Danish labour-market pension fund PensionDanmark is making its first investment in student housing, signing a public/private partnership (PPP) deal to build and rent affordable halls of residence accommodation for the Technical University of Denmark (DTU).
The DKK194bn (€26bn) pension fund set up a joint venture with Boligfonden DTU, an independent company attached to the university, for this purpose.
Torben Möger Pedersen, chief executive of PensionDanmark, told IPE: “It’s our first PPP in university housing, and it is very exciting; we are open to establishing other PPPs with other universities.”
The investment model developed in conjunction with Boligfonden DTU could be copied for PPP investments with other universities and institutions of a similar nature he said.
“We will issue an open invitation to other universities to get a dialogue going on this,” Möger Pedersen said.
The investment is PensionDanmark’s first investment specifically on housing for students – and on a large scale — although it has a smaller project in place to build 148 homes next year in Virum, just north of Copenhagen, with some of those to be aimed at students.
Boligfonden DTU foresees a demand for 1,300 apartments, which PensionDanmark said were to be built as quickly as possible, with the joint venture company expecting to launch a number of projects as early as 2017.
In the next 2-4 years, PensionDanmark said it expected to invest more than DKK1bn via the PPP joint venture, but Möger Pedersen said there were no fixed limits to this investment because it was a PPP investment that was expected to have a long life.
“We will fund student homes according to the demand, and as we identify good locations,” he said.
Under the terms of the agreement, Boligfonden DTU will undertake the facility management of the housing units produced, lease the units from PensionDanmark and in turn rent them out to individual students and teachers.
PensionDanmark said it would contribute its skills and experience in property development and be the owner of the assets.
Möger Pedersen said the return on the investment would probably be in line with the pension fund’s return on its real estate investments more generally, without giving a specific figure.
The deal came about because the university wanted to be able to offer low-price rental homes to its students, guest researchers and teachers, PensionDanmark said.
The homes will be located in places where transport times to the university’s campus in Lyngby, north of central Copenhagen, are no more than 30 minutes, it said.
Besides the Lyngby campus, DTU also has a campus in Ballerup, 10km to the west of Copenhagen, and in Risø, 40km to the west of the capital city, among other locations.
Mikael Hyttel Thomsen, director of Boligfonden DTU, said the need for more accommodation in the segment it serviced was so great it was only going to be met through new types of cooperation.
The firm has cautiously said it will need 1,300 new homes as soon as possible, he said.
“Seen realistically, the demand is much bigger if we take housing guarantees in courses of study into account,” Hyttel Thomsen said.