Greystar inks major student housing deal in UK

US student housing operator Greystar Real Estate Partners has joined forces with Goldman Sachs to acquire the bulk of the collapsed Opal student housing portfolio in the UK.

The package, consisting of 21 assets with a value of some £300 mln (€360 mln), was sold by Ernst & Young Real Estate Corporate Finance on behalf of a group of banks led by RBS. The package is believed to have received as many as 30 bids from a wide range of investors from across the globe.

Greystar, the largest apartment operator in the US with 215,000 units, said the deal represents its debut acquisition in the UK market. ‘This transaction provides access to a number of well-located but under-managed assets that we believe will be the first of many acquisitions in this sector,’ said Brett Lashley, Greystar’s UK managing director. ‘Our objective is to quickly become a major participant and thought leader in a market providing high-quality accommodation for students both in London and the regions.’ The deal is expected to close by the end of October.

The assets include Manchester student complexes Opal Hall, Opal Gardens, Daisy Bank Hall, Oxford Court, Briarfields Hall, Lambert & Fairfield and the Great Newton student block in Liverpool. Greystar and Goldman Sachs were advised by Macquarie Capital.

Opal, once the UK’s largest private owner of student accommodation with around 20,000 rooms, collapsed into administration earlier this year after failing to refinance its debt.

The transaction underlines the growing appeal of the student accommodation sector to UK and international institutional investors, who are attracted by the annuity-type income stream as well as the sector’s low volatility and reliable occupational market.

‘Compared to other alternative sectors, student housing offers the best proposition for stable cash flow at mid-range yields,’ commented Jo Winchester, head of student housing advisory at CBRE. ‘In this era of low returns and low growth, it provides one of the most robust opportunities for development style returns of all the sectors.’

The UK has attracted the bulk of investment in the sector, with some €3 bn of deals in 2012, double the amount of the year before. The increase in transaction activity was fuelled by several large-ticket deals including the acquisition by Dutch pension administrator PGGM of a 60% stake in the University Partnerships Programme, the second-largest provider of on-campus student accommodation in the UK.

PGGM acquired the stake from funds managed by Barclays Infrastructure Funds Management (BIFM) for a price understood to be at about €1 bn.

Earlier this year, APG joined forces with LaSalle Investment Management to raise £238 mln (€282 mln) for a joint venture vehicle offering developers whole loan construction finance on student housing schemes. The fund, LaSalle Residential Finance I (LRF I), is to provide a £100 mln development loan for the construction of Urbanest’s 1,100-bed Westminster Bridge Road scheme.

Similarly, the real estate fund management arm of M&G Investments recently acquired New Carnegie Court, a block of flats at the University of Aberdeen, from developer Unite.