Q Investment Partners (QIP), the Singapore-based private equity real estate firm, has launched a £30 mln (€33 mln) UK purpose-built student accommodation (PBSA) investment fund to tap 'post Covid-19 recovery', marking its largest fund raise to date.
The company said that the fund would focus on assets across top tier student cities with an 'opportunistic overlay'.
Despite the current climate, QIP said it expected demand for the total fund raise of £30 mln to be filled. The investment is targeting a net return of 13 to 15% per annum over a 4-year investment period.
Peter Young, CEO at QIP said: 'The strong, long-term drivers of the UK PBSA are widely accepted and investor sentiment for the sector remains strong despite the Covid-19 pandemic, and will likely improve as UK universities commence operations for the September 2020 academic year.
'Capitalising on these opportunities will require nimble, ready capital – and we are confident in our ability to execute once the assets are ready to be transacted.'
The fund will be 80% allocated to QIP's core business plan to buy, develop, operate, stabilise, and exit a portfolio of PBSA assets in 15 out of a potential 77 UK student markets. The investment will adopt a portfolio approach with an initial investment pipeline of five assets in London, Edinburgh and Bath, activating joint ventures with local partners.
Pandemic potential
The remaining circa 20% will be a 'strategic allocation' representing a defined opportunistic mandate, QIP said, to take advantage of market dislocations in the PBSA sector. For instance, many retail and hospitality buildings are facing operational difficulties across the UK, thereby currently presenting a unique re-purposing opportunity into PBSA for these sites, the firm noted.
Identifiable 'dislocations' arising from the pandemic include land purchase opportunities; repurposing opportunities from retail-office to purpose built student accommodation; and redevelopment to purpose built residential rental buildings, where it makes sense from a valuation standpoint.
'The pandemic opened our minds to a broader investment approach and we quickly accepted the need to re-imagine what the new norm will be in the UK University sector and respond accordingly to build long term student housing products that will be resilient,' added Young.
Growth metrics
'Through our land and deal access, we expect our properties to deliver inflation beating rental income and year-on-year increments of our net operating income over the long term.
'This is due to the property location and value creation from the best use of the land we purchase and the robust student products created. To sum up, the pandemic puts QIP in a unique position to access and unlock compelling real estate opportunities and deliver our proven PBSA strategies in a new lens.'
QIP said that its investment case was backed by new research showing that Britain has surpassed the US for the first time this year as the preferred overseas study destination for Chinese students, according to a report by the Beijing-based New Oriental Education & Technology Group.
