EUROPE – PGGM is looking to replicate its UK student-housing joint venture across mainland Europe – but only if it can find a platform similar to the one created in the UK by the University Partnerships Programme (UPP).
The Dutch investor acquired a controlling interest in the UK university accommodation provider last year and senior investment manager Vincent Gerritsen said PGGM had yet to find an equivalent structure in mainland Europe.
“We’ve got everything we need [in the UK]," he said. "If similar structures or investment opportunities emerged in other markets, we would happily look at them – but there is only a handful that have the partnership model."
Gerritsen contrasted the UK with the heavily regulated and subsidised Dutch student housing sector, where tight rent regulations prevented investors earning market-based returns. The result was that investors struggled to find "economically sensible opportunities".
He added: "There are only so many student-accommodation markets that interest us as an infrastructure investor. Often, student accommodation is a local or nationally regulation-driven subsidised asset class instead of a free market.”
Explaining why the €128bn pension fund manager included European student housing within its infrastructure portfolio, Gerritsen said the classification had been the subject of internal debate.
In the US, where its real estate team handles student housing, PGGM plans to acquire assets directly.
In contrast, in the UK, Gerritsen said, "we’re not buying off-campus assets and letting them directly on the free market". He added: "Rather, this focus is on PPP-like structures with universities for on-campus accommodation."
Under its agreements with UK higher education institutions – including restricted covenants limiting the amount of new supply that can be brought into the university and the rent agreement – ownership reverts to the university at the end of the term.
Gerritsen acknowledged there were residual risks even with the UK model, notably the threat that medium and long-term demand for the universities themselves would deteriorate.
But he said UPP would manage the risk by targeting Russell Group universities with strong research capabilities and established track records.