We’ve been hearing a lot of concerns about the “next recession.” Perfectly understandable. The last recession shook up so many of us. It had such a direct and dramatic impact on so many.
Operating under the old adage of “once bitten, twice shy,” we are noticing hesitation with many investors starting to creep back in. Especially if those investors are considering California real estate or the stock market. Folks are flat out frightened about the prospects of investing at the peak of a cycle.
There is legitimate concern that some of the more tried-and-true investment vehicles are at a high. And there is certainly no shortage of economic Chicken Littles. Almost everywhere you look, there is a recession-scared Paul Revere shouting, “Red Ink is coming!”
What’s surprising though, is we’re also hearing optimism on the other side of the spectrum. Advisors pointing to low global interest rates forcing the reserve to slow interest rate hikes. Attractive P/E ratios, a business-friendly administration with deregulation policies, and a massive new tax bill are just now making their impact on economic growth.
You can imagine how confusing that can be for regular investors. This is one of the main reasons why NB Private Capital fell in love with student housing. The data on U.S. college enrollment over the last 40 years shows almost no correlation to macro-economic factors. War, peace, election years, recessions, high inflation, high interest rates — you name it — is everything we’ve experienced in that timeframe, and yet all we’ve seen is slow, steady, consistent growth in college enrollment.
We believe that growth will remain that way for most of the major colleges and universities. Some of the smaller, regional, specialty or junior/community colleges may be threatened, but the large, institutional, research and public universities continue to expand their applicants, support, endowments, etc. That’s our main investment focus right now — student housing.
Our feeling is that for non-commuter schools, students will enroll regardless of the economic cycle. For non-commuter schools, these students will need a place to live. Preferably close to campus. Since many of these campuses have been around for centuries, there is often, a limited, finite amount of space near campuses.
With that in mind, if we find what we believe to be the right student housing property, potentially well-positioned in a tight market, NB Private Capital believes we can keep the property well-occupied, with consistent profitable cash flow, tax shelter benefits and long-term appreciation potential — all in a brick and mortar, tangible investment. A property where the potential for cash flow derives from demand that is anchored by the historical stability of the university.