Colleges across the U.S. are returning to full-time, on-campus instruction this fall, and that could be great news for student housing operators. In this Fool Live video clip, recorded on June 15, Fool.com contributors Matt Frankel, CFP, and Jason Hall discuss why American Campus Communities (ACC) could be a big beneficiary of the return to normal college life.
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Matt Frankel: American Campus Communities, they're the only publicly traded real estate company that specializes in student housing. They pioneered the industry in the early 1990s, starting with just the management contract for one property. Now they have over 200 purpose-built student housing communities. If you've ever been in one of their properties, it's not a dorm. These are amazing apartment communities where I would like to live. They have game rooms, they have big community areas, they have resort-style pools, they have everything that a student could dream of. The reason that their business model is so great is they focus on the Power Five Conference schools like the one I went to, things like that where the average housing inventory consists of 53-year-old dorms with outdated technological infrastructure, shared bathrooms, the building smells like mold. We've all been in those dorms.
Jason Hall: People live in them for exactly nine months because they have no choice.
Frankel: Right. But upperclassmen can live in those, but why would they? The reason American Campus' business is so attractive is because they offer a much better alternative for, on average, a lower price. It costs about $10 less per month on average to live in a private bedroom, American Campus Communities apartment, where you have your own room, than it does to live in an antiquated on-campus dorm.
Hall: To put that in college student terms, that is approximately the price of a case of cheap beer.
Frankel: Right. This is like if there was a BMW dealership and the dealership next door was selling 2009 Hondas at the same price, which one would you buy? It's a product that sells itself, in other words. American Campus, they are the first mover in this a long time ago, they still make the best product, they get the best deals, they have a third-party management business where they're actually building properties on-campus that schools own and managing them for them. They are in the process of building. They've used COVID to really accelerate the progress. They're building Disney World's campus for its giant internship program. That is on track to be on schedule. They estimate that alone will create up to $3 a share in instant value when it's delivered. Just based on how much more it will be worth than what it costs to build. I don't know what's wrong with Jason there. But American Campus Communities is one of my favorite real estate stocks.