Carlyle enters UK student housing market

The Carlyle Group announced on Monday the acquisition of a site for student accommodation in Highbury & Islington in London, and the formation of a joint venture agreement with Generation Estates Limited (GEL).

The move marks Carlyle´s entry into the UK student housing market, continuing the global private equity firm's strategy of expanding its real estate horizons through joint venture partnerships.

Carlyle and GEL are progressing schemes on a further three sites in London which are to be acquired, providing the group with an initial portfolio with capacity for circa 1,850 beds at a total value of around £350 mln (EUR 411 mln).

The partners hope to work closely with London Universities and other private sector and overseas educational providers. Carlyle said it is a strong believer in student housing as a long term institutional asset class and the move into the London market follows its announcement of a student accommodation development programme and investment called City Living in the Netherlands in October 2009. It is also considering a similar venture in Paris.

Carlyle intends to build a business with GEL of at least 4000 beds in London, including the initial pipeline of schemes. Each site will comprise a mix of studio rooms (en suite plus kitchenette) and smaller en-suite study bedrooms, which will be in the three to four star end bracket which Carlyle believes offers ‘the most sustainable and attractive business proposition’.

Carlyle will invest through its third European real estate fund CEREP III, which raised EUR 2.2 bn in June 2008.

Student accommodation is the second new real estate market Carlyle has turned to in the UK in recent months. In July Carlyle began investing in the UK residential market with a £40 mln (EUR 48 mln) acquisition of a prime development site in the heart of Chelsea. The deal is a 50:50 joint venture with the Athos Group.