Developer Buys Site for Student Housing Project Near Arizona State University

Article originally posted on CoStar on May 8, 2024

Multifamily developer LV Collective, along with two partners, have closed on a deal to build a luxury, off-campus student housing complex in Tempe, Arizona, near Arizona State University. The transaction comes as the asset class outperforms its traditional multifamily peers and investors, bringing in big dollars.

Located less than a quarter mile from the university campus at 1020 E. Apache Blvd., the development, dubbed the Rambler, is slated to measure 552,380 square feet and include 289 units ranging in size from studios to four bedrooms. In total, the project will open 829 beds to students.

“With a prime location, close to Arizona State’s campus and the Phoenix/Tempe light rail system, and unmatched amenities designed specifically for ASU students, Rambler will be an attractive addition to the area,” David Kanne, LV Collective’s CEO, said in a statement.

Financial details of the project were not disclosed, but CoStar data shows LV Collective purchased the site that included a 55-room Super 8 motel in March for $15 million from On Pointe Property Management. Work began that same month with completion of the project expected in time for the 2026-2027 school year, the company said.

Student residents will have access to an on-site cafe, a study mezzanine for coworking, private study rooms, two pools with hot tubs, a jumbotron and a two-story fitness facility.

LV Collective’s partners in the deal include Kayne Anderson Real Estate, an alternative investment management firm, and insurance company Pacific Life, which provided debt for the project.

The deal comes during a downturn for traditional multifamily development, particularly in the Sun Belt, as the region’s new supply has outpaced robust demand. As a result, asking rents in Tempe have declined 1.5% over the past year, while in the Phoenix area at large, rents have decreased by more than 2% over the same time, according to CoStar data.

In contrast, asking rents for student housing near Arizona State University have increased by 1.22% on a yearly basis, even as the supply of beds has grown by 82 basis points.

Driven by this outperformance, investment dollars have flown into the student housing space as colleges struggle to build enough on-campus housing to meet student demand. A study released in March by Coldwell Banker showed that U.S. investment in student housing has surpassed $10 billion and is projected to exceed $14 billion by 2027.

That positive outlook for student housing got another boost in April when KKR, an alternative asset manager, agreed to purchase a 19-property student housing portfolio from Blackstone for $1.64 billion that is expected to close in the third quarter. Blackstone will likewise remain in the student-housing business through its American Campus Communities unit, which included roughly 190 student-housing developments before the deal.

“We believe student housing in the top university markets will continue to benefit from strong enrollment growth and structural constraints on new supply,” Travis Roberts, CEO of the KKR-owned University Partners said at the time.

Enrollment at Arizona State University has increased every year since 2017, according to CoStar data.