Toronto-based REIT taps Ottawa’s student housing market with two building purchases

student housing
A rendering of The Annex, the University of Ottawa's latest student housing complex.

A Toronto-based company has scooped up a pair of residential complexes near the University of Ottawa in a bid to establish a local foothold in what it considers one of the last untapped niches in Canadian real estate: student housing.

Alignvest Student Housing, a private real estate investment trust established last year, says Canada still lags far behind countries such as the United States and the United Kingdom in the amount of rental accommodation devoted to post-secondary students.

“It’s a proven asset class around the world,” said Jonathan Turnbull, a managing partner at the REIT. “From our perspective, Canada is underdeveloped relative to other countries. We’re trying to be a leader in the space.”

Turnbull said Ottawa, with its hefty population of more than 60,000 university students, is “a phenomenal market” in which to invest. To that end, two of the REIT’s first three properties are located in the National Capital Region, where there are currently about 8,500 residence beds.

In the past two and a half months, the venture has bought two buildings within easy walking distance of UOttawa: it closed a deal last fall on a former hotel at 111 Cooper St. that was converted into a private student residence three years ago, and earlier this week it announced it purchased The Annex, a new nine-storey, 503-bed highrise at 265 Laurier Ave. E. that was built specifically to house students.

New school residences

And these aren’t your father’s residence buildings. In contrast to the old-school design that often featured a single bathroom shared among several apartments, each unit in The Annex comes with its own ensuite bathroom. A state-of-the-art fitness facility is right on-site, with membership included in the housing fee, as well as a coffee shop.

High-speed Wi-Fi, a games room and a communal terrace with picnic tables are also among the amenities at the property, which features 159 suites ranging from studios to five-bedroom units.

Industry experts say it’s all part of a trend toward higher-end accommodations designed to attract students in an increasingly competitive environment for universities, which are trying to keep up with rising demand for residence space.

Today’s students are much more likely to cite the quality of the rooms where they live as a main reason for choosing a particular university than their counterparts in previous generations, said Rachelle Clark, director of housing services at the University of Ottawa.

“Buildings like The Annex definitely give us a competitive advantage,” she told OBJ. “They are more cutting-edge; they’ll often come with amenities. There’s things that are really attractive to students.”

Private sector partnerships

The Annex is also part of a growing move toward more partnerships between private investors such as Alignvest and post-secondary institutions. Under a licensing agreement with the REIT, the University of Ottawa assigns students to the building and manages the property just as it would any other residence it runs.

REITs and other institutional investors see student housing as a steady, sure-fire source of long-term returns, and the Canada Pension Plan Investment Board alone has pumped more than $4 billion into student housing since 2015. Meanwhile, cash-strapped universities use such agreements to expand their housing portfolios without necessarily having to shell out precious funds of their own.

“The partnerships that we have with the private sector definitely benefit the university and students,” said Clark, noting four of the school’s 11 residence buildings operate under such agreements.

“It allows the university to keep up with the demand for newer, state-of-the-art residences that students are looking for while minimizing our capital investment that’s required to build these new residence buildings.”

Turnbull says owning student housing is “a very different business” from investing in more typical multi-family apartment buildings.

University residences often experience as much as 50 per cent annual turnover, up to five times the rate at a typical multi-family property. But since most student buildings generally have more residents per unit and owners typically collect rent from every single occupant, student residences usually generate more revenue per square foot than their multi-family equivalents.

And Turnbull said the number of post-secondary students in Canada continues to grow at a faster rate than the overall population, making the private student housing space fertile territory for future growth.

“From a demographic standpoint, it is a more attractive market,” he said. “We’re building this business for the long term.”