Bob Nelson of Pacwest Real Estate Investments and René Nelson of Pacwest Commercial Real Estate Investment sit down with David Moore of Equity Advantage on this episode of Ask the Experts to discuss how the new Phil Knight Science Center and the transition of Hayward Field stand to impact student housing investments, including availability, cost, and more.
Hello. David Moore here for another episode of Ask the Experts. I’ve two wonderful, wonderful experts here today with me: Rene and Bob Nelson. I have had the pleasure of knowing Bob for, how many years, probably almost 30 years.
Bob Nelson: Yes.
David Moore: In 1990, it’s been a while. We’re not that old though.
Bob Nelson: Speak for yourself.
David Moore: Yeah, yeah, yeah. And Rene, it’s been probably 20 some odd years now with you, too.
Rene Nelson: Yes. Absolutely.
David Moore: It’s great to have you both here, and thanks for all the great times through the years. What we had today, we had a CCM meeting, and we talked about senior housing, we talked about some of the development going on coast to coast, in that world, but you two are a lot closer to sort of the opposite of the spectrum, the student housing. I just wanted to see if you could share with our viewers a little bit of what’s going on with the student housing world and what’s happened with Eugene.
Rene, you’ve done some big projects down there over the years. I know you’ve got some stuff on your plate, too, so you would you mind telling us a little bit about what you’ve got going on?
And Bob, I know you’re going to have something to add too, so I’ll sit back and let you guys tell us a little bit about what’s happened in Eugene and what do you see happening nation-wide, who the players are, and if there’s a shift someplace, roughly what you think it’s going to be.
Eugene Student Housing Investment Market
Rene Nelson: Sure. Right now, what we’re seeing in the Eugene market is there’s lots of national student housing developers that are interested in our market. I really think that’s because of what’s happening with the Phil Knight Science Center and Hayward Field. They’re really going to try to transition Hayward Field to look like a European track. They’re trying to bring in some high, high athletes. It will look great for the University of Oregon. It really is putting us back on the map.
You know, for years our football program was at the pinnacle. Through some changes there, we’ve kind of slipped off, but we still have a high caliber of sports program, whether it’s track and field, basketball.
David Moore: Basketball, sure.
Rene Nelson: Women’s softball. I mean, we’re really at the top with competing with all the other national schools. That keeps us on the radar for the developers.
Part of the issue that we’ve had with the University of Oregon is their enrollment stays pretty steady. They haven’t built a lot of additional classrooms yet. The Phil Knight campus will really add a huge benefit. They anticipate that’s going to add about 750 students and professors in total, just at the scratch of the beginning of it.
David Moore: Wow.
Rene Nelson: We know that, that’s going to add some additional students. The national student housing developers look are our market and know that we still have a large influx of out-of-state investors as well as international students that what to come to our market.
We really have two different dynamics. We’ve got the older complexes that were built in the ’60s, ’70s, and ’80s. Those are your typical, three-story, wood frame apartment complexes. Those are just filled a waiting list. Then, you’ve got the nicer complexes where the rents are a little higher.
Bob Nelson: The brand new complexes.
Rene Nelson: The brand new complexes. They’re about $200 a bedroom higher, so not every student can afford that.
David Moore: Not every student can afford it… Not every parent!
David Moore: I know you had a Duck, and I had Duck graduate, and you had a Duck graduate. I’ve got two more Ducks down there. Mine have been… I had one in one of the facilities that you worked on, and she was very happy, very impressed with the place. My older daughter, Cecilia, she stayed in some of the old beater houses, but they all have stories, and stories to tell, and great memories.
But, it’s definitely a different marketplace. You talk about the softball down at Oregon, and the women’s softball, I mean, that field is about the premier space in the whole campus, I mean, for an athletic facility, and what is right adjacent to it, I mean, what was built right before that went in across the street.
New Student Housing Offers “Country Club” Style Amenities
Rene Nelson: Yeah, absolutely. It’s amazing we’ve got local developers that have built some smaller complexes, and those are full. Now, with like you were talking about, with what’s coming with the track and field and some different things, I mean, we’re just starting to see some pretty amazing student housing developments.
With those larger national developers, a lot of times what they bring to the table is the amenity package. Whether it’s free tanning, or roof-top pools, and sand volleyball pits, that’s where that student gets that quality of life. That’s what the students call it, quality of life. Mom and dad look at it and go, wow, you’re going to drain my bank account.
Bob Nelson: That’s the country club.
David Moore: Well, I think you’d agree. You start walking through the parking lots and you wish you could be one of the students.
Bob Nelson: Yes.
David Moore: I mean, the parking lots and the newer facilities are big. You’ve got lots of foreign students here and they’ve got lots of really nice cars. I mean, you’ve got student housing with Porsches and Mercedes. I’ve actually even seen some Lamborghinis in there, too.
Rene Nelson: Yes.
