Student Housing properties typically refer to apartment complexes designed with students in mind, often rented by the bed rather than the entire unit. They can be located on-campus or off-campus, but they are leased and managed by private firms (as opposed to official dormitories owned by the school). As university budgets have become more constrained and administration has realized the benefit of outsourcing non-core competencies, the industry has grown significantly.
Student Housing is frequently recognized as recession-resilient in part because student enrollment trends are independent of economic cycles (or even counter-cyclical in the case of students who go back to school in an unfavorable job climate). In fact, each real estate contraction has seen an increasing number of multifamily (and even recent hospitality) investors drawing into the space. As this occurs, the asset type has gone from being a minor niche to being an institutional quality asset class with growing liquidity. That said, like all Virtus property types, student housing complexes require a different operational acumen than typical multifamily assets, in part because of the vastly different leasing cycle and different customer psychographics. In addition, as student debt becomes an increasing issue, university budgets shrink, and online coursework options flourish, the typical worldview of which educational institutions will thrive and which will fail is called into question. As such, passive or generalist investors will often find difficulty approaching the space without years of earned expertise.
The Virtus Student Housing Team is highly experienced in sourcing, underwriting, and directly managing Student Housing communities. The team is headed by Managing Director – Acquisitions, Kevin White, along with Vice President – Acquisitions, Chris Kott; Vice President – Asset Management, Nicholas Mueller; Analyst – Acquisitions, Matt Powers; and Analyst – Asset Management, Cody Cox.
For more details on Virtus Student Housing Case Studies, please see here.
Senior Living communities are designed for older residents with a variety of caregiving needs. They exist at all points of the “acuity spectrum” from age-restricted apartments with no care component to high acuity skilled nursing facilities. Virtus chiefly invests in Independent Living, Assisted Living, and Memory Care facilities as the income streams are more defensive in these private pay “needs-based” categories of senior living.
The Senior Living space benefits from a massive demographic groundswell, as the Baby Boomers are just beginning their retirement years, with the generation still to reach the 75+ age range in the year 2021. As this occurs, they will be moving into an existing building stock that is currently undersupplied and increasingly out of step with evolving consumer demands and caregiving frameworks. For instance, according to CBRE, 40,325 new units must be delivered per year in order to meet peak demand (2020 – 2025). This can be compared to the current construction rate of 16,440 units per year as of 2014. Despite the overwhelming growth in the senior population, new supply growth has remained well below the highs of 2006 and early 2008, while stabilized occupancy has continued to increase.
As such, Virtus believes that acquisition, renovation, and development of Senior Living facilities comprise one of the very best risk-adjusted opportunities in both commercial real estate and general domestic investment. That said, it is not an easy space for passive investment. While the coming years will see many new entrants into the space, Senior Living is unique compared to more conventional forms of real estate by being far more operationally complex and demanding from a regulatory purview. In sum, despite the favorable population momentum that underpins the Senior Living sector, a successful execution of the strategy requires an experienced and dedicated investment team.
The Virtus Senior Living Team has a combined fifty years of experience sourcing, underwriting, and directly managing Senior Living communities. The team is headed by Managing Director – Acquisitions, John Sweeny, along with Managing Director – Asset Management, Michael Casey; Vice President – Asset Management, Hamilton Madden; Associate – Acquisitions, Austin Summy; and Analyst – Asset Management, Sky Sgovio.
For more details on Virtus Senior Living Case Studies, please see here.
Medical Office Buildings (“MOB”) are structures leased by healthcare providers, from general practitioners to specialty caregivers. Frequently, MOB spaces are adjacent to or affiliated with major hospital systems who lease out space and facilitate a whole, cohesive range of caregiving options through the spaces. Virtus has historically focused on hospital-affiliated MOB centers for the robust tenant demand, but there is a move to bring healthcare services from the hospital setting out into the community.
Medical Office Buildings have historically behaved with much greater economic stability and lower rate of default than typical office structures because of the consistent needs-based nature of the product and the incentive for tenants to have a consistent location for their practice’s client base leading to higher renewal rates. Like most Virtus property types, MOB investment has significant knowledge and operational barriers (such as keeping up with constant innovation and progress in healthcare technology and best practice), which make it difficult for passive investors.
Currently, the Medical Office space is currently poised for a major increase in aggregate demand, but it also faces extreme operational uncertainty—both trends due to the Affordable Care Act. While the increased number of insured citizens will translate to greater healthcare expenditures, the new regulatory framework has encouraged consolidation of medical practices and other operational changes. Nonetheless, Virtus believes that Medical Office will be one of the most attractive and robust investment spaces for managers who have expertise in the space and who have kept track of the complex evolution in recent years.
