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Why are some owners of student housing in Rexburg converting to apartments?

Rexburg – Some of the condominiums that have hosted Brigham Young University Idaho students for years as part of the university’s approved housing network are preparing to leave that network to sell units individually as apartments.

Why do condominium owners go this route, and what has created a market in which this appears to be the best transition for some owners?

So far, the owners of two Rexburg apartment complexes, Brigham’s Mill and University View, have received approval for the change from Rexburg City Council, opening the door to leaving the student housing system and selling individual units.

A third complex, The Roost, has condominiums for sale on multiple listings service and signage outside ad condo sales, but according to Rexburg’s Director of Planning and Planning Alan Parkinson, The Roost has not begun the approval process for the necessary plat change.

“The Roost has not applied for a condo at this time, so no legal sales can take place until the process is complete with city council approval,” Parkinson says.

Requests for information from The Roost did not receive a response.

The Roost in Rexburg has apartments for sale in MLS, but at the time of publication, the owners had not yet begun the necessary makeover with the city. | Emily Miller, EastIdahoNews.com

Erik Mattson is one of the owners of the Abri Apartments, part of the BYU-Idaho Approved Housing Network. In his opinion, the owners are getting out of this market because they have no better choice.

“The revenue model is broken,” Mattson says. “The reason people are turning to apartments is because they have no other choice.”

There is no such thing as a Rexburg market anywhere in the country, says Mattson, who also works for a real estate investment firm in Portland, and it’s the only place the company is losing money.

Related | BYUI tenants are asked to leave after apartment owners seek apartments

“In our company’s 50-year history, this has been the only market we’ve ever lost money in, and the reason is really simple,” Mattson says. “The university sold us an idea and didn’t follow through. What they told us was that they would equalize all semesters, so the fall, winter and summer semesters would be equal.”

According to the BYU-Idaho Student Housing and Living page on the university’s website, in the Spring 2022 semester, which ended in July, the total occupancy of approved student housing was only 71.3%. The upcoming semester in Fall 2022 shows an occupancy rate of 92%.

Rachel Woolery is president of the BYU-Idaho Off-Campus Housing Association and supports apartment complexes that are taking steps to leave the student housing market. In a letter she sent in April to Rexburg City Council, Whoolery threw her support for University View owners, who were seeking flat change that would allow them to sell their units as apartments, which was eventually approved.

Whoolery wrote in the letter: “A major contributor to our underperforming market is that we have a closed system that we can only rent to students who are not married to BYUI.” “When there are only 71.1% of students enrolled, there are no other options to fill our beds. The beds must remain empty for 5 months!”

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Signs outside The Roost in Rexburg advertise apartments for sale. The Roost has hosted unmarried students in BYU-Idaho but is taking steps to sell the units as condos. Emily Miller, EastIdahoNews.com

According to Whoolery, this amounts to more than $95 million in assets that “remain empty each year for about half a year.”

Mattson says he put up Ibri apartments for sale when most real estate markets across the country were hot, but no one was interested.

“People asked for information, but when they started to realize all the issues we were dealing with, they didn’t want to buy,” Mattson says. “It’s a very tough market to work in.”

According to Mattson, some of the issues that scare potential investors is that BYU-Idaho has a lot of control over real estate and can choose to terminate agreements at any time.

“How can we make money in a market where we have no real insight into supply and demand, where the university can tell us what we can do with our holdings, and if anything is wrong, they threaten to kick us out of the program?” Mattson asks. “Banks will not lend because the university can unilaterally kick us out of the system.”

Grant Collard is an owner at Redstone Residential, which owns several Rexburg apartment blocks. Collard says Redstone does not plan to leave the BYU-Idaho-certified housing market, but he is aware of the challenges landlords face.

“More than half of student housing in Rexburg is for sale, or informally for sale ‘off-market,'” Collard says in an email to EastIdahoNews.com. “Asset types at the moment. This is not normal.”

Collard maintains that student housing was overpriced and that enrollment on campus is not high enough to keep apartments full for most of the year. Meanwhile, he says, the apartment market is “on fire.”

“There is much more demand for traditional condominiums or apartments, and much less demand for student housing,” Collard says. “The expense structure of running a project as apartments or traditional housing is much lower – these residents pay for their own services (which is not true in student housing), stay occupied all year (as opposed to emptying out in the summer), etc. . Money where it is better handled.”

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Brigham’s Mill was the first student housing complex to receive Platt Change approval from Rexburg City Council, allowing them to move forward with selling apartments individually as private apartments. | Emily Miller, EastIdahoNews.com

Collard and Mattson agree that a problematic market can be temporary.

“I think the apartment boom won’t last long, and interest rates will dampen demand significantly,” Collard says. “I believe that registration will continue to grow in BYU-Idaho, that new venture beginnings will be few and far between (due to higher land prices, construction prices, interest rates), and that owners will be more satisfied with their investment in Rexburg in the long term. We have decided that we will not conduct Any condo transfers for projects owned by Redstone in Rexburg.”

Mattson hopes the university will do its part to bring the student housing market back to a healthy place.

“I think the university is in a position where they’re starting to see problems and hopefully they’ll fix them,” Mattson says. “We would like to be good partners with the university. We love the real estate and we love the location. But we cannot afford to stay there and we cannot reinvest in the market under the current conditions.”

BYU-Idaho officials did not respond to requests for comment.

Stephen Zollinger, the city attorney for Rexburg, says that while the city recognizes the importance of adequate student housing in Rexburg, regulation of the market is not ultimately the city’s responsibility.

“The role of the city is very small,” Zollinger says. “We have very little control over how people use their property. We strive to allow any use that does not harm the community as a whole, or the property in the immediate vicinity.”

If converting apartments into condominiums, Zollinger says, the city’s responsibility is to check that infrastructure and parking needs are being met, but not to dictate what landlords do with their properties.

“The City of Rexburg is concerned with managing the infrastructure requirements within the city for all those who live within our borders,” Zollinger says. “The manner in which owners of private property choose to use their property within the parameters established through zoning is a matter of property rights which the City, as an entity, seeks to avoid choosing one side.”

Several BYU-Idaho students protested being told to move out of their apartments in April when Brigham’s Mill received approval for a Platt change from City Council, allowing owners to sell units as condos. According to Brigham’s Mill resident Guillermo Lemus, who has a contract to live in the complex through September, those residents who chose to reside at Brigham’s Mill were eventually able to come to an agreement with the property owners and stay until the end of their stay. shrinkage.

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