David Moore: If you like that kind of thing. It’s really amazing.
Bob Nelson: What’s not to like?
David Moore: So, we’ve just got to figure out and tell everybody how they can make enough money to like that kind of thing, to get that kind of thing, right?
Bob Nelson: Right. The campus is a wide range of age groups, sizes, and in some instances, back in 2005 to 2000… somewhere in that range, a lot of four-bedroom apartment units were created, in part, as an answer to a restrictive parking requirement, that you had to have X number of parking spaces per unit. If you went with more bedrooms, you still only had to have so many parking spaces per unit, so that reduces the amount of parking that you would have to provide.
It became an interesting thing. Those properties hit a bit of a dilemma in that they didn’t have the amenity package that was generated in the most recent apartment complexes. It’s been an interesting back and forth situation, however, there seems to be a chicken for every roost. It becomes an interesting thing from an investor’s standpoint. We have people that are maybe more concerned with the preowned, older, lower priced per unit complex because they make greater sense for a rate of return standpoint.
David Moore: That value add type thing.
Bob Nelson: That value add thing.
Rene Nelson: I totally agree with that, yeah. That value add is a great play in the market.
Bob Nelson: Yet there really aren’t any slummy things on campus as I would perceive it. Everybody saw slum, they bought it and fixed it up. Not slum, allowed to slide back in its condition, may be a better way to say it.
David Moore: So, it’s sort of funny, we were talking about cars a second ago. I’m going to bring it back. I like cars, so we’re going to bring it back to cars. You’re talking about facilities where they’re saying you’ve got to have a minimum number of cars, and here we are, if look Multnomah County, they’re saying you can only have a max number of parking spots. That’s what irritates everybody else, so you’re looking both sides of this whole thing.
One of the comments that they made during the presentation today was the old classic location, location, location, location comment. I think he was sort of saying, well, it’s not as much maybe location as it is where the jobs are these days.
It’s sort of interesting, after the election you think, okay, people would call up and say, where looks good? What do you think is going to be a good spot? And you think about, okay, who won that election? What he had talked about doing and we’re starting to see changes in all this industrial Americas coming alive, right? So, you’ve got a situation where, yeah, the housing…
Bob Nelson: If there’s any income, there’s income to generate to pay rent. And if there is no income being generated because the jobs aren’t there, there’s no money to pay rent. It’s that simple. Focus on employment base and then focus on location.
If you say, hey, the community doesn’t have a large enough employment base, well, guess what? There’s not enough people to pay rent, bottom line. You might focus on a little different market or a little different asset type. It is absolutely true. I’ve had that as part of my portfolio design. As I look at investment strategies for individuals to continually look at, what’s the health of the economy, what’s the health of the job market?
David Moore: Well, so we look at the state and we’re talking about student housing, and you start looking at student attendance, the tuition costs, and we’re starting to look at minimum wage issues here in this state, which they talked about an impact on the university is dramatic. I mean, they’re talking about increasing tuition a whole bunch just because of that minimum wage. Anybody that was getting $15 is no longer going to be happy at $15, and so on and so forth.
Bob Nelson: But, it’s interesting, the minimum wage doesn’t really produce much of a monthly income. We discussed that one a little bit ago. That’s a tough situation. It’s one thing to have… how many jobs at the minimum wage level and how many jobs at the skilled level that will also start to dictate the health of a local region?
Rene Nelson: Yeah, I would agree.
David Moore: So, we’ve got a world where it’s been track town US and it’s going to be track town earth, I guess.
Rene Nelson: Yeah, that’s really true. That’s what’s happening.
Bob Nelson: This year is going to be pretty amazing. Old Hayward Field being knocked down and creating this huge arena. I mean, it looks almost like something that Roman chariot runs should go through. Again, we’re very blessed that Phil Knight was a student and graduated, ran for Bill Bowerman, and went on, the two of them to form Nike, and he brings a huge amount of money back to make his campus the campus of the nation, possibly the world. It’s beautiful. It’s absolutely amazing. Without him, we would be, I’m not sure what I would equate it to.
Rene Nelson: Average.
Bob Nelson: Average, right. And, we’re not average.
David Moore: Well, yeah. Eugene has definitely benefited from him. Stanford has benefited a lot from him.
Rene Nelson: Yes.
David Moore: Oregon State has. PSU has.
Bob Nelson: Absolutely.
David Moore: I mean, OHSU has.
Rene Nelson: Yes.
David Moore: Yeah, he’s definitely an asset to our, just to the country, actually.
Bob Nelson: Absolutely.
David Moore: I was going to say to our region, but it’s beyond that. Thank you very much.
Once again, David Moore with Bob and Rene Nelson, and here to answer your questions. Thank you.
When you need expert advice on how to navigate the student housing investment market, contact Bob Nelson with Pacwest Real Estate Investments at 541-485-8100.