Greystar invests £291m to buy UK student housing assets from KKR

Greystar Real Estate Partners has invested £291m (€335.8m) to buy five UK student accommodation assets from KKR.

The real estate manager said it has acquired the purpose-built student accommodation (PBSA) assets located in London, Glasgow, Coventry and Bristol.

The five assets comprise a total of 2,163 units. Four of the assets are operational and let to students for the 2020/21 academic year, while the asset in Bristol is under construction and due for occupancy in September 2021.

KKR acquired the five PBSA sites in 2018 to develop and worked with Nido Student as operator of the sites.

Greystar said it will implement an asset management strategy to maximise the value of each asset and operate them under a newly created European brand, which will be brought to market later this year.

The acquisition forms Greystar’s second UK PBSA portfolio, alongside the premium London-focused brand Chapter. It follows the sale of the iQ portfolio to Blackstone for £4.7bn by the Goldman Sachs, Wellcome Trust and Greystar partnership at the beginning of 2020.

Ben Mowbray, a senior director in charge of UK Greystar’s UK investment, said the acquisition marks the firm’s re-entry into the regional UK student accommodation market following the sale of iQ portfolio to Blackstone and a successful six years owning and operating a separate premium portfolio in London.

“We see potential to generate additional yield from these assets through dynamic pricing and the introduction of our world-class operating platform. The fundamentals of the UK student accommodation market are still strong despite the pandemic. There was a record number of applications to higher education institutions across the country and students are adapting to a hybrid model of learning.

“Meanwhile there is still a structural undersupply of student accommodation to meet this demand.”

Mark Allnutt, a senior managing director at Greystar in Europe, said the rise of student accommodation is a global phenomenon, driven by global demographics. The global population of students in higher education, including both international and domestic, currently stands at 250m and this is expected to double over the next 15-20 years.

“Again, this is driven by secular trends rather than cyclical factors, notably the rise of the middle class in emerging markets. Regardless of the pandemic, student housing remains a counter-cyclical asset class, so while near term occupancy may be temporarily affected, we expect rental rates to remain resilient.

“As occupancy recovers, we expect to see continued rental growth with few risks from a weak economy and labour market. Student numbers tend to rise with unemployment as graduate students ‘retool’ for the recovery phase of the cycle.”

Seb D’Avanzo, managing director in European real estate at KKR, said: “These assets have helped to address the growing demand for high-quality accommodation across university hubs in the UK that provide a focus on wellbeing and community for students.

“We continue to see the UK as a strategically significant market for PBSA, with strong projected demand, and will continue to assess future opportunities to acquire and develop quality assets.”

To read the digital edition of the latest IPE Real Assets magazine click here.