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High quality cottage product at Power 5 SEC University
Junction is a best in class, high-quality cottage and townhome-style community that is preferred by Texas A&M students. The property is a market leader as represented by it’s preleasing at over 92% as of June 7th. Students prefer the cottage-style student housing properties as they offer the feel of living in a house in an exclusive community with only other college students as your neighbors. The three properties leading the market in lease-up are all cottage-style communities.
Located at the 2nd largest single-campus enrollment in the US
Texas A&M University logged another record enrollment in Fall 2020 and welcomed more than 65,600 students to College Station, making it the 2nd largest single-campus in the US. Over the last decade, TAMU has averaged 3.6% annual enrollment growth. Continued growth is expected as the great state of Texas is experiencing significant population growth in the 18 to 24 year-old demographic. Texas’ growth in this demographic is 2.4% higher than the national average.
Priced well below replacement cost
While Junction is being offered unpriced, we expect the asset to sell in a price range that represents, at minimum, a 30% discount to replacement cost. The cost basis at which a purchaser can be into this best-in-class asset will provide a competitive advantage in rental rate flexibility now and long into the future. Based on current construction costs, which seem to be inflating on a weekly basis, a new owner of Junction has the security to know any future deliveries in the market will have to be at rental rates substantially above Junction to make any new development pencil.
Upside opportunity with rental rates $62 per bed below market
With strong preleasing above 92% as of June 7th and no concessions offered to achieve these results, Junction is well positioned for significant rent increases. Based on the competitive set of properties, Junction’s rental rates are $62 per bed below the average of its competition. Based on the popularity of this community and the cottage-style property type with its exceptional amenities, its strong current occupancy, its below market rental rates, pace of preleasing without concessions and no currently planned development in the pipeline, it is clear Junction is primed for material rent growth for a new owner.
Assumable 3.48% interest rate debt that does not require COVID debt service reserve
The property has an assumable Freddie Mac mortgage with a 3.48% interest rate and two years of interest only payments remaining. An additional benefit of this attractive underlying debt is that it does not require a COVID debt service reserve. The loan also does allow the ability to place a supplemental loan on the property. The loan does enhance the yield for a purchase and should allow for a very attractive year-one cash yield and above market leveraged IRR.
Located in College Station, Texas, Texas A&M is one of three flagship universities in the state. In addition to being classified in the highest tier of research universities, Texas A&M's offerings are rounded out by what is considered one of the most successful college sports programs of all time. Currently, Texas A&M boasts the state's largest student body with a fall 2020 cohort of 65,684 students.
Texas A&M is the largest university in the state and boasts the 7th-largest financial endowments in the country, bringing in more than $12 billion annually. According to a survey conducted by the National Science Foundation (NSF), Texas A&M was ranked among the top 20 research universities in America with $922 million in research and development expenditures.
On-campus living is not required of students, except for those enrolled in the Corps of Cadets leadership program. At the beginning of fall 2020, Texas A&M recorded 10,277 students living on campus. In total, there are 25 residence halls that generate a combined housing capacity of 7,248. The Corps of Cadet Quadrangle consists of 12 additional halls that accommodate about 2,600 students. The university also operates two apartment communities, The Garden Apartments and White Creek Apartments. Despite this, more than 84% of the total student body is in need of off-campus housing, generating significant demand for rental units in the area.
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