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The August 4, 2018

Times

August 2018 Inaugural Edition

Vol. 1

2018 Half-Time Report! NP Has Banner Year in Preleasing

NP Achieves Independence Aliso Viejo, CA – August 2, 2018

Nelson Partners establishes independence on April 18, 2018. Over 240 years ago, Thomas Jefferson wrote, “When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of... ~Continued on page 2

The “100” Club

Keeping a watchful eye on prelease percentage is a key to projecting occupancy and performance to come. . . . ~Continued on page 4

All-American Competition

A forensic look at a side-by-side comparison of student housing between conventional multifamily apartments. ~Continued on page 3.

Fort Worth, TX—New senior partner Paula Platt leads NP to a banner year in preleasing. As of August 1st, 2018, 12 out of 18 properties are 100% preleased, with the entire portfolio 97% preleased. See the chart below.

Properties

Aug 4, 2017

(18/19 prelease)

Almond Tree

54.05%

100.00%

Alpine Flats

100.00%

100.00%

N/A

100.00%

Auraria Student Lofts

100.00%

100.00%

College Crest*

78.45%

100.00%

Dixie 9

17.14%

100.00%

N/A

100.00%

Stadium View

100.00%

100.00%

The Mark

56.77%

100.00%

N/A

100.00%

University Gardens Apt

100.00%

100.00%

University Gateway

72.70%

100.00%

University Towers

54.66%

100.00%

Mountain Valley Apt

42.90%

99.24%

The Vue at MacGregor

56.82%

98.40%

Loft Vue

51.70%

95.92%

Taylor Bend

91.67%

93.75%

Duck Abbey

82.86%

90.00%

59%

99%

Gather Bellingham

University Flats

Total

N/A = Newly Acquired * Rehab/Construction

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TITAN

Aliso Viejo, CA— Nelson Partners builing a world-class sales team. . . . ~Continued on page 2

Aug 1, 2018

(17/18 prelease)

Apple Tree Cove*

Birth of a Titan BIRTH OF A

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New Acquisitions - University Flats - Gather Bellingham

5 6

Lone Star State MVP

Fort Worth, Texas— Paula brings 20 years of experience in operations, acquisitions, and disposition of student housing. ~Continued on page 2

Property Highlights - Auraria Lofts - Duck Abbey - Vue on MacGregor - Loft Vue - The Mark

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Aliso Viejo, CA – August 2, 2018

NP Achieves INDEPENDENCE

Nelson Partners establishes independence on April 18, 2018. Over 240 years ago, Thomas Jefferson wrote, “When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.” At Nelson Partners, our causes are simple: performance, leadership, and transparency with integrity.

Patrick Nelson, former CEO of Nelson Brothers, founded Nelson Partners in combination with two of the three core competency firms making up the Nelson Brothers Group of Companies. Nelson Brothers achieved tremendous success for over 10 years, reaching #129 on the Inc. 500 for 2017, earning the BBB Torch award for ethics, and finishing as a semifinalist for the Ernst and Young Entrepreneur of the Year, Orange County. Nelson Partners retained Nelson Brothers Property Management—(with over 180 employees, managing more than $400 million in student housing across 11 states) and Nelson Brothers Construction (which has 15 employees and over $300 million in ground-up projects in its pipeline), rounding out a

well-integrated student housing total platform. “The student housing industry is vibrant,” says Patrick Nelson. “We have some of the most talented and qualified people in the country, and the timing is right in the economic environment to do extraordinary things. We are very blessed and couldn’t be more pleased with this magnificent opportunity in front of us. We have all the ingredients.” Brigham Young is credited with saying, “True independence and freedom can only exist in doing what is right.” Nelson Partners is founded on the sound economic principals of buying right and managing with industry-leading competency and pure integrity.

