This High-Powered Real-Estate Fund Is Run by College Students
A student-run real estate investment fund is proving that hands-on experience can deliver real results. Managing $12 million in equity, the undergraduate team recently achieved a 65% gross return on its first property sale, highlighting the growing role of experiential learning in preparing the next generation of real estate professionals.
5 min
On a recent summer Sunday afternoon, Brooks Hiller was hunkered over his laptop at his apartment in Chicago, dialing in to hour three of a marathon series of conference calls on real-estate deals.
The 21-year-old isn’t a professional, and he doesn’t make a dime from this work. He is a rising senior at Indiana University’s Kelley School of Business, where he leads a team of 20 undergraduates who manage about $12 million in equity.
Those students operate their own real-estate investment business, called Sample Gates Management, named for the Gothic-style limestone arches that are the gateway to the Bloomington campus.
Unlike the many student investment clubs that deploy university money or rely on donations, the Indiana group raises funds from third parties and invests in properties across the country, such as apartment developments and industrial parks.
As a high schooler, Hiller was so enamored with the program—by most accounts, the undergraduate-run real-estate investment group that manages the most capital—that he chose to attend Indiana with hopes of being a part of it.
“Students get the experience, the school gets a better education for their students, and the investors are making their money back and get to be a part of the program again,” Hiller said. “I really wanted to be part of that.”
The group’s success is emblematic of changes transforming both higher education and the real-estate industry.
An industry that once revolved around information shared at private clubs or events has become a highly digitized landscape. It’s now flooded with standardized public-market data, so much so that undergraduates can readily peer inside and participate on nearly equal footing.
Meanwhile, colleges in recent decades have championed what is called “experiential learning,” encouraging students to do the hands-on work that will teach them the practical job skills they can’t learn in traditional classroom settings. Plus, dozens of universities now offer real-estate degrees, minors or concentrations for undergraduates.
“At its core, this program wouldn’t have existed 30 years ago,” said Harvard University real-estate professor Avis Devine.
This summer, Sample Gates Management sold its first investment, an industrial warehouse development in Indianapolis. In about 16 months, the fund earned a 65% gross profit on that property.
“That’s a really fantastic return in this environment,” one that would be “good for sort of any professional firm, not just students,” said Tim Morris, a member of the board responsible for approving the students’ investments, who is a founder and co-managing partner of the real-estate firm Proprium Capital Partners.
That property was an “easy yes” investment, Tom Peck, the students’ faculty adviser, recalled. It would diversify the group’s investment portfolio, and a reliable tenant was committed to leasing the building once it was finished, Peck said.
Most of the fund remains tied up in investments, making it difficult to gauge exactly how well it is performing overall.
A decade ago, there were only a few student-managed real-estate funds in the country. Today, there are at least 18, and two more are set to launch this school year, according to Mariya Letdin, a real-estate professor at Florida State University who has researched student-managed investment funds and advises one herself.
And yet, although a program like Sample Gates is an attractive resume line that provides unique experience among undergraduates, it isn’t necessarily a launching pad to help students secure jobs. Because of Wall Street’s summer-internship pipelines and early recruiting timelines, many of the 20 seniors in the group have already secured full-time jobs at global giants before they even touch Sample Gates funds.
In fact, the students’ professional experience—some of them participate in internships all three summers of college—is often a boon for Sample Gates. Students’ stints at institutional shops have left them with a “networking mindset” that “snowballs very quickly into a really, really good Rolodex,” Morris said.
At the Kelley School, where currently 278 students are majoring in real estate, faculty picked only 20 to manage the private-equity fund. The rising seniors were selected from Kelley’s already competitive roughly 60-student commercial real-estate workshop, in which students analyze deals and pitch them to mock committees.
In 2022, for the group’s first round of fundraising, Sample Gates raised $4.2 million from 46 investors, 40% more than their goal of $3 million. Last year’s cohort raised $7.8 million from 74 investors in the second round of fundraising, with one investor forking over $700,000. Some investors put money into both funds.
Many of the investors are Indiana alumni now working in the real-estate industry themselves. They expect the students to return a profit, but they are also enthusiastic about fostering the young program and meeting standout students.
The student managers screen between three and eight deals each week, which could mean they evaluate up to 400 potential investments a year. However, between 2023 and 2025, they selected only 12 investments, ranging in location from Indiana to Arizona.
Once a potential investment passes an initial screening, a team builds financial models and meets with prospective partners to pressure-test the viability of a deal.
For students to move forward with an investment, they must present it to their investment committee, a board of 10 seasoned real-estate executives. The committee has to sign off on all deals, and they reject roughly a third of the ones the undergraduates bring to the table.
And if the students think they can pitch an investment without getting their eyes on the physical property—regardless of where it is located— they would best think again.
Some observers predict that students might be disappointed when they start their full-time jobs because of the shift from doing the highest-level work of managing a fund to being a lowly analyst at a large firm.
“To have all of these skill sets in a short period of time and then to go be an associate for Blackstone would be mentally defeating,” said Rhett Trees, an investor in Sample Gates and Indiana alum who is the chief executive of a Denver-based real-estate private-equity firm.
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Rising Australian bond yields are putting pressure on listed property and the cost of capital. Here’s why A-REITs can signal changes in property valuations before the direct market moves.
4 min
Most property investors spend considerably more time watching interest rates than bond markets.
