PGIM Real Estate has acquired a purpose-built student accommodation (PBSA) portfolio from Unite Group comprising six UK properties for £184 mln (€214 mln).
Unite's share was equal to £76 mln.
The assets, totalling just under 3,000 beds, are located in Birmingham, Cardiff, Leicester, Liverpool, Nottingham and Sheffield. Around 31% of beds are let on short-term nomination agreements.
Unite said that the disposals were priced in line with book value, reflecting an NOI yield of 6.2%. Proceeds will be recycled into the firm's asset management activity and used to meet redemption requests in the Unite UK Student Accommodation Fund (USAF).
PGIM Real Estate intends to conduct a rolling refurbishment programme across the entire portfolio to modernise the accommodation and to provide facilities to better serve student needs when studying, socialising and residing in the property.
Generation Partners will act as the asset and development manager and its operational management arm, Now Student Living, will be retained as the property manager.
The refurbishment programme will also enable material improvements to sustainability and energy efficiency via initiatives including passive measures (building fabric) that minimise the energy demand, refurbishment of plant to provide more energy efficient services and the introduction of on-site renewable energy sources.
The acquisition was made on behalf of PGIM Real Estate’s European core plus strategy, and the transaction was originated by James Wright in the UK equity team.
Tobias Waldschmidt, senior portfolio manager of European core plus strategy at PGIM Real Estate, said: 'In the current market environment, it’s rare to find a stabilized portfolio with high-quality yielding assets located in key regional cities.
'We believe the UK PBSA sector has strong underlying fundamentals as demand for student housing is only set to increase with more students applying for university. We are confident that, together with Generation Partners, we can add value to this portfolio on behalf of our investors, whilst delivering a secure stable income stream from day one.'
Alan Artus, chief executive of Generation Partners, said: 'Generation is excited to be working in partnership with PGIM Real Estate on this portfolio in conjunction with our recently established operational management arm, Now Student Living.
'The opportunity to upgrade these assets to provide high quality PBSA whilst still appealing to a broad student demographic is an exciting challenge and we look forward to working with PGIM to deliver our joint objectives.'
Joe Lister, Unite Students chief executive, commented: 'These disposals continue our disciplined approach of recycling capital for reinvestment and further increases our alignment to the strongest universities.
'The growth outlook for purpose-built student accommodation remains compelling and we are tracking a number of new investment opportunities at attractive returns.'
PGIM Real Estate’s European core plus strategy targets liquid European markets, with a focus on sectors benefiting from structural trends driven by digitalisation, changing demographics and decarbonisation.
That includes areas such as last mile logistics, residential including rental, senior and student housing.
