GLOBAL - Singapore sovereign wealth fund GIC has signed up for a second joint venture with student housing firm Unite Group focused on London development projects.
Unite announced the creation of the new vehicle as it revealed GIC had also agreed to extend the £400m (€496m) Unite Capital Cities (UCC), an existing joint venture, to 2022.
The new 10-year joint venture, LSAV, will focus a planned war chest of £330m on development projects in the capital, in addition to existing seed projects with a combined value of £129m.
In an emailed response to questions, GIC Real Estate Europe regional head Chris Morrish cited London’s status as a “major hub” for international students, notably those from China and India’s increasingly affluent middle class.
“Student housing in London remains undersupplied and faces rising demand, particularly from overseas students,” he said.
According to a market alert, Unite will funnel most of its development activity in the capital via the new vehicle, which will have first refusal on its development projects until it meets its investment targets.
Under the terms of the agreement, the partners can agree to extend the programme by £200m once it has met its initial investment objectives.
In contrast to UCC, the partners will have equal stakes in LSAV.
In the meantime, Unite plans to increase its stake in UCC from 30% to 50% before merging the two joint ventures in 2016.
By then, Unite intends to sell around 25% of UCC’s assets that fall outside a narrow focus on “highest-quality London locations”.
Morrish said selling 20% of its shares in UCC would create a better alignment of interest between the partners in the long term.
Unite chief executive Mark Allen claimed in a presentation to investors that the agreement signed last week offered “a clear pathway” to a simplified joint venture structure.
LSAV’s creation will enable the group to boost its development programme in the capital without stretching its balance sheet.
Meanwhile, said Allen, extending UCC “removes uncertainty and maintains our London focus”.
Allen recently told analysts that the group would not increase its 16% stake in the £660m Unite UK Student Accommodation Fund (USAF), which it manages, because the fund did not focus exclusively on the UK capital.