That makes sense. The Reserve Bank cash rate has an obvious relationship with mortgage repayments, borrowing capacity and investor sentiment, while government bonds can seem far removed from what someone will pay for an apartment in Sydney or an office building in Melbourne.
But the bond market can provide one of the earliest indications that the price investors are willing to pay for property is changing.
That became evident last Thursday, when Australian shares suffered their worst trading session in months. The S&P/ASX 200 fell almost two per cent, with property among the rate-sensitive sectors caught in the sell-off as government bond yields moved sharply higher.
Australia’s 10-year government bond yield pushed to around 5.4 per cent, close to its highest level in 15 years, against a backdrop of rising global yields and renewed concern about inflation and the direction of interest rates.
For property investors, that matters because the government bond yield is effectively one of the reference prices for money.
An investor buying an Australian government bond is receiving a return while taking comparatively little credit risk. Property comes with tenants, vacancies, maintenance, leasing costs, illiquidity and the possibility that the underlying asset falls in value, so investors generally expect to be compensated for accepting those additional risks.
A property yielding five per cent therefore looks considerably more attractive when a 10-year government bond yields three per cent than when that same bond is yielding more than five per cent.
That does not mean property values automatically fall every time bond yields increase. Rental growth, scarcity, lease structures and the quality of an asset can all outweigh movements in rates, but it changes the return investors require and therefore what they may be prepared to pay.
SG Hiscock & Company made that point in an ASX Investor Update, arguing that real, or inflation-adjusted, bond yields can be particularly relevant to property because real estate is fundamentally a long-duration investment whose value is derived from future income.
The first place investors can often see that repricing is the sharemarket.
A house or commercial building does not have a price that changes every few seconds. An Australian real estate investment trust does.
A-REITs can own billions of dollars of shopping centres, offices, warehouses and other property, but their securities trade continuously on the ASX. When expectations around interest rates and bond yields change, investors can immediately alter what they are willing to pay for those property earnings.
That can create a situation where the value attributed to a portfolio on the sharemarket falls even though the underlying buildings have not changed hands and their independent valuations remain unchanged.
The two markets simply move at different speeds.
Mark Ferguson, Head of Charter Hall Maxim Property Securities, has previously described direct property valuations as lagging the listed market. Writing for Charter Hall during an earlier period of rising interest rates and bond yields, Ferguson noted that listed property was already pricing increases in capitalisation rates and falls in underlying property values before those adjustments had fully emerged in direct-market valuations.
The effect can be substantial.
Consider a commercial property producing $1 million a year in net operating income. At a five per cent capitalisation rate, that income implies a value of $20 million.
If investors subsequently require a 5.5 per cent return while the property’s income remains unchanged, the implied value falls to around $18.18 million. At six per cent, it falls again to roughly $16.67 million.
Nothing necessarily happened to the building. It could have the same tenant paying the same rent under the same lease. What changed was the return required by the person buying it.
That is also why income growth becomes so important.
A well-located property with constrained supply and strong rental growth can increase its earnings quickly enough to absorb some of the pressure from higher required returns. An ageing office building facing vacancies, refurbishment costs and an approaching debt refinancing could instead be hit from several directions at once.
Debt adds another dimension because property is one of the economy’s most capital-intensive asset classes.
Higher market rates can increase the cost of financing an acquisition or refinancing existing debt while simultaneously increasing the return investors expect from the property itself. For developers, the consequences can be even more pronounced because higher construction finance costs can coincide with lower anticipated end values.
If that happens, a project can be squeezed from both directions: it becomes more expensive to deliver at precisely the time investors become less willing to pay yesterday’s price for the finished asset.
The direct property market generally takes longer to reveal that adjustment.
An A-REIT can lose five per cent of its market value in a trading session. An office building may not transact for another year. Owners can reject lower offers, transactions can be withdrawn and valuers must wait for comparable sales to establish new evidence.
That lag is one reason listed property can be useful even for investors who have no intention of buying a REIT.
The same principle eventually extends to residential property, although houses and apartments are generally valued using comparable sales rather than capitalisation rates.
Residential property is particularly sensitive to credit. Higher bond and swap rates can influence bank funding and fixed mortgage pricing, while higher borrowing costs reduce the amount households can service.
If prospective buyers can borrow less, the number of people capable of paying yesterday’s price can shrink. Vendors may initially resist that adjustment, resulting in fewer transactions rather than immediate price falls, before motivated sales eventually establish new comparable values.
For investors, rental growth can provide an important buffer. Rising rents can help offset higher financing costs, just as increasing commercial rents can compensate for some expansion in capitalisation rates. Investors relying primarily on capital growth while accepting a low rental yield have considerably less protection when the cost of money rises.
That is why movements in listed property and bond markets deserve attention beyond the trading floor.
They provide a constantly updating view of how investors are pricing interest rates, debt, future income and property risk, often months before those changes become obvious in direct transactions.
For an A-REIT investor, that means looking at gearing, debt maturity, hedging, interest cover and the discount or premium to net tangible assets rather than simply chasing the highest distribution yield.
For a commercial property investor, it means testing what happens to valuations if capitalisation rates move 25, 50 or 100 basis points higher.
For residential investors, it means understanding mortgage costs, borrowing capacity, realistic rental income and how much of the investment case relies on future capital growth.
The cash rate will continue to attract most of the attention in Australian property. But investors looking for an earlier indication of how the market is repricing risk should also be watching the bond market.
Property prices might take months to respond to a changing financial environment. The price of money moves considerably faster.
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