Like bond prices, real estate investment trust (REIT) values in America continue to soar, as more savers and income investors search for ways to quench their thirst for higher yield without having to take excessive risk with their money. College housing is one category of REIT that has not only been winning the hearts of investors in recent times, but also delivering remarkable returns to its owners. (See also, REITs: How Long Can They Stay This Hot?)
Since the $1.9-billion acquisition of Campus Crest Communities earlier this year, American Campus Communities (ACC) and Education Realty Trust (EDR) have been the only publicly traded REITs that primarily focus on the college housing market. The two REITs have seen their stock prices increase in the last 12 months by more than 47% and 55% respectively, easily trumping both the 12% increase in the Bloomberg North American Apartment REIT Index and the S&P 500’s total return of 3% realized during the same period. (See also, REITs: Still a Viable Investment?)
Reliable, Recession-Proof Income
With political uncertainty on the rise and weak economic data being released, many investors are beginning to put their efforts into hedging their portfolios in the event that the U.S. and other global economies weaken. One of the contributing factors for such a steep rise in student housing REIT valuations could be that investors are using them as a way to hedge their bets in the market. Unlike others forms of real estate that are susceptible to changes in market conditions, such as commercial property and apartment units, student housing, and college enrollments as a whole, are generally unaffected during recessions, at least in recent history. This may be partly due to the fact that students in the United States have relatively easy access to financing to cover their college-related expenses.