Two major deals in the UK student housing market in September illustrate the attaction for equity players of this niche market In an age when students are groaning under grant cuts and other austerity measures, it may seem paradoxical that property investors are increasingly seeking out the ‘stability and long-term cash flow’ of student housing. But two major institutions illustrated in September that there is money to be made from the studying classes and that this niche market is proving to be an attractive target.
Two major deals in the UK student housing market in September illustrate the attaction for equity players of this niche market
In an age when students are groaning under grant cuts and other austerity measures, it may seem paradoxical that property investors are increasingly seeking out the ‘stability and long-term cash flow’ of student housing. But two major institutions illustrated in September that there is money to be made from the studying classes and that this niche market is proving to be an attractive target.
Dutch pension giant PGGM led the way. The asset manager, which invests €125 bn of pension assets on behalf of healthcare workers in the Netherlands, was responsible for the largest real estaterelated transaction in Europe in our review period from 1 July to 17 September 2012 by taking a large bet on the student accommodation market. PGGM acquired a 60% stake in University Partnerships Programme, the second-largest provider of on-campus student accommodation in the UK. The stake was sold by Barclays Infrastructure Funds Management (BIFM) to PGGM Infrastructure Fund 2010.
Although the price was not disclosed, the investment is estimated to be in the region of €1 bn. Officially an ‘infrastructure’ play, the deal is all about securing long-term rental income. Henk Huizing, head of infrastructure at PGGM said: ‘The deal is a good example of our efforts to increase direct investments in stable social infrastructure, focused on the long term. And, of course, it is crucial that the inflation-linked, stable cash flows
perfectly match the requirements of our clients.’ Coinciding with the PGGM-UPP transaction, Unite, the largest student accommodation specialist in the UK, announced it was extending its existing partnership with GIC Real Estate, the real estate arm of the Government of Singapore Investment Corporation. Unite and GIC said they were also creating a new 50:50 joint venture with the target of building up a €1.2 bn London portfolio. There is a similar pressing demand for good quality student housing in most of the top university cities in Continental Europe. Yet, as property adviser Savills notes in a report on the Italian situation, private-sector involvement in developing and owning student accommodation remains limited, while yields are very attractive. The same applies in Germany, France and the Netherlands. The limiting factor may be the lack of institutional-grade developers like UPP and Unite on the Continent. In later issues PropertyEU will explore the difficulties and opportunities for institutional investors seeking to access this niche segment.
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Our analysis of reported transaction activity in the third quarter (up to 15 September) shows that, aside from the whopper PGGM investment, Union Investment Real Estate was the most prolific dealmaker. PropertyEU recorded five acquisitions by the German real estate fund manager with a volume of about €750 mln.
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