September 18, 2021

JF2573: University Off-Campus Housing Investing with Frederick Pierce

Frederick Pierce got the commercial real estate bug while still in college. Now, he owns one of the largest student housing companies in America. Today, Frederick is telling us the criteria he looks for in universities, the types of requirements current-day students look for in their housing, how he finds financing for these multimillion-dollar deals, and why he’s not developing multifamily housing in non-university settings. 

Frederick Pierce Real Estate Background:

  • Founder, President, and CEO of Pierce Education Properties
  • Actively involved full-time as an owner/operator in the student housing industry nationally 
  • Pierce Education Properties owns nearly 20 major student housing communities located in the Midwest, South, and Northeast sectors of the United States. 
  • He will begin construction of two sizable student housing projects in San Diego in the fourth quarter of this year that will be adjacent to San Diego State University, his alma mater.
  • Based in San Diego, CA
  • Say hi to him at:


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Ash Patel: Hello, Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel, and I’m with today’s guest, Fred Pierce. Fred is joining us from San Diego, California. He is the founder and CEO of Pierce Education Properties, which is an owner operator of student housing nationwide. Fred started this company 26 years ago. Pierce Education Properties owns nearly 20 major student housing communities, and is building additional communities later this year.

Frank, thank you for joining us, and how are you?

Fred Pierce: I’m doing just great. Really a pleasure to be here.

Ash Patel: Thank you. Fred, before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Fred Pierce: Yeah, so I own one of the largest student housing companies in America, and we go to the largest public universities in America. So we go to universities with 20,000 undergraduate students, or 25,000 total students, that play Division I Football at the Power Five Football conference universities, or those known as the Group of 5 universities, Football Conference universities, if they’re in major metropolitan areas. And we’ve had the good fortune that since founding the company, we’ve acquired more than 27,000 beds of student housing, more than a billion dollars nationwide.

Ash Patel: I’ve got to ask you this… Are you a huge football fan, or D1 schools just a metric to make sure you’re in a big location?

Fred Pierce: Yeah, that’s a great question. I get that question all the time. And if you come into my office, to commemorate all the universities where we’ve been involved, we have those little mini-football helmets; we’ve got a shelf of them, which is really kind of cool. If you look behind me, the bottom of—those feet that you see on that portrait, and I’m going to actually do this… That is a portrait of the greatest football coaches at San Diego State history. So John Madden and Don Coryell, Herm Edwards, Joe Gibbs… In any event. But to answer your question – yes, I am a football fan, and I’m a big college football fan. But the reason that’s our criteria is that athletics is a marketing tool for universities. And when they play big time Division I Football, pretty much most kids have heard of them, and as a result, there’s insatiable demand, enrollment demand at those universities. And that’s what you want. You want an anchor in any business, right? And in our business, my anchor is the neighboring university; enrollment needs to be strong, and enrollment is always strong at big time Division I Football universities.

Ash Patel: Fred, how did you get started 26 years ago in student housing?

Fred Pierce: It started when I was in college; this would have been in the early 1980s, and I got an internship with a real estate consulting firm. And I really got the commercial real estate bug, if you will, at that time. I saw how tangible commercial real estate was. I saw people could be very successful in that field. So when I was 21, I decided, “Someday I want to own my own company.” Now, I didn’t know that was going to be student housing or university real estate, but I knew it was going to be commercial real estate, and I set off for the first 10 years of my career as a real estate consultant, working on gigantic real estate projects all over the country. Ultimately, I ran commercial real estate consulting for Price Waterhouse, the now  Final Four accounting firm; PwC, they go by now. And then I got my opportunity, and my opportunity was that one of my consulting projects had been to redevelop all the land around my alma mater, San Diego State University. 131 acres, 100 acres to be acquired. And when a couple of major real estate developers weren’t successful in getting that project off the ground, the project where I’d been the consultant and had given the recommendations on how to do the project to the university, the university came back to me and said, “Fred, these smart people can’t find a way to make this happen, and it was your idea. What do you have to say for yourself?” And I say, “How about this? I’ll quit my job, I’ll start a company… You just make me the developer, and I’ll make it happen.” And well – that’s exactly what happened. They gave me a 90-day consulting assignment to write the business plan, they adopted the business plan and then they hired me, which is when I started my company, 26 years ago.

Ash Patel: And that appears to be a massive project. I don’t know where to start… Where did the money come from? How’d you get the plans together?

