NETHERLANDS - Dutch pension fund manager PGGM is understood to be in exclusive talks with Barclays Capital with a view to acquiring the investment bank's 80% shareholding in the UK University Partnership Programme (UPP) for an estimated £1bn (€1.1bn).

A PGGM spokesman today said: "We've heard those rumours, too" - but declined to confirm them.

However, asked whether student accommodation was of interest, he pointed to the pension fund manager's continuing interest in infrastructure, including social infrastructure, and pointed to several investment announcements made this year.

That may give an indication of the likely portfolio destination for any acquisition.
In the meantime, Barclays Capital, which owns UPP via its infrastructure funds, did not respond to requests for comment.

Speculation that it would sell its stake in the fund has been circulating since May, after UPP's strategic review of funding options mooted bringing in new funding partners, selling the business or issuing CMBS backed by the university partnerships in order to raise funds for future developments.

UPP's business model comprises joint ventures with universities under which it builds and operates on-campus accommodation.

Its investments generate £81.5m annually in rental. The Partnership has already rejected funding bids from McQuarrie, GI partners and a consortium involving Lend Lease.

PGGM is the principal investor in a fund launched last December by Lend Lease to invest in social infrastructure.

A spokeswoman for UPP, which is also keeping silent on the negotiations with PGGM, said any hypothetical deal would not affect joint-venture partnerships agreements with universities.

She said: "The agreements, the operations team and the management will continue as they are."

The University of Reading, the most recent partner after it named UPP as preferred bidder for the UK's largest university residential development project, was unable to comment on the market rumours. 

A spokesman for university seemed unaware of the rumoured likely change of ownership.

In a separate development, F&C Commercial Property Trust, a listed company, has gained its first exposure to student accommodation with the £26.5m (€30.3m) acquisition of a residential block let to the University of Winchester on a 25-year lease.

F&C property funds director Richard Kirby told IP Real Estate: "The objective is to provide good-quality income and capital growth - which I can get through alternatives and student accommodation. A 25-year unexpired lease with some inflation hedging - that's very attractive to the company."

He added: "Generally speaking, good-quality student accommodation is pretty scarce. It's pretty tough to get hold of. There was competition [for this asset]."

Quality indicators in this case include the fact the block is let to the university rather than an operator, and that it is supported by residential values in a high-income area.