Tag Archives: LeverCapitalPartners

Micro-Construction: A Game-Changer for Solving the Student Housing Crisis

by: Rachel Epstein

A recent survey uncovered that 43% of students at four-year colleges in the United States grappled with housing insecurity in the year leading up to the study, an increase of over 100% since 2022 (Benbow, 2023.) This troubling trend is forcing many students to couchsurf with friends or commute from home to attend school. In response to this challenge, the University of San Diego turned to a temporary solution by placing students in hotel rooms due to a shortage of on-campus housing (Staff, 2023). The aforementioned solution has been seen at the University of Miami and other campuses as well. This predicament has been intensified by a 9% surge in student housing demand over the past year (Staff, 2023). To address the escalating housing crisis, micro-construction is emerging as a solution, offering compact living units that provide individuals with personal space while accommodating more occupants within a single building, thus alleviating the strain on student housing.

Micro units are smaller efficient units usually ranging from 100-200 square feet which are priced at a lower cost. These units include kitchenettes, bathrooms, and a small study space. A few other benefits of the buildings are fitness centers, game rooms, meeting spaces, and storage lockers. The buildings will incorporate larger common space for students to socialize and study. Internet is also included in the rent for their units which attracts many students to live there. An added bonus is that the units come fully furnished so one does not have to worry about purchasing furniture. As stated in the article, “… murphy beds that transform into desks”(Interactive, 2022) so the room can be transformed within minutes as one pleases. This allows individuals to have their own personal space when wanted but also gives them the opportunity to be with their friends. The emphasis on these small units genuinely represent the current generation and their need for personal space but also wanting to have time with friends.

The rent for micro-units could be significantly less expensive “…students in Vancouver can rent a 140 square foot unit for $675-$695 a month, as compared to $1,000 for a full-size unit” (Interactive, 2022). The price difference is significant enough that it can be the reason one attends school or not.  This will certainly attract students to live in these units because they could have their own space and privacy but also be able to spend time with their friends whenever they want. 

Historically, regular apartments were about 800 square feet with four bedrooms with one to two students per bedroom. The units came with a full kitchen and bathroom but the buildings had limited study and communal spaces. Students could not enjoy spending time in their apartment with all their friends. Most of the time they would have to find another location for everyone to be together. Lenders and investors are interested in these spaces because of the future micro-housing holds. 

At Lever Capital Partners we are dedicated to remaining well-informed about the evolving market for modular housing construction in the Student Housing space by diligently tracking industry trends and staying ahead of developments. Our approach involves collaborating with lenders known for their reliability, ensuring that clients receive the best possible financing solutions for their projects.

References:

https://pointintimestudios.com/micro-student-housing/ https://apnews.com/article/rent-us-college-students-1cc3bc02f25f8a628f828902029bad9b\ https://studenthousingbusiness.com/maximizing-space-is-paramount-as-costs-soar-for-developers-students/ https://www.newsweek.com/student-housing-supply-crisis-america-1795711 https://therealdeal.com/national/2023/07/05/student-housing-holds-promise-for-cre/ https://www.preqin.com/insights/research/blogs/private-capital-is-making-space-for-student-housing https://www.biggerpockets.com/blog/student-housing-remains-as-resilient-as-ever https://www.nytimes.com/2020/12/15/business/modular-construction-pandemic-coronavirus.html

Unlocking Investment Potential and Asset Diversification: The Rise of Suburban Mixed-Use Developments in a Dynamic Real Estate Landscape

by: Kyle Tran

In the dynamic world of real estate investment, suburban mixed-use developments stand out as a key opportunity for investors. Catering to the changing needs of a workforce where 12.7% are working from home and 28.2% engage in hybrid models (TenantCloud, 2023), these developments offer a unique blend of residential and commercial spaces. These developments are not just about blending spaces; they are about maximizing utility and profitability. With diversified revenue streams, they present a robust platform for investment. The presence of on-site retail and recreational amenities enriches the living experience and enhances the value of these developments, making them multifaceted and secure investment options.

The resilience of mixed-use developments is particularly noteworthy when considering their performance during and after the global pandemic. In the wake of the pandemic, these developments have shown remarkable resilience, attracting the attention of a diverse array of investors. This includes interest from EB-5 investors, private equity firms, and Real Estate Investment Trusts (REITs), as noted by Kirk in 2022. This resilience is partly attributed to their operational efficiency, which stems from a unique mix of residential, commercial, and retail elements. This blend not only optimizes operational costs but also creates a variety of revenue streams, further enhancing their appeal in the ever-fluctuating real estate market.

In addition to their resilience and diversification, mixed-use developments also stand out in terms of financial performance. Research by JLL indicates that office spaces in mixed-use developments command higher rents – by about 24.7% – compared to those in nearby submarkets. Furthermore, these properties often have higher market valuations, with lower capitalization rates by approximately 75 basis points than prime assets in the broader real estate market (Kirk, 2022). This economic advantage underscores the appeal of mixed-use developments in the current investment landscape.

Hudson Yards in New York City is a perfect example of a successful mixed-use development. This project has transformed over 28 acres of underutilized land into a thriving urban space. It boasts more than 18 million square feet of commercial and residential space, including over 100 shops, a range of restaurants,  approximately 4,000 residences, and state-of-the-art office towers. The transformative development has rejuvenated a previously dormant area of Manhattan and contributed to creating a dynamic environment that merges modern living, work, and leisure. Its design emphasizes sustainability and a community-centric approach, making it a landmark project in urban development.

Mixed-use developments were initially challenging due to the complexity of integrating multiple asset classes into one, this made financing, permitting/approvals, and valuation quite tricky. However, developers and capital providers have grown to love mixed-use assets as it allows them to mitigate risk through further diversification and operational efficiency. Data from JLL (2023) reveals that these properties maintain lower vacancy rates, even during market fluctuations. Major metropolitan areas like Chicago and San Francisco demonstrate this resilience, showing lower vacancy rates compared to central business districts.

The broad tenant base in mixed-use developments contributes significantly to financial stability. For example, if the retail sector faces a downturn, the residential or office components can continue providing steady cash flow offsetting significant loss. This balance across different tenant types ensures a consistent and resilient income stream, as highlighted in a 2023 report by JPMorgan. To summarize, mixed-use developments represent a safe and attractive investment opportunity in the current market. Their ability to adapt to changing work models, combined with their financial stability and market resilience, positions them as a strategic choice for investors.

At Lever Capital Partners, we specialize in complex financing for these kinds of developments. With over 1,000 capital provider relationships we are able to procure tailored financing solutions that cater to the unique needs of mixed-use assets and many others. We work with our clients to curate the most efficient capital stack for any commercial real estate project nationwide, allowing them to focus on what they do best. Contact Lever Capital Partners today to explore the potential of mixed-use developments in your portfolio and the financing you’ll need to get your next project across the finish line.

References:

https://www.wealthmanagement.com/development/post-pandemic-boom-mixed-use-mega-projects-underway https://finmodelslab.com/blogs/rising-capital/mixed-use-development-rising-capital https://www.jpmorgan.com/insights/real-estate/commercial-term-lending/the-growing-popularity-of-mixed-use-properties https://communityimpact.com/dallas-fort-worth/plano/development/2022/07/18/mixed-use-developments-look-to-transform-planos-landscape/ https://montgomeryplanning.org/tools/research/real-estate-and-land-use/mixed-use-study/ https://s3da-design.com/the-mixed-use-future-urban-development-in-2023-and-beyond/