One of the largest developers in the space, Scion has an impressive 95,000 beds under their management across 83 schools in 35 states. Scion, which is a registered investment advisor, manages more than $10 billion in assets. The firm focuses on the middle market almost exclusively, buying properties at big universities. Its principal owner and leader, Robert Bronstein, was the company’s founder. During the year of 2020 it experienced unprecedented activity and is now expecting even more growth, spurred on by shifting student preferences and a changing marketplace.
As their founder and CEO, Bronstein told us, Scion’s strategy is to be very deliberate and targeted. The firm seems particularly focused on large public universities. Their portfolio is located near anchor institutions. These are known as the “SEC schools,” and consist of University of Florida, University of Alabama, University of Oklahoma, University of Mississippi, Texas A&M, and Clemson University.
During a recent conversation about student housing, Bronstein sounded hopeful for Scion’s long-term outlook. He acknowledged that new developments are down due to increased construction and capital costs, but he’s optimistic about the long-term opportunities. He noted, “I think that people are saying, ‘You know what, there’s a building that’s three years old, and it costs 30% less than a brand new building, and I wasn’t going to use the hot tub on the roof anyhow. I’m going to go with the less expensive option.’”
The evolution of student housing paints a picture of today’s extremely competitive tenant preference. From the cutting-edge co-working spaces to the remote interview rooms, students are back at work. Instead, they’re ditching the former luxuries of golf simulators and movie theaters. A recent report from Clean Energy Works illustrates that dramatic change within the sector. Luxury amenities don’t cut it anymore. Functionality, convenience, and affordability set the tone.
Bronstein pointed out a noticeable trend: “What we’re seeing is fall-off at the top and the bottom.” This comment is symptomatic of the broader market forces at play that students are moving to housing that they can afford. In particular, he noted how the lower end of the market is changing. Residents are going back to their relatively less expensive rental homes on the outskirts of campuses.
As for the demand for more housing at big national flagship public universities, it is a very hot market. Bronstein noted that those flagship institutions enrolling 40,000-60,000 students are doing well. Still, somehow, they do it so they keep getting record growth year after year. These schools have a hard time meeting their housing needs. “They’re not even coming close to being able to satisfy the housing needs that exist in these markets,” he remarked.
As Scion continues to make hay during these times, Bronstein assured that the company won’t stop seeking out new assets to collect. He said, “We’re approaching it like, alright, this is a market that we want to operate in. We’re never going to compete when they’re in it with 300 beds. We will own three or four different assets within our portfolio. At a few hundred or even a thousand beds, we’ll have true operating leverage!
The overall market for student housing appears to be rebounding, if not in spades. This follows a dip in transaction volume as macroeconomic headwinds presented some challenges to the sector. Walker and Dunlop recently reported that the market is recovering. Interest rates are starting to moderate, institutional capital is reestablishing its confidence, and enrollment at large research universities remains at all time highs.
Based on Bronstein’s insights, Scion certainly seems equipped to thrive in this changing market. He stated his very high conviction on certain markets. You can’t be bullish enough about Madison, Wisconsin, Ann Arbor, Michigan, Athens, Georgia—all these kinds of places—these university-centered economies.”
Scion’s communities reflect these shifts in preferences. For example, their property Annex in Oxford, Ohio is designed exclusively with students from nearby Miami University in mind. As usual with Scion, it’s more about functionality and affordability than flash. They are doing their part to serve the needs of today’s students while responding to the dynamic state of the housing market.