LGP invests in UK student homes

Legal & General Property has acquired student accommodation schemes attached to universities in Wales and England.

LGP is one of the most active investors in the student accommodation market in the UK. The investor paid a total of £130 mln (€151 mln) its sixth and seventh major university-backed acquisitions, bringing its total commitment to the sector to nearly £750 mln.

In a transaction totalling £86 mln and reflecting a blended net initial yield of about 5%, LGP acquired three blocks of student accommodation and an academic facility, let to INTO Newcastle University on two 35-year leases from October 2012. Comprising 534 student rooms in total, the investment also includes 4,000 m2 of bespoke, high specification teaching space.

In Wales, LGP purchased a new 1,000-bedroom, 23-block development, let to Aberystwyth University for 35 years from completion, for a total consideration of just over £43 mln. Work on site commenced in March 2013 and is being completed by December 2014. The lease will have the benefit of annual rent reviews linked to RPI.

Rob Martin, director of research at Legal & General Property: “We expect the next decade to be a more testing period for the UK’s higher education sector, with higher tuition fees shifting the financing burden onto students. However, the UK continues to enjoy a world-leading position in the market for internationally mobile students.

'As a result, we expect to see an emerging trend towards universities increasingly being defined as ‘premium’, research-oriented institutions able to attract students from overseas and a more value-oriented tier which are able to deliver lower-fee courses and a good record of securing employment for graduates. More generally, universities which clearly define their markets and compete effectively within them are set to outperform.'

Deloitte advised LGP on Aberystwyth and CBRE on Newcastle.