Fred Pierce: Well, that’s kind of the funny interesting part of it, is – I believe that if you want to win big, you’ve got to think big and you’ve got to act big. And you are right, that project is more than 5 million square feet, multi, multi, multi billions in capital investments… And before taking that on as a principal, as a business owner, taking that on as the developer, the biggest project I’d ever developed was nine houses, at a cost of about $2 million. So that’s a nice segue, wouldn’t you say?  …from $9 million to multi-billion dollars. But that’s the way that it came about, and I had a great relationship with the university.

And you asked about the capital – that project there, I was able to arrange for the university to obtain lines of credit to be able to put the upfront money that it takes in real estate development, the pre-development costs, and then the projects themselves were largely financed with tax-exempt bonds. And it’s, in fact, a way early on in that redevelopment, I was able to make it work feasibly, because it wasn’t using conventional capital with expensive equity and bank debt, but rather, it was using tax-exempt financing to finance 100% of project costs. So the feasibility was such a low cost of capital, was something that worked from day one, and that’s what got the project off the ground. So largely tax-exempt bond finance.

Ash Patel: And was the university part owner of this project?

Fred Pierce: Yeah, so we were what the industry would call a fee developer. So we were paid a variety of fees to manage the project. And yes, in fact, the University was the owner. So when we would borrow the monies, the university would be the borrower, they would be the owner of the properties… So yes, that’s the way that that worked in that situation.

Ash Patel: And then who managed the properties once it was constructed?

Fred Pierce: In that case, the University, they had a large real estate portfolio. So before I was involved with them, they had grown their off-campus holdings from 100,000 square feet of real estate, to over a million square feet, every kind of real estate you can imagine. So they already had in-house management capabilities at the university. So I managed the development, and then they took over the actual property management once they were completed.

Ash Patel: So Fred, it’s been 25 years since I graduated college, but I went to Indiana University; and as I was leaving, their real estate department was just starting to acquire off-campus housing. Has that continued? Has that been a trend? And do universities now go into the real estate business, so to speak?

Fred Pierce: Yes, absolutely. But let me just say, I’m an owner at Indiana University. So go Bloomington!

Ash Patel: Awesome.

Fred Pierce: I have a project there called The Avenue, and doing phenomenal. As matter of fact, the university master leases my entire building. But yes, the universities all have real estate departments… And they are focused on a couple of things, but a massive thing they’re focused on is acquiring land adjacent to universities, because most are landlocked. You do have some, what they call land grant universities, that have gigantic property holdings on the main campus; Michigan State University ha 5,000 acres. But most universities still are acquiring properties in their immediate surrounds. That’s what San Diego State set out to do.

In fact, there’s a national organization called AUREO. It’s an acronym which is A-U-R-E-O, and it stands for the Association of University Real Estate Officials. Those are the people who handle real estate, whether it’s lease transactions, donated gift property, or acquisition transactions off-campus. Virtually, every university in the country is engaged in off-campus real estate.

Break:  [09:21] to [11:22]

Ash Patel: I would think that proves a challenge for you, because now you’re competing with somebody with much deeper pockets, often given free land, and can borrow money or has a ton of capital on their books, and you’re competing with these people. How does that work?

Fred Pierce: In my business, which is primarily student housing, we’ve done some other university-related real estate projects, research buildings, and the like. But my company now is a student housing company. There’s a symbiotic nature of what universities want to do for housing and what private student housing operators, owners, developers do. And typically, you’ll delineate that at the freshmen class. So we typically don’t house freshmen; we encourage freshmen to go live on campus, live in the residence hall, get the on-campus experience. And then once they finish their freshman year, largely, they’re ready to move off-campus. You know, the university has certain rules and regulations, they want to have a little bit more independence… So that’s usually what happens. You live on campus as a freshman, and you move off campus, and that gives us access to them, typically for their sophomore, junior, senior year, graduate students. So the majority of the students are living off-campus, as opposed to on campus.

It’s different for private universities. That’s why we don’t go to private universities, because upwards of 80% or 90% of students live in on-campus housing at private universities. In that case, there’s no market for the off-campus for the private guys; but at public universities, they have a finite amount of debt capacity, even though they’re public, and they want to use it for highest and best priorities – research buildings, faculty offices, classrooms, more than residence halls, so they house the freshmen.

Ash Patel: What’s the minimum size of units that you would develop at a university?

