Clarion shops its first student housing fund

The New York-based investment advisor is looking to raise $500 million for its first fund targeting the niche sector – and its first closed-ended vehicle in six years.

Clarion Partners has returned to the fundraising trail after a six-year absence with its first student housing fund, Campus Clarion Student Housing Partners. The New York-based firm is partnering with Campus Apartments, a Philadelphia-based student housing developer and operator, on the vehicle, which has a $500 million target. 

Clarion has been marketing the fund since at least March 2013, according to documents from the Teachers’ Retirement System of Louisiana (TRSL), which committed $35 million to the vehicle at its board meeting last week. The vehicle also is the firm’s first closed-ended offering since Clarion Development Ventures III, which was launched in August 2007 and closed one year later. The firm declined to comment, but PERE understands that the firm has not yet held a first close on Campus Clarion Student Housing Partners.

Clarion primarily will be responsible for portfolio-level management, portfolio-level research, portfolio reporting, asset management oversight and client service on behalf of the fund, according to the TRSL documents. Meanwhile, Campus primarily will be in charge of acquiring, sourcing and underwriting investments; property and portfolio debt placement; asset development and property management; and business plans, reporting and financial statements.

Under the partnership, Clarion and Campus will work together on fund structure and governance; portfolio strategy; due diligence; exit strategy; and valuation and hold/sell analysis. The senior partners of the fund will include David Adelman, Campus’ CEO; Daniel Bernstein, Campus’ CIO; David Gilbert, Clarion’s CIO; and Robert Greer, portfolio manager at Clarion. Adelman and Bernstein will source the majority of the deals for the fund, while Gilbert and Greer will help oversee the fund’s strategy and monitor investments. Investment decisions will require approval from all four partners.

Campus will pursue investments in garden-style, mid-rise and high-rise student apartments that are suitable for repositioning and value creation and require an average of $15 million in equity. The fund is anticipated to be 75 percent invested in 25 to 30 value-added and core-plus deals, while the remaining 25 percent is projected to be allocated to eight to 10 development projects.

Although this is Clarion’s first student housing fund, the investment advisor previously placed $149.2 million in 21 investments in the sector through a separate account from 2006 to 2009, according to the TRSL documents. As of January 31, 2013, those investments were generating a gross return of 14.9 percent and a gross multiple of 1.9x.

Clarion is raising its new fund amid strong fundamentals in the student housing sector. In a fund review to TRSL, consultant Hamilton Lane noted that demand for the product has been rising amid increasing college enrollment, with the percentage of high school graduates who attend college rising from 62 percent in 2001 to 68 percent in 2011. Also, “current student housing stock is out of date and not in line with students’ desires, while universities lack the space and capital for improvements,” Hamilton Lane wrote in its review.