10
Student property provides secure income
from student lettings and a strong track
record of annual rental growth which makes
it a good investment asset. The majority
of investment has come from pension
funds and private investors, who have
been turning away from underperforming
residential and commercial property.
During 2011 and the first half of 2012
Savills recorded almost 80 major student
accommodation deals with approximately
36% based in London. Investment totalled
£350m in 2009, £450m in 2010, rising to
over £850m in 2011 (Knight Frank).
There was a massive increase in investment
into the sector in 2012 of over £2.7b (CBRE)
which included a small number of large
investment transactions equating to nearly
90% of activity. The most notable being the
purchase of a 60% stake in Barclays Capitals’
£1.4b Universities Partnerships Programme
(UPP) by the Dutch pension fund PGGM
and Round Hill Capitals’ £420m purchase
of the Nido portfolio from Blackstone. The
remaining 40% of the UPP portfolio was sold
to the Chinese state-owned Gingko Tree
Investment fund in January 2013 in a deal
thought to be worth £550m.
UPP owns and manages 28,000 beds at
universities across the UK and is also the
preferred bidder to develop a £200m
residential student village for Reading
University. The £420m Nido portfolio
comprises of 2,500 beds at Spitalfields,
Notting Hill and Kings Cross at a 6.25% yield.
The majority of institutional investment
has been in London, which has the highest
concentration of full time students in the
UK (290,000) and over 40 higher education
institutions. Some of the smaller deals
in London during 2012 included the
Hammersmith Palais, Goodman’s Fields and
The Quadrant in Stockwell which totaled
£158m. Collectively these will deliver 1,363
beds over the next couple of years.
Outside of London, other major deals
include the 778 bed Fountain Quay
purchased for £45m by City Heart with a 22
year lease in place to Napier University.
Some established funds have looked to take
advantage of the increased activity in the
sector including the Aviva Beach Student
Accommodation Fund which has 2,417 beds
in Nottingham, Sheffield and Birmingham.
Aviva was looking to market the fund for
approximately £162m with an annual
income of £11m, achieving a yield of 6.75%.
Small property development companies
have also been very active in the market and
have looked to private investors as a source
of funding. A number of small schemes of
50 to 150 beds located close to university
campuses came onto the market during
2012 with a specific focus on the retail
investors. These investments tend to be
located in large university towns in the north
of England including Liverpool, Manchester
and Newcastle offer the potential of very
exciting returns of 8% to 10% per annum.
The investor is generally offered the
leasehold on a student property which
will then be managed on their behalf by a
student property management company.
Despite the large amount of activity in the
sector from both private and institutional
investors, few banks are willing to lend for
development and those that are active are
very selective as a result of the 2008 housing
market crash. This is why many developers
have sought alternative funding from
private investors.
During the first eight months of 2012
planning applications were submitted for
over 27,000 student beds throughout the
UK with the majority of applications coming
from the private sector (72%). In London
alone there are 8,323 beds currently under
construction and a further 10,700 with
planning permission to be built over the
next few years. In total this is equivalent to
almost 9% of the UK purpose built student
accommodation market and represents a
major increase in supply.
INVESTMENTACTIVITY
INSTITUTIONAL INVESTORS AND FUNDS
City Heart
Urbanest
Mansion Student
Accomodation Fund
Carlyle Group
Real Star
Unite (UK) Student
Accomodation Fund
Oaktree Capital
Prudential
McLaren Property
Aviva Beach Student
Accomodation
RPS Capital
Cordia Savills
Student Hall Fund
Crosslane Student
Accomodation Fund
Round Hill Capital
PGGM Pension Fund