The Virtus Medical Office Team has a combined fifty years of experience sourcing, underwriting, and directly managing Medical Office communities. The team is headed by Managing Director – Acquisitions, John Sweeny; Director – Acquisitions, Matt Withey; Managing Director – Asset Management, Michael Casey; Vice President – Asset Management, Hamilton Madden; Acquisitions Analyst, Jake Katzen; and Analyst – Asset Management, Sky Sgovio.
For more details on Virtus Medical Office Case Studies, please see here.
Self-Storage properties are units of rentable space for excess possessions used by both individuals and businesses. Typically they are rented monthly, with potential for rate escalations on a more regular basis than other real estate categories.
Through both economic expansions and contractions, no other publicly tracked asset class has had the outsized returns Self Storage has boasted. Public storage REITs even posted a positive 5% return during 2008 as the broader stock market and REITs were imploding. In part, this is because Storage has an extremely diverse set of demand drivers that benefit from both economic expansion and contractions. Self Storage users are small business owners storing inventory, elderly households downsizing, economically challenged individuals moving in with family, and prosperous households expanding or storing recreational vehicles and accessories. In short, any volatile life event or lifestyle change can prompt demand for storage.
However, storage tends to challenge many larger investors who attempt to access those returns, because it is difficult to deploy capital both thoughtfully and in large amounts. The small transaction sizes also make storage investment difficult for typical investment firms that seek expansion of assets under management above all else. The surge of interest in self storage post-recession also means it is very possible to arrive late to the party and overpay for gateway market assets. By contrast, Virtus has been investing in storage for nearly a decade and has developed a deep network of off-market sources that allow us to invest carefully and according to our own judgment rather than prevailing market conditions.
The Virtus Self Storage Team is highly experienced in sourcing, underwriting, and directly managing Self Storage communities. The team is headed by Managing Director – Acquisitions, Kevin White, along with Vice President – Asset Management, Nicholas Mueller.
For more details on Virtus Self Storage Case Studies, please see here.
Since the 2009 Housing Crisis, America’s renter population has grown by over 8.7 million households, or 25%. However, despite the resurgence of investor interest in multifamily properties, very few of these households are served by the wave of new development—the vast majority of which has been targeted at more affluent renters. Workforce housing addresses the needs of agreat number of national households that do not qualify for subsidized housing, nor can they affordnewer constructionapartments or homeownership. Virtus believes that its efforts play a vital role in addressing a market segment with vast potential and great social need.
Recent decades have seen a marked dislocation between real wage growth for median income households, which have been stagnant, and construction costs, which have been rising at a greater rate than incomes.The end result is that, while conventional commercial real estate investors generally gravitate toward brand new class “A” construction, Virtus has found better risk adjusted returns historically for older class “B” properties that serve a wider consumer base and have less competitive risk from new supply.
In addition, the advent of much stricter lending practices in the wake of the 2009 Financial Crisis has kept many workforce renters, who would prefer to own, out of the market. This further exacerbated the relative lack of affordable options and has increaseddemandon the relatively older stock of housing that is available across the U.S. By acquiring and renovating such properties with today’s workforcerenter in mind, Virtus is both achieving its investment goals and getting average households into far more appealing housing stock.
The Virtus Workforce Housing Team is highly experienced in sourcing, underwriting, and directly managing Workforce Housing communities. The team is headed by Managing Director – Acquisitions, Kevin White and Managing Director – Asset Management, Scott Humphreys, along with Vice President – Acquisitions, Chris Kott; Vice President – Asset Management, Nicholas Mueller; Analyst – Acquisitions, Matt Powers; and Analyst – Asset Management, Cody Cox.
For more details on Virtus Case Studies, please see here.
Charter schools are publicly funded, privately run school that operate outside the governance of public school districts but which still receives public funding on a per pupil basis. While each state has its own unique application and chartering process, they all require theentity applying for a “charter” to operate within certain limits or standards. Charter schools that are well run offer parents and students an educational experience more tailored to specific goals or learning styles.
The charter school movement has seen significant gains in total enrollment and “market share” with nearly three million students, or over 5% of all K-12 students nationally, now attending. This percentage varies wildly by state, from zero presence to states with mature programs, such as Arizona, who haveenrolled 17.8% of their students into a charter program. As such, there is ample room for growth ahead, even under much more modest projections for total national adoption. Virtus intends to partake in this sector growth by providing equity and securing financing for facility acquisitions for upstart schools. While there is a rapidly maturing financial infrastructure for charters involving municipal bonds, it is not generally available to newer schools. This leaves an open window for private equity firms to help quality schools establish themselves before municipal bonding is an option.
Charter School efforts are handled by Kevin White, Managing Director – Acquisitions and Nick Mueller, Vice President – Asset Management. In addition, Virtus has partnered with Charterstone Capital, who offer both extensive experience and industry contacts. Charterstonecapital.com
For more details on Virtus Case Studies, please see here.