An opportunity fund advised by investment manager Tristan Capital Partners has invested £439 mln (€500 mln) in a new UK student housing joint venture that it has formed with the Liverpool-based developer-operator Downing.
European Property Investors Special Opportunities IV (EPISO 4) has acquired a 90% interest in the joint venture, which owns a 2,756-bed portfolio of six halls in some of the most prestigious university cities across the UK. It has an option to acquire two more residences next year, including a prime 32 storey, 578 bed scheme in the heart of Vauxhall London, taking the total number of beds to 3,644.
'This joint venture allows us to access a best-in-class, newly purpose-built student accommodation portfolio, in leading university cities. Having an experienced operating partner is critical for investing successfully in this niche sector and Downing offers a wealth of experience,' commented Peter Mather, managing director of Investments at Tristan Capital.
Downing will retain a 10% stake in the joint venture, which will acquire the eight assets in two tranches. Downing developed all six of the existing halls in the past two years and will deliver the two developments in Glasgow and London.
Simon Garnett, finance director of Downing, added: 'This investment strengthens our position to capitalise on additional growth opportunities and will allow us to further our ambitious expansion plans.'
The eight properties are West Village (Phase I and II) in Glasgow; The Kingfisher in Exeter; Cityside in Leeds; Verde in Newcastle; City Village in Coventry/Warwick; New Park in Edinburgh and Atlas in Vauxhall, London.
While the majority of the 3,644 beds will be leased directly to students, 11% are leased directly by the universities themselves and an additional 25% are under nomination agreements with these education establishments.
The number of full time students in the UK has increased by 21.5% since 2005/6, to over 1.7 million full-time students in 2015/16. However, there remains a structural shortage of supply, with only 30% of students able to access purpose built student accommodation. In addition, the development pipeline to 2019 is estimated at only 30,000 beds per annum, lagging the forecast increase in student numbers at 60,000 per annum.
'Student accommodation is becoming a mature and liquid asset class and is of increasing attractiveness to institutions based on robust and growing demand for the UK higher education institutions and a structural undersupply of purpose-built stock. The majority of purpose built beds are currently owned in small portfolios and there is expected to be further consolidation in the sector, which we are keen to explore,' added Peter Mather.
The joint venture follows EPISO 4’s investment in the redevelopment of Plymouth’s historic Derry’s department store earlier this year. The ‘Plymouth Cross project’, which received full planning consent in August 2016, involves remodelling, extending and refurbishing the building to create a multi-use asset which includes a 500-bed student accommodation block.
Senior financing for the portfolio was provided by AIG. Advising EPISO 4 on the purchase were BLP, EY and Knight Frank. Downing’s advisers were JLL, Hill Dickinson and DLA.
