The USAF fund managed by London-listed firm Unite Students is acquiring two student accommodation properties in the UK for £56 mln (€64 mln) and financing the deals largely through selling another scheme in London.
The acquired assets are a 222-bed development in Durham and a 418-bed scheme in Selly Oak, Birmingham. The acquisitions are expected to generate a yield on cost of 6.3% in their first full year of operation.
The University of Durham (pictured) and the University of Birmingham are ranked 4th and 16th respectively in the Times Higher Education rankings, with a combined student population of 53,000.
Unite's share of the investments was £12.9 mln, with the rest coming from other investors in USAF, a £2.3 bn open-ended non-listed fund that owns around 27,000 student beds in over 77 properties across 24 university towns and cities. Unite holds a 23% stake in USAF and manages the fund.
In parallel with these transactions, USAF sold a 128-bed studio scheme in central London for £42 mln, providing the majority of the funding for the acquisitions. The remainder will be funded by cash.
The disposal price reflected a value of £320,000 per bedroom, in line with book value and represents a net initial yield of 4.25%. Disposals in 2017 now total £180 mln, on a Unite share basis, against our target of £150-200 mln.
Richard Simpson, group property director at Unite, said: 'These transactions demonstrate our strategy of investing in new, larger and more efficient properties with cluster flat accommodation, available at a lower price point for students.
'We will continue to deploy funds from the disposals made at the start of the year to further improve the quality of the portfolio and to extend our highly accretive development programme in strong regional locations with top-ranked universities like Durham or Birmingham, where we see the most sustainable growth.'
Henley expands in student housing
Separately, CBRE Capital Advisors announced it had arranged an investment facility of £30 mln on behalf of Henley to support the private equity real estate investor's £50 mln acquisition of a student accommodation portfolio in the UK. The deal represented a loan-to-value of 55%.
The portfolio consists of six purpose-built properties located in Sheffield, Stoke and Preston, totalling 1,519 student rooms. The assets were purchased from Liberty Living and further strengthen Henley's presence in the student accomodation sector. Through its Henley Ark platform, Henley also owns a portfolio of student properties in Dundee and Salford, valued at over £25 mln.
CBRE worked alongside Henley for over six months to model, structure and raise the appropriate finance for the project.
Lisa Attenborough, director at CBRE Capital Advisors, commented: 'Student housing is the alternative sector that commands the most appetite from lenders and despite approaching the market in the aftermath of the referendum, willingness to lend was strong. An imbalance between supply and demand still exists in many university cities across the UK and as such, there is greater liquidity in the debt markets for this asset class.'
