The impact of the coronavirus (COVID-19) is being felt across every facet of the student housing industry. On and off campus, owners and operators have grappled with the cancellation of in-person classes and administrative orders by universities for students to vacate campus entirely in hopes of slowing the spread of the virus.
As the situation continues to evolve, many in the industry are wondering what the virus’ impact will be in the months ahead and on the upcoming academic year. On Friday, April 17, Student Housing Business released a complimentary webinar sponsored by Pavlov Media, during which four CEO’s from some of the top companies in the industry provided their perspective on the impact of COVID-19 on the industry.
The discussion was led by Rich Kelley, publisher of SHB, with speakers including Wes Rogers, president and CEO of Landmark Properties; Rob Bronstein, president and founder of The Scion Group; Peter Stelian, CEO of Blue Vista Companies; and Christopher Merrill, co-founder and CEO of Harrison Street.
April Rent Collections
Despite mounting concerns over the impact the cancellation of in-person classes might have on rent collections, all four CEO’s reported at least 90 percent of rent payments collected as of April 16.
“Rent collections are currently at 94.4 percent across our 86-property portfolio,” reports Bronstein. “We normally collect 98.8 percent of rent payments by month-end and I anticipate we will be at 96 to 97 percent by April 30.”
For The Scion Group, the percentage of unpaid rents does not vary by property type. “The roughly 4 percent delta is very consistent across our portfolio regardless of price point — payments at our highest-end properties were lagging by 4.1 percent; our cottage properties and townhomes were lagging by 5 percent; and payments at our least-expensive properties were behind by 4.2 percent,” says Bronstein.
Wes Rogers, whose company Landmark Properties owns a portfolio of 38,000 beds across the country, saw rent collections as high as 96 percent for the month as of April 15. “Our rent collection has been significantly better than I’d feared,” he says. “Our collections ratio has been higher at our higher-end properties and less than 5 percent of our residents have inquired about rent relief.”
Landmark is offering a program in which the company will allow a mild deferment of rent if the student resident can provide proof that their guarantor has lost their job, but less than 1 percent of residents have applied for this relief.
Peter Stelian of Blue Vista Companies reported that 95 percent of rent had been collected for April. Harrison Street reported a similar outlook, even in its European assets. “Across 150 properties in the U.S. and Europe, we’ve been pleased with rent collections in the 90 percent range, which is very similar to last year’s levels,” says Merrill. “We’re seeing very good news out of the portfolio.”
Are Leases Still Being Signed for Fall?
Another question looming over the industry is whether or not leasing will be impacted for the upcoming academic year. The CEO’s reported their portfolios to be between 60 and 79 percent pre-leased for the fall, with leasing velocity for most slowing, but not to a halt.
“As far as pre-leasing, our portfolio is approximately 70 percent leased for the upcoming academic year,” says Bronstein. “Up until about a month ago, we had a year-over-year lead that was as high as 4 percent in pre-leasing, but that lead has gone over the last few days, and we’re about 2 percent behind last year’s numbers.”
“Leasing has definitely not stopped since schools started announcing closures in early March,” he continues. “We’ve signed about 2,700 contracts since then. That is 45 percent of what we signed last year, but considering all of the disruption, we’re satisfied with that. We have no doubt that once things have settled down and people have more clarity on the future, there is going to be a late rush of leasing.”
Similarly, Blue Vista reported numbers a few percentage points behind where they would’ve been last year. “We’re at just about 63 percent in terms of pre-leasing, which is about two percentage points behind where we were last year,” says Stelian. “Our leasing on a weekly basis is around 40 percent of what we saw last year. In terms of physical occupancy, we’re at about 64 percent occupied — a large percentage of students decided to stay in place at our properties.”
By contrast, Landmark reported a higher number of units pre-leased for the upcoming academic year than they had seen at the same time last year, with 78.9 percent of units pre-leased versus 74.5 percent.
Will Universities Open As Usual for the Upcoming Academic Year?
Across the board, the outlook for the upcoming academic year is cautiously optimistic. “In terms of large, public universities, we believe they will be open for in-person classes, although I wouldn’t be surprised if it is in a reduced way,” says Bronstein. “There may not be a football season, or very large lectures, but we feel that universities will open back up in the fall. Starting a new year for incoming freshmen online would be difficult, and schools that don’t open should anticipate many students taking a year off.”
Bronstein also cited a recent survey by the Association of College and University Housing Officers-International (ACUHO-I), which polled 337 universities. The survey reported that 22.6 percent of universities responded that they are already planning to open and that 76.8 indicated that a decision had not yet been made. Only two schools responded that they had already made a decision not to open in the fall, according to Bronstein.
“Many universities are indicating that they are considering reduced occupancy,” he says. “Several universities have also indicated that they are considering keeping an entire residence hall offline to serve as an emergency quarantine zone. We think that schools will be open and reliance on off-campus housing might even be increased.”
Rogers of Landmark Properties also feels highly confident that universities will open in the fall, but potentially in a reduced way. “We’ve had discussions with several universities and someone on the Board of Regents at a large, state institution told us that they have taken an enormous financial hit already due to the virus — several hundred million dollars — and if the university does not open in the fall, it is going to be a financial Armageddon,” he says. “It is in universities’ best interest to open, with tuition acting as a strong revenue source for them. They are going to be looking to the CDC for guidance, but to the extent that they can open in accordance with health regulations and guidelines, they are going to do so.”
Rogers also expects that university response will look different on a state-by-state basis. “Universities might respond differently depending on what the virus is doing in their respective states, so you might see a few delays,” he says. “We might also see smaller classes or online classes for the large, lecture courses.”
“You’re also probably going to see masks on-campus,” Rogers continues. “We’re hearing that universities are concerned about density on-campus. A dorm-style configuration with two residents in a bedroom sharing a hall is about the worst possible configuration that you can have in terms of spreading a virus. As of now, we’re maintaining a relatively optimistic outlook that universities will likely open in the fall.”
Stelian of Blue Vista shares a similar outlook. “We’ve heard everything from schools shifting from semester to quarter schedules to mute the impact of an online portion of the year, to new admissions policies to lessen the impact felt by foreign students,” he says. “It’s a great year to be a high school senior applying for colleges in the U.S. because you’re probably going to be able to get into a better school than you would have otherwise due to the fact that there’s a large chunk of foreign students that won’t be expected to be on-campus right away.”
— Katie Sloan