Dumping Distress And Going To School

Here is another one of those Bloomberg articles that start with one topic, but then goes on to include a bunch of other important information.  Toll Brothers, the US's largest luxury home builder, is shutting down its distressed investment vehicle and getting into building high-end college dormitories.   This passage jumped out at me:

As Toll enters the dormitory market, it’s “winding down” its distressed real estate investing division, Gibraltar Capital and Asset Management LLC, Yearley said.

“The deals aren’t there,” Yearley said.

Toll Brothers started Gibraltar in 2010 to buy portfolios of foreclosed properties and nonperforming loans from banks following a collapse in demand for new housing. Toll’s peak investment of $135 million in Gibraltar has declined to $125 million, Yearley said.

I have been hearing from real estate fund sponsors about distressed opportunities for years, and I've just never seen a sizable amount of attractive, large dollar deals.  Small, nimble investors have been able make money in small, broken deals, but but I have not seen the anticipated wave of high quality properties in upside down financial positions. 

And here is the case for student housing:

College enrollment is expected to increase by at least 10 percent by 2016, as “echo boomers” enter their late teens, fueling demand for student housing on and off campus, according to Axiometrics Inc., a Dallas-based research firm specializing in apartments.

Demand for student housing was less robust than expected during the first half of the 2012-2013 school year, according to an October report by Andrew McCulloch of Green Street Advisors Inc., a Newport Beach, California-based firm that researches real estate investment trusts.

“A challenging economy, new supply and overly aggressive rent hikes were the main culprits,” McCulloch said. “Newer, more amenitized assets in close proximity to campus have been, and are expected to continue to be, outperformers.”