Fred Pierce: That’s changed a little bit as things have gotten more expensive. So it’s maybe better stated in terms of dollars, right? So from a development project perspective, we’ve got two going on right now at San Diego State; one is 169 beds, which is small in student housing business, but it’s almost a $50 million project; the other’s 301 beds, and it’s a $60 million project. So on the development side, you’re probably talking about $50 million plus. On the acquisition side, we would dip out to $25 million. And on the off-campus acquisition side, we largely want between 400 and 1000 beds. That way, it’s not too small to challenge management, and it’s not too big to be too unwieldy, it fits right in our wheelhouse, 400 to 1000. But the new construction, like I mentioned, are smaller projects, because they’re expensive, immediate walking distance to SDSU.

Ash Patel: Fred, are there amenities that are now required in student housing? I don’t know what you call this latest generation that’s going to go to college, but what do they need that we didn’t back in the day?

Fred Pierce: Yeah, that has changed dramatically. So student housing today is like a resort hotel. Back in our day, it was slumlord central, right?

Ash Patel: Yeah.

Fred Pierce: You had no amenities, and that’s just the way it was. Today, you’ll start with, usually, a resort swimming pool and a spa. We’ll have study rooms and a fully fitted out fitness center, yoga rooms… We have tanning beds, we have study lounges and study rooms, we have game rooms where they have billiards and ping pong, and shuffleboard, big-screen TVs are all part of what is commonplace now in the student housing space.

Ash Patel: It doesn’t seem fair, does it?

Fred Pierce: Well, it doesn’t, and I’m not sure that they can afford or live in such nice places once they graduate, but while they’re in school, they’re treated pretty well indeed.

Ash Patel: And then Pierce Education Group – where does your financing come from? Do you take on investors?

Fred Pierce: Our financing has, historically, been institutional. So our debt has largely been the agencies or other big lenders. Our biggest lender today is Fannie Mae, and our equity has been institutional. So picture  life insurance companies, pension funds and private equity firms have been where we’re at. We forward with a project now, first one ever, that’s moving into individual investors, and we haven’t done that before; that’s an exciting opportunity. But again, historically, it’s been institutional, and that’s enabled us to do a billion dollars worth of acquisitions, which would be tough to do raising money $50,000 and $100,000 at a time to do a billion dollars, as opposed to going to institutional investors who’ve been our bread and butter historically.

Ash Patel: Fred, so you obviously know how to develop large – we’re going to call them apartment communities. Why not do that for non-student housing as well? Maybe seniors, urban areas…

Fred Pierce: Good question. And some are doing that. I’ve come to learn in business that you can succeed more if you’re very focused. If you’ve got a strategic plan, a business plan, you know who you are and you’re not all things to all people. And believe it or not, while a senior apartment complex or a conventional apartment complex or a student housing complex contemporarily built may all look very similar, they’re very different, and attenuating to the needs of seniors, on the one hand, to freshmen; and seniors, I mean, senior citizens, versus freshmen. Wow, what a difference! And we lease our properties up all year for a move-in that happens all within one or two days, where conventional apartments have people moving in and moving out every month.

So I believe in business, if you know who you are, focus on your expertise, and you have the ultimate opportunity for success. So we’ve wanted investors to know also that our attention is not diluted, right? If they want to be in student housing, we’re a leader in student housing. It’s all we do. Our senior management has student housing, has its background and has experience, and they’re going to get the best operator they can in the business. Stay focused and have something scalable, have been some of my business ethics.

Ash Patel: Yeah, great points. What’s your biggest challenge today, in your business?

Fred Pierce: In any business, competition, right? And in the real estate business, it can be new supply. So we watch very carefully for what in all real estate industries they call “barriers to entry.” I want to try to find locations where it’s very difficult to find land to build new supply. So I would say that would be the issue. And then we’ve got a contemporary challenge that there’s not necessarily common understanding deeply of our industry. So I spend a lot of time educating investors by way of example. People might have thought because universities were really negatively impacted during COVID, they had to pivot to 100% online education in 2020, and then they shut their dorms down and moved all the kids home. And then they had to rebate room and board revenues, really painful for universities.

On the other hand, it was a terrific year for student housing. And in 2020, my net operating income for the year beat my budget in a COVID year, and my collections were 98% in the spring and 99% in academic year 2020/2021. So there’s education that needs to be done, and I’m doing that regularly. But as that gets out there, more and more investors are looking to add student housing into their investment portfolio.

Ash Patel: Was revenue up because students wanted to live away from home, or did they actually relocate to home, but because they signed the lease with their parents co-signing, they were obligated to pay?

