Investor Don Wenner is set to turn dorms into apartments as the nation’s colleges continue to battle falling enrollment compounded by the coronavirus.
Wenner’s DLP Real Estate Capital has picked up a 184-unit, 552-bed student housing community adjacent to Kutztown University in Kutztown, PA, for $21.1 million.
The investment firm, whose northern US headquarters are in Bethlehem, PA, acquired The Edge at Kutztown located at 2200 Lifestyle Lane in Berks County. They will rename the property DLP Kutztown and offer it as affordable housing to both students and families living in Kutztown and the Greater Lehigh Valley area.
The property was previously owned by Toll Bros. co-founder Bruce E. Toll’s BET Investments, which paid $30 million for it in 2011 when Kutztown had an all-time high enrollment of 10,707 students. Toll lost the property to foreclosure last year when Kutztown’s enrollment dropped to 7,892 as COVID shut down campuses across the US.
It’s not an issue confined to one school. According to the National Student Clearinghouse Research Center, undergraduate enrollment this spring is in its steepest decline so far since the pandemic began. A falloff in the number of births during the last recession is expected to drive numbers down further beginning in the mid-2020s.
Wenner, founder and CEO of DLP Real Estate Capital, said it makes sense to broaden the tenant base at The Edge beyond students.
“By transforming the community to a mix of both student and multifamily units, more hardworking individuals and families will be able to live here at a more affordable price,” he said. “The acquisition of DLP Kutztown adds to our growing portfolio and confirms our belief in the Greater Lehigh Valley where I was born and raised.”
Lou Davis, managing director of investments, added, “DLP Kutztown is a great example of how DLP is making an impact for our residents and investors alike. Our team remains bullish on the Greater Lehigh Valley area and we are committed to adding value in Kutztown through our regional expertise.”
DLP Kutztown features 184 apartments across 21 buildings situated on a 23-acre campus. Apartments feature a full appliance package, white cabinetry, vinyl tile flooring, Formica countertops, stacked in-unit washer and dryer and original bathrooms. Community features include a clubhouse, patio with grilling area, package receiving area, pool table, bike racks and vending machines.
A team from JLL Capital Markets that included Fran Coyne, Tom Hall, Mark Thomson and Carl Fiebig helped broker the sale.
“We have seen tremendous interest in our REO and NPL sales on behalf of servicers and lenders,” said Hall. “Given the competitive unit finishes and amenity package, an investor can reposition the asset and begin renting as market rate to further increase rental income upon acquisition.”
Wenner is not the first investor to flip the format on student housing. As far back as 2016, Pebb Capital began acquiring student housing, including Yeshiva University’s Alabama property in New York’s East Village. After paying $58 million for the building and transforming the dated dorms into furnished apartments, the company and its JV partners sold it last year for $104 million as a mixed-use property housing a mix of graduate students and young professionals.
Pebb Capital and TriArch also built Monarch Heights for Columbia University students but switched to a mixed-use format once the pandemic hit.
One of the fastest-growing companies in the US, DLP now has over $1 billion in assets under management, including more than 10,000 apartments and homes located primarily throughout the south and northeast, as well as a portfolio of more than 500 real estate loans, originated to active real estate investors.
