Bought into a 168 bed LP on an enrollment number that counted students who never needed a bed

The enrollment work matters, though I think the thing that priced your loss was the building. At $112k a bed you paid for demand from one institution, and a four bedroom per unit layout has almost no second use if that institution shrinks. Converting back toward conventional apartments means the parking ratio and any cap on unrelated occupants in a dwelling have to permit it, and those caps are set locally and differ city to city, so check the actual ordinance before assuming a fallback exists. I look at the land under these deals first for exactly that reason. A site that would take a conventional multifamily plan at market rent gives you a floor. A purpose-built by-the-bed asset three blocks from a school losing residential undergrads has no floor at all, it just has next August.

The part I keep rereading is that the true statement and the useful statement were different numbers in the same sentence. Total headcount up 4%, residential undergrads down 11%. I would rather own something dull at a school that is turning away applicants than earn two extra points at a place that discounts tuition to fill a class. Thanks for putting the exit price in writing, most people leave that out.

Same shape as small town rentals near a single employer. One demand source, no second use, and the exit knows it.

Question from the screening side, since that is what I have been buried in. Did the leases carry parent guaranties, and if they did, was the collection loss actually low? I ask because your problem was empty beds rather than unpaid ones, and I have been assuming guaranties were the main risk control in this sector. Sounds like they protect you from the resident who stops paying and do nothing at all about the class that never showed up.

Two things I want to understand better before I ever look at one of these. First, how did you and the buyer land on 0.58? Was there an appraisal or a recent capital account statement behind it, or was that just the only bid you could get. Second, did the LP agreement give the sponsor a right of first refusal on transfers, because if it did, the sponsor effectively set your price by declining. That is the part I would not have thought to ask about six months ago.

I would push back gently on one implication, quill. Nothing here says the position recovers if you hold it. When I model holding through a bad stretch I want a reason the demand comes back, and a smaller cohort reaching college age is not a cycle that reverses on a schedule. Selling at 0.58 in year two may look better in 2030 than sitting through three more reserve funding requests at a school with a 70% retention rate. The mistake was the entry, and everything after it was a choice between bad outcomes.