Tristan Capital Partners has invested £439m (€497m) in a new UK student housing joint venture with Liverpool-based developer and operator Downing.
The company’s European Property Investors Special Opportunities IV (EPISO 4) fund has acquired a 90% interest in the joint venture, which owns a 2,756-bed portfolio of six halls in university cities across the UK.
It has the option to forward purchase two more residences next year, including a 32-storey, 578-bed scheme in the heart of Vauxhall, London, taking the total number of beds to 3,644.
Peter Mather, managing director of investments at Tristan Capital, said: “This joint venture allows us to access a best-in-class, newly purpose-built student accommodation portfolio, in leading university cities.
“Having an experienced operating partner is critical for investing successfully in this niche sector and Downing offers a wealth of experience, unrivalled industry relationships and a proven track record as a first class developer and operator.”
Downing will retain a 10% stake in the joint venture, which will acquire the eight assets in two tranches.
Downing developed all six of the existing halls in the past two years and will deliver the two developments in Glasgow and London.
The majority of the 3,644 beds in the future eight-property portfolio will be leased directly to students, while 11% are leased directly by the universities themselves and an additional 25% are under nomination agreements with these education establishments.
The number of full-time students in the UK by 21.5% between the 2005-06 and 2015-16 academic years to over 1.7m, according to the Higher Education Statistics Agency.
But Tristan Capital said there remains a structural shortage of supply, with Knight Frank research showing that only 30% of students are able to access purpose-built student accommodation.
In addition, the development pipeline to 2019 is estimated at only 30,000 beds per annum, lagging the forecast increase in student numbers of 60,000.
Mather added: “Student accommodation is becoming a mature and liquid asset class and is of increasing attractiveness to institutions based on robust and growing demand for the UK higher education institutions and a structural undersupply of purpose-built stock.
“The majority of purpose built beds are currently owned in small portfolios and there is expected to be further consolidation in the sector, which we are keen to explore.”
The joint venture follows EPISO 4’s investment in the redevelopment of Plymouth’s Derry’s department store earlier this year. The ‘Plymouth Cross project’, which received full planning consent in August 2016, involves remodelling, extending and refurbishing the building to create a multi-use asset that includes a 500-bed student accommodation block.
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