Lone Star State MVP

Fort Worth, Texas—Paula brings 20 years of experience in operations, acquisitions, and disposition of student housing. Paula Platt joined NB in August 2017 and is now a senior partner at Nelson Partners. She has held senior roles for Campus Apartments, GMH, and Fountain Residential Partners, managing up to 25,000 beds at one time. Management is a determinant of overall performance in a student housing investment, and Paula is skilled in the many facets of the industry specific to property and asset management within the microeconomies surrounding universities. Paula and her husband of 25 years, Greg, live in Corsicana, a small town outside of Dallas, TX. Paula and Greg are the proud parents of three beautiful children—Logan, Presley, and Alec. Logan is a senior in high school, Alec is a sophomore at Texas A&M University, and Presley is a graduate of Texas A&M University and a recent bride (her husband Travis is also an Aggie). Paula has enough room in her heart for her three children as well as two dogs (Tex, a Catahoula Leopard Dog, and Chief, a Dogo Argentino) and two “grand-dogs” (Chief’s brother Bull and a Maltese Beagle named Aggie). Paula was a Texas State Strutter in college and danced in a USO tour for military bases throughout the Far East. When Paula isn’t working, she enjoys family time at the gun range, beach vacations, and college football! All of Greg and Paula’s love and money go to Texas A&M University. Gig ’em!

BIRTH OF A

TITAN DEVELOP

ALISO VIEJO, CA—Nelson Partners is building a world-class sales team. Sandy Simmons, Director of National Sales, has more than 30 years experience as a wholesaler, and Warren Posner has come aboard as the Director of National Accounts and West Coast Distribution. Warren has worked in investment services for more than 30 years. Our nationwide wholesale team offers a broad spectrum of experience and expertize in managing directors. Leading the team are managing directors: Dan Roebuck (East Coast), Brett Frum (North Central), and Ron Glasgow (South Central). They are supported by an additional team of regional vice presidents. New Regional Vice President- East Coast: David Abraham; Regional Vice President Elle Demetriou, Regional Vice President Jake Benitez will be heading up internal sales operations, while Regional Vice President Angelica Proctor-Saddler will work in investor relations and with National Accounts. On May 1, 2018, Nelson Partners partnered with Patrick Capital Markets, LLC (PCM), a privately held broker-dealer. PCM will be acting as the managing broker/dealer for Nelson Partners. PCM is unrelated to Patrick Nelson and Nelson Partners, LLC.

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ALL-AMERICAN COMPETITION Student Housing vs. Traditional Multifamily A forensic look at a side-by-side comparison of student housing between conventional multifamily apartments.

Student

• Each University tends to be its own micro economy • Occupancy and therefore revenue driven by University economy • Growth and economic situation of University is based on: - student demand - age demographics - demand of that University is less correlated with national economy • Lower correlation makes investors portfolio more diversified and safer (that’s hard to find now) • #1 factor in determining occupancy: Location, proximity to campus • #2 management • #3 supply demand • If you’re close to campus- the “10 to” rule- all the stats show you stay full • Biggest risk: over supply at better or equal location • Risk mitigators: barriers to entry: - Location- close to campus - cost of construction - management: economies of scale, manager experience, niche market, need to be experts in student housing • Recession resistant: during recession demand skyrocketed, everyone went back to school • Education more vital now than ever before for job competition- huge international demand • On value adds: rents are raised per bed not per unit, creating significant upside with smaller burden in the individual leases • Slightly higher cap rates, historically strong returns attracting a lot of institutional capital now • Easy to predict the successful projects- they are close to campus at a major or stabilized University • If you miss a lease up- only stuck for a year then you have tens of thousands of college students coming back the next year • Concession competition: maybe you have to give out a free month or gift card but still get fully leased up. The down years tend to be less but still positive cash flow

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Conventional

• Every asset is different and based almost entirely on location’s economic drivers: downtown economic conditions, local manufacturing plant, jobs, schools or access to public transportation • Tend to move in correlation with national cycles • Higher end properties tend to get hurt in rough economies • If local economy gets soft or the supply over built may be impossible to recover • More susceptible to total loss to the lender- for example, during the recession people started renting out their homes creating a huge shadow rental market that competed directly with multifamily assets. People were desperate, so they slashed rental rates and many multi-family apartment complexes went back to the bank • Currently there is an enormous amount of building going on • Much more susceptible to supply and demand • Barriers to entry are low- easy to build within proximity • Cap rates are lower than student housing and there are many competitors • Immense amount of individual due diligence is required and it’s still very hard to predict which projects will do well and which will struggle and be more susceptible to any economic change. Every property has a story that needs to be really understood • Housing prices can be positive or negative and will drive some demand purely for economic reasons • Lower returns from lower cap rates from more demand since more people know conventional than student housing dynamics • Value add is all per unit - not per bed. It is much harder and likely costly to create the upside value • Conventional is generally a less diversified asset since it is more correlated to the national economy probably like other investments in the portfolio

