Demand-driven real estate: senior and student housing (with Romaine Bostick, Katie Greifeld)

Merrill focuses on demand-driven asset classes like student housing, senior housing, medical properties, and self-storage, which are resilient through cycles. He notes that 15-20% of colleges may go out of business, so they focus on public universities with growing enrollment. On senior housing, 80,000 people turn 80 every month, and supply is not keeping up, creating a significant undersupply in 3-6 years. Higher rates have choked off supply, which helps existing assets. DPI (distributions to paid-in capital) is the new IRR.

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Harrison Street Asset Management 2.5
Asset Manager
Christopher Merrill 8.5

Demand-driven real estate: senior and student housing (with Romaine Bostick, Katie Greifeld)

Christopher Merrill

The focus for our business has not been on macro, but on the demand side. Investing in areas around education and healthcare where demand is consistent in good and bad times has been our thesis. That's student housing, senior housing, medical properties, self-storage—very strong, resilient asset classes.

Demand-driven assets are less sensitive to the macro cycle.
Christopher Merrill

Of the 4,000 schools, you're probably going to see 15-20% go out of business. So it's very important to focus on schools that are going to be the enrollment takers. We focus on public universities with great long-term demand drivers. Only 15-20% of kids can be housed on campus, so developing off-campus is very important.

The student housing market is bifurcated; only strong universities will thrive.
Christopher Merrill

80,000 people turn 80 every month. When you look at 85+, almost one-third has some level of dementia. People are living longer, and it's very hard to take care of a loved one with health issues. The big issue is supply isn't there. We're going to wake up in 3, 4, 5, 6 years and be so undersupplied in this segment.

Demographics create a structural demand tailwind for senior housing.
Christopher Merrill

Higher rates and inflation mean development is very difficult, so supply has been choked off. We're in asset classes that can reprice on a monthly or annual basis. These are great asset classes to be in over a long period of time.

Higher rates act as a barrier to new supply, benefiting existing owners.

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