Barings, on behalf of a value-add investment strategy, has made its first European purpose-built student accommodation (PBSA) investment in a £43.8m (€49.5m) UK deal to forward fund the development of two buildings.

Barings, which manages real estate investments on behalf of its parent MassMutual insurance company and third-party investors, said it has agreed to fund the development of the buildings located in London and Manchester.

Gunther Deutsch, head of Europe real estate transaction at Barings, said: “The UK remains one of the highest-ranked countries in the world for higher education and we believe this transaction presents an opportunity to invest in two high-quality schemes at an attractive entry point that will help to meet growing demand.”

Deutsch said the transaction is Barings’ first PBSA investment in Europe and the start of a wider living investment strategy in its key jurisdictions including the Nordics, the Netherlands, Germany, the UK, Italy, France and Spain.

Barings is targeting €350m of investments across PBSA, build-to-rent and micro/serviced living and “will work with strong and experienced developers as we build our product pipeline and increase investment volumes”, Deutsch added.

SEC filings in March last year revealed that Barings had at the time raised $468.3m for the Barings Real Estate European Value Add Fund II fund. IPE Real Assets had previously reported that Kentucky Retirement Systems and MassMutual Life Insurance Company had agreed to commit €425m to the second Barings European value-add real estate fund.

Unlike the predecessor fund which invested mostly in office assets, the second vehicle will have a greater focus on logistics and will be able to allocate some capital to alternative property types, such as student accommodation, senior housing, apartments and hotels as well as some selective retail assets.

The London and Manchester assets, which are being developed by Alumno, are expected to be completed in time for the 2022/23 academic year, Barings said.

The 4,600sqm development in London, located on Bermondsey Spa Gardens, will comprise 143 beds and the 1,100sqm Manchester building – situated within the campus of Manchester Metropolitan University – will contain 62 studios.

Darren Hutchinson, managing director and head of UK real estate transactions at Barings, said: “These are two high-quality PBSA assets in very strong locations in London and Manchester, which are both undersupplied markets supported by strong universities and a deep occupier demand.

”We are excited to work with Alumno to create well designed, contemporary accommodation that will appeal to a wide range of students.”

David Campbell, founder and managing director at Alumno, said: “This is a huge boost for our business coming into 2021. It also highlights the confidence in bringing forward major investment into the PBSA sector, which has again demonstrated its resilience during these challenging times.

“We very much look forward to working with the Barings team and developing our relationship further and believe this will be the start of a strong, long term partnership.”

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