AMERICAS NEWS: Campus collection

Raising money from US LPs is no small feat today. With fundraising in 2010 some 30 percent below the trough witnessed in 2009, it’s clear to see that limited partners are still being cautious with their capital. It, therefore, makes any fund closing a notable event. For Kayne Anderson Real Estate Advisors, however, the first closing of its second opportunistic fund is more notable for the fact it took just three months.

The Armonk, New York-based fund manager held a first close on $119 million for its Kayne Anderson Real Estate Partners (KAREP) II vehicle at the end of December, according to people familiar with the matter. Kayne Anderson declined to comment to PERE, but sources said the first closing came just a few months after marketing was launched in September.

Sources added that a further $100 million in LP commitments has been “soft circled” for KAREP II, although no documents have been signed yet. The vehicle – targeted toward US LPs, including institutional investors, high-net-worth individuals, family offices and endowments – is expected to hold a final close of around $350 million, although a hard cap of $500 million has been set.

KAREP II is expected to follow its predecessor fund’s strategy of predominantly focusing on student housing, with the ability to make some self-storage deals. In the past six months, Kayne Anderson’s two funds have closed on a number of transactions, including last month’s $40 million acquisition of a 228-unit, 740-bed off-campus student housing complex in Lexington, Kentucky from Orlando developer Progressive Capital Group.

The firm also acquired a portfolio of nine off-campus student properties from REIT Education Realty Trust for $84.8 million. That portfolio, which closed in two parts in December and January, included 3,793 beds located close to seven public universities in Alabama, Georgia, Kentucky, South Carolina and Tennessee. With an average occupancy of 95 percent and average monthly rental rates of $358, the deal helped push Kayne Anderson’s student housing portfolio to roughly 11,000 beds in total.

Kayne Anderson also owns two multifamily buildings and 11 self-storage properties, with KAREP I acquiring five self-storage assets comprising 7,000 units in November in partnership with developer and operator Flagship Investment Group. KAREP I, which closed in March 2009 on $136 million in commitments, is believed to now be fully invested.

Student housing increasingly is becoming a target for real estate investors, with the sector set to enjoy growing demand from so-called Echo Boomers, those born between 1982 and 1995 who are starting to enter college. According to the latest US Department of Labor statistics, more than 70 percent of the high school graduating class of 2009 entered college – the highest level since records began in 1959. The boom, however, is only expected to last 10 years, according to the 2011 Emerging Trends report from the Urban Land Institute and PricewaterhouseCoopers, when the “number of college-age kids sharply declines”.