Fred Pierce shares how PEP has become a major force in student housing and what lies ahead.
By Carrie Rossenfeld
Even as an intern attending San Diego State University's undergraduate program, Fred Pierce wanted to own a commercial real estate company. The current president and CEO of San Diego–based student housing investment and operating company Pierce Education Properties (PEP) had an internship at The Goodkin Group with renowned real estate consultant Sandy Goodkin and was "compelled by the tangible nature of commercial real estate and inspired by the obvious success that so many entrepreneurs have had in that industry, he tells SoCal Real Estate.
Pierce's determination eventually led him to start a company that has acquired more than $900 million in purpose-built student housing in less than 13 years. The firm's website touts that with a portfolio of approximately 13,000 beds valued at nearly $600 million, PEP was ranked in 2016 by Student Housing Business Magazine among the top 15 owners of student housing in the U.S.
Pierce is also actively involved the SDSU West Initiative — which is set to be on the San Diego ballot in November — and is determined to see Qualcomm Stadium redeveloped into a mixed-use project that will both benefit the San Diego region and provide growth for SDSU and its athletics program.
We spoke with Pierce about his career trajectory, how PEP got its start, where it's headed, and what advice he would give other entrepreneurs in the CRE industry.
SoCal Real Estate:
Tell us how your company started out and how it has grown over the years.
Pierce: I spent the first decade of my professional career as a commercial real estate consultant — starting at Goodkin, which was acquired by KPMG — following which I was recruited to Price Waterhouse, where I ultimately became the West Region managing director of real estate consulting in the early 1990s. During those formative years, I remained focused on someday starting a real estate company, and I forged my first venture — a nine-house subdivision — as a part-time investment while still working for Price Waterhouse.
My biggest break came in 1995, when a former consulting client — SDSU Foundation — was struggling in getting their planned redevelopment project off the ground. The College Community Redevelopment Project (CCRP) involved the planned acquisition and redevelopment of 131 acres and approximately 100 parcels of largely privately owned land adjacent to SDSU into a multibillion-dollar mixed-use development. Land costs and the economy were calling the project's feasibility into question, and SDSU Foundation approached me about what should be done. I advised that the project was still feasible and offered to come aboard as the project's developer. Initially, I was hired to create a Phase I implementation plan and, following its adoption, SDSU Foundation hired me to be the master developer. Then was born The Pierce Company Inc., the predecessor to Pierce Education Properties.
For more than a decade, I oversaw the acquisition of some 25 properties and the design and construction of multiple phases of the CCRP. We gained national recognition for the project, including multiple Pacific Coast Builders' Conference Gold Nugget Awards and being selected as "The Entrepreneurial University" related to real estate at a joint meeting of the National Association of College and University Business Officers and the Association of University Real Estate Officials. Today, if you return to Montezuma Mesa, you witness the complete metamorphosis of the front door to the campus, including various phases of the CCRP, many new campus projects (Conrad Prebys Aztec Student Union, Viejas Arena, Fowler Athletics Center), and the SDSU Trolley Station.
In 2006, I decided to take the company national. We rebranded to Pierce Education Properties and within a year had acquired 3,500 beds of student apartments for $130 million at Michigan State University and Central Michigan University and been awarded development rights on $1 billion in planned new projects at Michigan State University and Arizona State University. We had four employees, but lots of experience and lots of ambition.
In the ensuing decade, Pierce Education Properties has grown to become the 14th-largest owner of student housing in the country, with a portfolio of more than 15,000 beds at 24 universities nationwide. During that time, we have acquired more than $900 million in student apartments, totaling more than 22,000 beds (a few were sold along the way), and our workforce has grown to more than 400 employees.
What do you see as the company's next step?
We expect the industry to see continued consolidation of ownership among the largest and strongest companies in the space, which includes Pierce. I expect we will penetrate the ranks of the top 10 private owners of student housing in the country by the end of 2018, and by 2020, we should rank in the top 5.
That being said, the goal is not growth for growth's sake. Our increasing size is part of a strategy to capture increased market share, achieve increasingly greater operating cost efficiencies, acquire student housing at a growing number of Power Five Football Conference universities, achieve even greater portfolio diversification, and provide meaningful career-growth opportunities for our employees. We currently own only one asset in each of our 24 markets. In the future, along with adding geographies to the portfolio, we also plan to make additional investments in existing universities' markets where we forecast the strongest future outlook.