Analysis of Investments

NB Stadium View

Nelson Brothers

Nelson Brothers Stadium View is an investment into a Class A student housing apartment complex in Bozeman, Montana. The property is marketed to students at Montana State University. The property consists of a total of 499 beds across 139 units. The property was built in 2015.

Investment Highlights

  • Yr. 1 Cash-on-Cash 7.00%
  • Initial Occupancy 99.40%
  • Est. Time Horizon None YEARS
  • Current Cash Flow
  • Yr. 1 Cap Rate to Investor 5.96%
  • Investor Purchase Price $47,742,335
  • Total Offering Size $19,623,335

Loan Information

The total loan is $28,145,000 and is from Fannie Mae. The term is for a total of 10 years with the first 3 years being interest only. When amortization begins it will be based on a 30 year schedule. The interest rate is fixed at a rate of 3.88%.

  • Yr. 1 DSCR 2.59
  • Loan-to-Offering 58.90%
  • Hold Period DSCR 2.09

Tenant Information & Lease Terms

The property is marketed to students at Montana State University. Leases for off-campus student housing is generally on a 12-month schedule; however, it is possible that students may sub-lease their units during the summer. 
Leases are signed on an individual basis and not per unit. This is why the cost per bed rather than per unit and square foot are more relevant when analyzing student housing.
Parents are required to sign a guarantee of rent payments on leases for students.

Key Positives

  • The university has created a focused effort on increasing enrollment at the university. They have increased enrollment over 16% since 2010.

  • As of 2013 the university enrollment had surpassed the projections for 2014 enrollment and this trend is projected to continue.

  • The on campus housing options allow for only 3,532 students to reside on campus. This represents a total of 22.5% of their current enrollment. Due to the low number of students that can live on campus, there is an opportunity for off-campus housing to capitalize.

  • The property was built in 2015 and is new construction. This decreases the likelihood for capital expenditures to be required at the property.

Key Risks to Consider

  • The sponsor is using aggressive occupancy assumptions. Their ProForma states they will be 100% occupied during the hold term.

  • The rent growth is assumed to be 3% each year of the hold term which is aggressive for the local area.

  • The local area is not infill and there is ample land that may be developed into competing properties.

  • There is a newly built student housing facility that is planned to be open in Fall of 2016.

  • The population in the area is boosted by the student population. In the 5-mile radius of the subject, students account for 31% of the total occupancy in the area.

  • The sponsor and appraiser have different projections as far as year 1 NOI. The difference is 14.52% and this can be attributed to the sponsor projecting Operating Expenses to be 26% less than what the appraiser is projecting.

Investment Sponsor Information

Nelson Brothers

According to the sponsor's website: "Since its inception in 2007, Nelson Brothers has acquired and managed over $240 million in assets through the acquisition of 19 student housing properties and 3 assisted living properties across 9 states. Nelson Brothers focuses on targeted growth opportunities and value-added investments for its clients through capital improvements, cost efficiency, and revenue maximization. Its entities include Nelson Brothers Professional Real Estate LLC, and Nelson Brothers Property Management Inc."