Coastal Ridge, Goldman Sachs Buy Arizona Student Housing Community
Coastal Ridge will manage the 448-bed property in Flagstaff, Ariz.Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes
Commons at Sawmill. Image courtesy of Coastal Ridge and Goldman Sachs.
Coastal Ridge and Goldman Sachs have purchased Commons at Sawmill, a 448-bed student housing community in Flagstaff, Ariz. Nelson Partners sold the property, serving students at Northern Arizona University, after roughly six years of ownership. The firm acquired the community in 2016 for $37.1 million. CBRE brokered the current deal.
Coastal Ridge will manage the community at 901 S. O’Leary St., less than a mile from the NAU campus. The property encompasses a mix of studio, two- and four-bedroom units ranging between 405 and 1,200 square feet. Community amenities include covered parking, a clubhouse with a fireplace, a fitness center, and a study area.
Driven by Arizona’s strong population growth, Flagstaff has become a solid market to invest in. As of Fall 2021, Northern Arizona University had a total of 28,718 enrolled students, with 21,248 at the Flagstaff campus, as reported by the institution. Annual rent growth at NAU was up 10.3% as of March, while bedrooms under construction accounted for 2.6% of enrollment, according to Yardi Matrix data.
The state’s strong market fundamentals and positive demographic trends drove Coastal Ridge to invest in Commons at Sawmill, Managing Director Dan Dooley said in prepared remarks. The management company operates more than 23,000 student housing beds across the country.
What are the benefits of investing in student housing communities?
Investing in student housing communities can provide a number of benefits. These include increased job opportunities, increased consumer spending, and improved neighborhood quality. Additionally, student housing communities can provide a steady stream of rental income, as well as potential tax benefits. According to Multifamily.loans, student housing communities can also provide investors with a higher return on investment than traditional multifamily housing.
What are the risks associated with investing in student housing communities?
Investing in student housing communities can come with a few risks. Firstly, construction costs have risen dramatically over the past few years, and this can impact renovation work as well as ground-up development projects. Make sure you do your research and plan ahead with a strong budget before beginning apartment renovations to avoid any nasty surprises.
Construction delays are also an unfortunate fact of life, and due to supply chain issues, some cannot be avoided. It may be best to take a very conservative approach in terms of your project timeline.
Finally, your renovation work may simply not be enough to get the investment outcome you’re looking for. You may invest a lot of capital to add the highest-end luxury amenities to a property built in the 1980s — but if potential renters are looking for a newer building, you may not see much of an uptick in occupancy or rental revenue.
Additionally, properties in college towns typically have a higher percentage of student tenants. While this roughly equates to a steady source of tenants, the inherent seasonality of school schedules could lead to seasonal vacancy issues.
How does Goldman Sachs' investment in Coastal Ridge benefit the Arizona student housing market?
Goldman Sachs' investment in Coastal Ridge Real Estate Partners, a student housing investment firm, is expected to benefit the Arizona student housing market. According to MultifamilyBiz.com, the investment will allow Coastal Ridge to expand its student housing portfolio in Arizona and other markets. The investment will also provide access to Goldman Sachs' commercial real estate financing products, which could help Coastal Ridge acquire more student housing properties in Arizona.
What are the advantages of Coastal Ridge's student housing community?
Coastal Ridge's student housing community offers a variety of advantages to its residents. These include access to social and health services, career services, and other amenities. Social and health services can include an on-site dietician visit to offer nutrition advice, trained counselors for those dealing with trauma, and career counseling from local leaders. Additionally, the community offers amenities such as a fitness center, swimming pool, and study lounge. These amenities can help students stay healthy and focused on their studies.
What are the potential challenges of investing in student housing communities?
Investing in student housing communities can present a few potential challenges. One of the main challenges is the seasonality of student tenants. Since students typically only stay in the area for a few months out of the year, this can lead to seasonal vacancy issues. Additionally, student tenants may not have the same level of financial stability as other tenants, which can lead to difficulty in collecting rent payments. Finally, student housing communities may require more frequent maintenance and repairs due to the higher turnover rate of tenants.
Source: 5 Considerations for Choosing an Investment Property and Challenges of the Apartment Lease-Up Period
How does Goldman Sachs' investment in Coastal Ridge compare to other student housing investments?
Goldman Sachs has been a major investor in student housing, investing in a number of projects across the country. In 2021, Goldman Sachs provided a $97.8 million loan to Coastal Ridge Real Estate for the acquisition of a student housing portfolio in the Midwest. This was one of the largest student housing investments made by Goldman Sachs in 2021, and it was part of a larger trend of increased investment in student housing by the firm. According to a report from GlobeSt, Goldman Sachs has been investing heavily in student housing, with the firm providing more than $1 billion in student housing loans in 2020. This is significantly higher than the $400 million in student housing loans that Goldman Sachs provided in 2019.