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NP Competitive Advantage Aliso Viejo, CA—Management is a crucial determinant in the future performance of a student housing property or investment. The occupancy, rental rates, and collection rates are key derivatives of the management’s competency. Management competency requires more than just knowledge specific to the property and asset management within the local microeconomy surrounding each university: it needs to understand the reputation and current trends within that microeconomy. There is an art to the science. The NP advantage is further created by having the brightest and best in the industry hyper-focused on only our 4,466 beds throughout the country. This gives them the ability to customize marketing, pricing, and reputation management for each culture or environment. After all, students in Mississippi may have very different expectations of off-campus living than students in Montana or Texas. Compare this to being a few thousand rentable beds amongst tens of thousands of other beds managed through a third-party manager that has the same obligation to other property owners (and those tens of thousands of beds) as they do to you. Being as microfocused as we are, no one can care about our residences and properties the way we do.

The

‘100’ Club

Total # of Beds

August 4, 2017 (17/18 prelease)

Aug 1, 2018 (18/19 prelease)

Almond Tree

39

54.05%

100.00%

Alpine Flats

195

100.00%

100.00%

Apple Tree Cove*

27

N/A

100.00%

Auraria Student Lofts

438

100.00%

100.00%

College Crest

67

78.45%

100.00%

Dixie 9

36

17.14%

100.00%

Gather Bellingham

417

N/A

100.00%

Stadium View

500

100.00%

100.00%

The Mark

229

56.77%

100.00%

University Flats

262

N/A

100.00%

University Gardens Apt

193

100.00%

100.00%

University Gateway

285

72.70%

100.00%

University Towers

248

54.66%

100.00%

Mountain Valley Apt

658

42.90%

99.24%

The Vue at MacGregor

375

56.82%

98.40%

Loft Vue

147

51.70%

95.92%

Taylor Bend

288

91.67%

93.75%

Duck Abbey

70

82.86%

90.00%

4,474

59%

99%

*

Total

N/A = Newly Acquired * Rehab/Construction

Keeping a watchful eye on prelease percentage is a key to projecting occupancy and performance to come. Year-over-year preleasing reflects the strength of the portfolio and indicates the potential to meet performance objectives in the year ahead. As of August 1, with about a month to go, 12 properties have already joined the “100 Club!” The Nelson Partners portfolio is 97% preleased as a whole.

Editor’s Notes

Angelica Proctor-Saddler

At Nelson Partners, we are working to provide better insight and communication to our investors. I hope you enjoyed the newsletter, and we hope to have a lot of fun with it in the future. The final Nelson Brothers Q1 reports were delayed during the separation and reestablishment, but they have all been sent out. The first Nelson Partners

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quarterly reports will start with Q2 and should be delivered the beginning of August. Going forward, investors should receive timely quarterly reports at the end of each month following quarter conclusion. Future editions of the NP Times will include topics such as real-time updates and breaking news covering Nelson Partners

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and our properties. For this edition, we are spotlighting five properties: Auraria Student Lofts, Duck Abbey, Vue on MacGregor, The Mark, and Loft Vue. In the meantime, please always feel free to contact me or a member of our team at any time. We’d love to hear from You!

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NP Acquires 2 New 100% Leased Student Housing Complexes Greeley, CO – University Greeley Flats & Bellingham, WA – The Gathering Bellingham The prime quality properties characteristic to be expected from Nelson Partners Student Housing investments is evident in the first two premiere purchases previewed below:

Watch Video JUNE 25, 2018: Nelson Partners Student Housing Acquires The Gathering Nelson Partners purchased a 113-unit and 417-bed property located two blocks from Western Washington University (WWU), near downtown Bellingham. New construction was completed in the summer of 2017, and the property opened for the 17/18 academic year with 100% occupancy. As the only truly purpose-built pedestrian student housing property in the local market, NP Gathering is already preleased at 100% for the 18/19 school year. Nelson Partners believes that the key to maintaining investment objectives at NP Gathering is the overall strength of the student housing market, continued enrollment growth at WWU, and rental rate growth. The Gathering at Bellingham features luxury units, including high-end fit and finish and stainless-steel appliances, granite countertops, faux-wood floors, open floor plans, and high-quality