Fred Pierce: Great questions, and it was both. So in our portfolio in April of ’20, right when the pandemic came out, we did a survey and 39% of our residents had moved home; and we still had 61% living with us, but 39 had gone home. Just the next month, in May of 2020, only 30% were still home. So 9% moved back with us. And this fall we have one of the highest show up rates.

We lease apartments starting in September for the following August, right? So September, October, November, December, we’re leasing all the way through the academic year and even through the summer. So occasionally, something happens in student’s life and they end up in a circumstance where they don’t show up; they signed the lease, but they don’t show up. This last year, in the middle of the pandemic – one of our highest show up rates ever; it was over 99.5% of people showed up. And by the end of the fall semester, we had more people living with us than had signed pre-leases. So what that was indicative of was two things; that was indicative of kids wanting to be at school.

And this fall, fall 2021, it’s going to be the largest freshman class in at least a decade, because of all those high school kids who had to study from home last year – they can’t wait to get away to school. And that small percentage of would-be freshmen last year that didn’t enroll, that took a gap year – they’re coming back this year. But yeah, the kids want to be in their colleges so much more than classroom instruction, as we all know. On the flip side, we do have parental guarantees, and that certainly was a safety net to ensure that we collected rents, whether the students were living with us or whether they were at home.

Ash Patel: Fred, what advice would you give operators in let’s say Division II or III schools that have smaller units than what you’re operating?

Fred Pierce: Be careful, is what I’d say. Be careful, for a couple of reasons. One is if you’re at a smaller school and a new project comes online, there’s a much smaller enrollment base to compete with, to capture the students living with you. The second is, honestly, the smaller universities are in challenging times right now. Small private universities in many instances are struggling for survival. Second-tier and third-tier public universities are, in many instances, experiencing declining enrollments; you definitely don’t want that. You want to at a minimum have stable enrollment, and in a perfect world, you want growing enrollments, right?

So for those, I would tell them to be very careful. And if they were building, rather than the purpose-built product that we build and own at major universities – and what that means is those are largely three bedroom, three bath units or four bedroom four bath units, which we leased by the bedroom; very different model. For those at smaller universities, I’d say have your product be conventional; have it be studios, ones and twos, so that you could pivot… That if enrollment at that university declines, you could pivot and you can lease it in the conventional marketplace. Whereas if you’ve got only three- and four-bedroom units in a small university, if something happens at that university, it’s a head-scratcher as to what you do to keep your property full.

Ash Patel: That’s a great point. Great advice.

Break: [22:57] to [25:00]

Ash Patel: Fred, I’ve got to ask you a question that’s burning my mind. I’m envisioning, back in the day, the dorms that I stayed at; and they probably had 300 units. And we had RAs, we had security, the whole nine. I can’t imagine as a sophomore, junior or senior, living in a resort-style community with 300 college apartments. Are there security issues, concerns? Do you guys have staff that is on each floor like, an RA so to speak? Or how do you control the partying, the crazy nights?

Fred Pierce: That’s a really good question also. And it’s important that there’s balance in our residents’ life.

Ash Patel: Yeah.

Fred Pierce: We care about our students, and we care about them graduating. And if we’ve got a bad reputation that we’re party central, and no one’s graduating in our property, in today’s social media world, it would be our death knell. But at the same point in time, we can’t be Alcatraz, right? We can’t lock down so much that the kids can’t have any fun. So there’s a balance, and part of that does come with more staffing. So we definitely have way more staffing than a conventional apartment building. We have a staff of what we call CAs. So they were RAs on campus, resident assistants. In ours, they’re community assistance; and they’re there to be an ambassador for our residents, and also an ear to the ground. And we do pay attention. We have rules about occupancy in apartments in terms of gatherings, we have noise rules… So if there’s too much noise, wevgo in and break it up. If there’s too many people there, and we find out about it, we break it up. So we keep things under control, so they can study, get good grades, graduate, but still have a good time.

And your question to security – it’s less security as it relates to activities, because we can manage that with our staff pretty well. So then it just happens to do with the actual physical location of a property. So we’ve got some properties where we’ve got professional third-party security that’s on patrol, sometimes seven nights a week, sometimes busier activity nights, like Thursday, Friday and Saturday nights… And we’ve got other properties that, they’re so quiet and there’s such limited activity, we have no security, because there’s just no need for security. So it kind of runs the gamut; probably like some conventional apartments as well.

Ash Patel: Yeah. Thank you for answering that. That’s interesting. Fred, what’s your best real estate investing advice ever?

