds serving Columbia University. The 14-story building will feature studio, one-, two- and three-bedroom, fully furnished units. Shared amenities will include a state-of-the-art fitness center; a study area with breakout rooms and a conference center; an outdoor terrace; bike storage; a package room; security surveillance; a rooftop deck; and a coffee bar.
“This project is symbolic of our transition,” says Benson. “We have shifted our focus because we see great opportunity in urban areas to address the need that students have for safe, purpose-built student housing. Cities like New York are difficult to live in. You have to find roommates, you have the cost to furnish, utilities — it can really be a challenge.”
“When parents walk into our projects, you can see the relief on their face because they’ve been running around the city looking at lesser quality options that do not seem safe or geared towards students,” continues James Jago, managing director of PEBB Capital. “They see our doorman, our security cameras and programming for students with study rooms and they want their children to live there. Our product is similarly priced, but with a much stronger value proposition to tenants.”
The company’s development in Morningside Heights is scheduled for completion in May 2020, and PEBB plans to embark upon more developments along this vein in the coming years. “This model doesn’t just work in New York City — we’re working on a project in Providence, Rhode Island, now serving Brown University’s medical and nursing schools,” says Benson. “Our goal is not to be the largest student housing owner and operator in the industry. We are constantly buying and selling, but one thing that is consistent is our focus on seeking out value propositions to offer to the marketplace.”
While PEBB Capital invests in a variety of asset classes — including retail, traditional multifamily and office — the student housing sector continues to be a focus as the company expands. “Student housing — specifically in dense markets where there are multiple demand drivers like hospital systems, students and young professionals, all of whom are seeking a seamless, turnkey housing solution — is one of our top areas of focus,” says Benson.