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fixtures. With coveted student property amenities—consisting of a 24-hour fitness center, community lounge with billiards table, video-game room, study lounge with group and private study areas, computer lab, and rooftop terrace with sweeping views of the mountains and Bellingham Bay—the property investment is poised for success. Sandy Simmons, the new director of national sales and West Coast distribution, says, ”This Class A student housing property can make an ideal part of a 1031 exit strategy.” Situated between the high growth metros of Seattle and Vancouver with recently renovated academic buildings, athletic facilities, classrooms, and improved parking, in addition to future plans including a $141 million science building and waterfront campus expansion, the WWU market boasts strong fundamentals. Click to Watch the Video

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JUNE 25, 2018: Nelson Partners Student Housing Acquires University Flats Near Northern Colorado University

Watch Video Serving the University of Northern Colorado, University Flats was the initial purchase after Patrick and Brian’s split of business interest. Nelson Partners Student Housing purchased the 92-unit and 262-bed property for $21,907,000. The beautiful gardenstyle student apartment community sits on approximately 4.12 acres and consists of eight three-story buildings with feature amenities including a single-story pool building, fitness center, and clubhouse.

Internet access, and free parking.

The new two- and threebedroom apartments at University Flats Greeley feature granite countertops, private bathrooms, basic cable TV, wireless high-speed

as well as dining room and living room furniture. Free access to all these great amenities is included in your low monthly cost.

Furnishings in each apartment include a bed, dresser, desk, and chairs in each bedroom,

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Located less than a mile from the University of Northern Colorado (with its enrollment of over 12,000 students) and approximately one mile from the North Colorado Medical Center (a state-of-theart facility renowned for burn and trauma care, cardiac program, and cancer care program), NP’s first offering enjoys a current 100% occupancy and is preleased for the 18/19 school year at 100% as well! Click to Watch the Video

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Auraria Lofts, July Announcements Auraria Student Lofts, ASL, is two blocks from the largest college campus in Colorado. Serving 55,590 students from the University of Colorado Denver, the Community College of Denver, and Metro State University, it is no wonder how ASL maintains a 99.77% occupancy! As of July 13, 2018, Auraria has secured 167 renewals of a total 275 new leases and is a top member of the NP “100 Club,” being

preleased at 100% for 2018–2019 next year. Auraria Student Lofts features fully furnished and renovated highrise units (including appliances and flat-screen television), and the property holds a rooftop swimming pool, fitness center, and lounge with multiple study areas as well as many competitive student amenities.

Hawaiian Summer Mixer The Nelson Brothers Property Management (PM) team is in tune and involved with the local community and residents. A Hawaiian resident mixer was hosted by PM for the summer. The University of Denver and Chancellor Rebecca Chopp unveiled the Denver Advantage Campus Framework Plan on May 30, 2018, “The needs of our campus and neighboring communities continue to evolve,”

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said Chopp. “We thought long and hard about what it means to plan for the future while keeping our core University values at the forefront. Education, the student experience and financial access remain our top priorities—to fulfill that promise, we’re creating spaces where people can establish a sense of belonging and build community.” Construction began on this project in summer of 2018!

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DUCK ABBEY, JULY DIGEST Just a quarter of a mile from the University of Oregon campus, the Abbey student housing apartments’ current occupancy is 97.14%. The last three years have seen an increase in bed count. However, the Nelson Partners competitive advantages have allowed the property to compete, and the investment shows promising performance fundamentals.

At 90%, Nelson Brothers Property Management is on track to admit Duck Abbey for membership into seven leases left to reach 100% preleased for the 2018–2019 academic year!

All-American

University of Oregon student-athletes compete as part of the Pac-12 Conference in the National Collegiate Athletic Association (NCAA). The Oregon Ducks are best known for their football team and track-and-field program.

For the first time in program history, the Oregon Ducks have two players selected for the prestigious McDonald's All-American game.

The organization announced on May 30, 2018, at the Women’s College World Series media day, “The Oregon softball team tied a program record, with four players being named National Fast-pitch Coaches Association All-Americans. From our intuitive and modern room-to-room design, to our colorful surroundings, it’s easy to see why we’re redefining the standard in University of Oregon housing. Just two blocks from campus, around the corner from scenic Amazon Park, minutes from the colorful city center, and close to essential LTD public transit stops, getting around town is a breeze!

Founded in 1876, the University of Oregon is a public flagship research university in Eugene, Oregon. The university has a Carnegie classification of “highest research activity.” UO is organized into five colleges and seven professional schools with a graduate school and offers 316 undergraduate and graduate degree programs.