Fred Pierce: My best real estate investment advice—well, there’s a couple of things… One of which is, you need to know what your objectives are. So many real estate professionals and entrepreneurs are what I would call deal junkies. So they go find a deal, they do the deal, whether it’s buying an investment, then they hold it and then they sell it, or whether it’s doing a development and you buy the land, you do the development, then you sell the property; lots of deal junkies out there. You can be very successful doing that, but at the end of the day, what you’re left holding most likely is the profits that you made from those investments over time.

I’ve taken a little different tact, which is to make the profits along the way, but to build an operating company that’s an asset, that at the end of the day is sellable. Picture like a real estate investment trust. So I built a company that’s growing, that wants to hold assets, but we don’t always, because sometimes our partners have closed-end funds and are required to sell… But our primary objective is to build to hold. So I’ve got a company that’s got a capitalized value. So I’ve got real estate holdings we can make money, but I’ve got a company that’s got a tangible value as well, that might merge into a REIT someday, and would give me an exit for the operating company.

The other piece of advice I would give is – you’ll be optimally successful if your business is executable, it’s more simple and straightforward, and it’s scalable. And I’ll give you an example. I got kind of really excited early in my career when I was doing really large, mixed-use projects on land-adjacent to University. I’m talking about large quantities of retail space, 200,000 feet, 300,000 feet, with anchor tenants, and then student housing, university-serving hotels, campus-serving office buildings, these mixed-use developments… But these were really, really difficult to execute, and really difficult to make scalable. So after going that direction for some time, I pivoted to where buying student apartments was something that was a burgeoning industry, that I could go all over the country. [unintelligible [00:29:42].19] investment sales have been $10 billion a year. And I can do four or five, six deals a year in acquisitions, and keep doing them, and it’s scalable, and it’s repeatable, and it’s a way you can build size. And size gives you economy of scale, and size gives you bigger profits. So those are my thoughts in terms of business and student housing, and commercial real estate, frankly.

Ash Patel: Thank you for that. Fred, are you ready for the lightning round?

Fred Pierce: Okay. I’m not sure what the lightning round is, but go ahead and shoot.

Ash Patel: You’re going to find out. Fred, what’s the best ever book you recently read?

Fred Pierce: It’s interesting. I’d rather watch a movie, than read a book; it’s easier to manage my time. But where I get my information is from two sources – periodicals, and in my business, there’s one… Student Housing Business Magazine is my go-to. So that’s what I read, is the Student Housing Business Magazine. And then secondly, there’s three major conferences in my industry. One is put on by Student Housing Business, it’s called InterFace; I just was there last week. And then the second are two conferences put on by the two major national associations; so NMHC, the National Multi Housing Council has a Student Housing Conference once a year. So does NAA, the National Apartment Association. So rather than books, I get it from magazines, and I get it from conferences, is where I get my information.

Ash Patel: Hyperfocused.

Fred Pierce: That’s it.

Ash Patel: Yeah. Fred, what’s the best ever way you like to give back?

Fred Pierce: Boy, thanks for asking that, because philanthropy and volunteerism is a huge part of what’s important to me; and it just so happened that I got involved in giving back to higher education, starting back in the late 1980s. So almost immediately after finishing graduate school, I got involved with the Young Alumni at San Diego State. And since then, I’ve spent what seems to be a lifetime of involvement. And today, I’m on boards at four universities. So I’m the Chairman of the Board of Franklin Pierce University in Rindge, New Hampshire. I’m on the board of the Property Management Program at University of Georgia. I’m on the Endowment Board and several others, past chairman of the College of Business, the Fowler College of Business at San Diego State… I’m on the Wine Business Institute board at Sonoma State University. So if you think of Sonoma and San Diego, and New Hampshire with Franklin Pierce, at Georgia, I’ve kind of got the country staked out, right? And with that is volunteering time, but it’s also making contributions that’s really meaningful to me to endow and to provide scholarships for today’s students to give forward and give back to what higher education gave to me. So it’s really important to me, and I spend probably 15 hours a week on volunteer activities in the charities that I support.

Ash Patel: That’s amazing, Fred. Fred, how can the Best Ever listeners reach out to you?

Fred Pierce: They could reach me at our phone number, which is area code 619-297-0400 in San Diego, and our website is Two good places to get us.

Ash Patel: Fred, thank you for taking time out of your day today to share your journey into the student housing world. Starting out as a college intern at a real estate firm, and what you’ve accomplished today is truly remarkable. So thank you for teaching us some of your lessons that you learn along the way.

Best Ever listeners, thanks for joining us as well, have a best ever day.

Fred Pierce: Thanks for having me. I appreciate it.

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