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Property in Seattle Part of $175MM Investment in Student Housing Portfolio Deal with Principal

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By Jon Peterson

Des Moines, Iowa-based Principal Real Estate Investors has made an investment in the 196-unit Identity student housing property in Seattle as part of a five-property student housing portfolio where the total investment was $175 million. The asset in Seattle is located at 4106 and 4123 12th Avenue near the University of Washington.

“It was our opinion that the property in Seattle fit several parameters that we have for investing in student housing. These would include that the school has more than 20,000 students, that the school’s on-campus housing capacity covers less than 30 percent of the student population and that the complex is located within four to six blocks of the school,” says Rod Vogel, senior managing director for Principal.

The four other assets in the transaction are Uncommon, located near the University of Oregon in Eugene, Incon and Incon Gardens situated near the University of Santa Barbara in California, The Flats near Illinois State University in Normal, Ill. and Evolve, close to the University of Tennessee in Knoxville.

The investment made by Principal was a recapitalization of an existing portfolio. The investment replaced capital of another un-named institutional investor. The manager of these assets is Chicago-based CA Student Living.

Principal last year started the process of looking at investing in the student housing sector. It decided to create a joint venture with CA Student Living to invest in the sector. “The five-property portfolio deal is our first deal for the joint venture. I would think that we would be looking at investing another $200 million in the property type over the next 12 to 24 months. All of this capital will be invested in existing properties,” said Vogel.

The capital that Principal is investing in the venture is being funded from the manager’s core open-ended commingled fund, the Principal U.S. Property Account. Through the first quarter of this year, this commingled fund had gross real estate assets valued at $7.2 billion.

The U.S. Property Account currently has around 17.8 percent of its assets invested in apartments. This represents the second highest percentage of any property type in the portfolio. The only higher one is office buildings, which totals 44.5 percent of the commingled fund. The Pacific region makes up the biggest part of the portfolio from a geographical perspective. This region holds 30.4 percent of the portfolio.

The commingled fund does have one asset in Seattle that is considered in its top 10 investments. This is the 112 at 12th Street office building. This property has a gross asset value of $197.6 million and represents 2.7 percent of the commingled fund’s total gross asset value.