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Vue on MacGregor, July

The market surrounding Vue on MacGregor is highly competitive, with 1600 new beds arriving prior to the 2017–2018 leasing year. This year, much of that inventory has been absorbed. In addition, Ms. Platt has direct experience working for the developer of Vue on MacGregor and overseeing the lease up from its inaugural two years. In combination with new marketing strategies and the local market absorption, Vue on MacGregor is currently leading the entire market, preleased at 85.87% compared to last year at 40.46%, an astounding increase of 45.41%!

The University of Houston is a Carnegie tier one state research university founded in 1927.

Local News

Taxes _________________ The property was assigned significantly higher than expected property tax assessment in 2016. The projected $25 million assessment came in at $35 million. In April, our property’s tax team was able to secure a substantial reduction in the assessment at $26 million for the 2016 and 2017 tax years. This accomplishment will subsequently reduce property tax expense for 2018 by 25%. The property should receive a refund—minus commissions paid to Paradigm, who oversaw the negotiations— of the excess taxes already paid within the next 60–90 days.

In 2017, the university reached a record enrollment level of 45,364 students. The Vue on MacGregor is located less than a mile from the University of Houston, and with current occupancy at 94.28% and favorable preleasing this summer, Vue Mac needs 24 leasers to join the NP “100 Club” soon!

Yelp Reviews _________________

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Market News _________________ The University of Houston Board of Regents approved the proposal to open the UH College of Medicine. According to Houston Public Media, the new medical school will open in 2020. More information on the development can be found at: Houston Public Media

“Kristen is a good manger and just worked to get the lights installed for better safety. Maintenance responds to requests quickly. “This complex is very convenient to U of H.”

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Loft Vue

Loft Vue’s current occupancy is 92.52%. Preleased for the 2018–2019 school year, Loft Vue is leased at 91.84% compared to 48.98% at this time last year! Texas Christian University (TCU) is a private university in Fort Worth, Texas. Since 2008, TCU has had a positive enrollment trend of 2.1%, with 10,489 students enrolled in 2017. Freshmen and sophomores are required to live on campus, and TCU has a master housing plan proposing a new fraternity/sorority Greek village, expected to be finished by fall 2018. The new housing will include a projected 781 total beds, an increase of approximately 250 beds from the current Greek housing. In addition, students living with roommates in small single-family homes is a trend in this local market, and with 13,000 students and 250 homes in the area, it is a challenge to fully lease up Loft Vue. DEVELOP

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Loft Vue secured 30 renewals and needs 20 leases to reach the 100% goal! Nelson Partners Property Management is actively engaged with residents and the university’s local community.

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Texas Christian University – - Fort Worth, Texas TCU is a private university with a positive enrollment trend since 2008 and offers 119 undergraduate programs, 53 graduate degrees, and 28 doctoral degrees in six colleges. The TCU Horned Frogs are the athletic teams that represent TCU. The 18 varsity teams participate in NCAA Division I and in the Football Bowl Subdivision for football, competing mostly in the Big 12 Conference. The school was a founding member of the Southwest Conference and was a member of the Western Athletic Conference, USA, and the Mountain West Conference before joining the Big 12.

The PM team provides donuts in the office weekly, held a “Meet the New Manager” with Natasha Harmon in May, and hosted a summer BBQ on July 13, 2018.

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The Mark July Magazine

The Mark ended Q1 2018 with a physical occupancy of 69% and is currently at 80.35%. The Mark is preleased at 100% compared to last year at 50.22%, which is a 49.78% improvement! The Mark is located less than a third of a mile from the campus of Arizona State University (ASU) and a short walk to the Dorsey and University St. Valley Metro Light Rail (Metro) station.

“This New American University is measured by who it includes, not who it excludes; pursues research and discovery that benefits the public good; and assumes major responsibility for the economic, social, and cultural vitality and health and well-being of the communities it serves.” – ASU Facebook

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Amenities construction on this property—including a swimming pool with lazy river, wading area and slide, outdoor theater, fire pits, a double-decker spa and grilling and entertainment lanai—was completed in December 2017.

“Arizona State University is ranked as one of the top 100 research universities in the world. The university's mission is to create a new model for higher education in the United States that meets the challenges of the 21st century.”

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NP Times August 2018  
NP Times August 2018  
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