Student Acommodation Acquisition Report 2020
|Created At:||20 January, 2021|
|Created By:||Casita Team|
Thanks to valuable transactions in the first two months of 2020, the student housing sector has remained strong despite the COVID-19 outbreak. Even though investments in 2020 were only $1.58 billion compared to the $2.29 billion in 2019, cap rates have sustained near-record lows. The private sector also accounted for an impressive $36 million in acquisitions through the second quarter of 2020. As for institutional capital, more than $853 million worth of properties sold in 2020, making up 56.5% of total market share. Amongst the many business transactions throughout the year, Blackstone and GSA, as well as other providers managed to add numerous buildings to their portfolio.
1. Scape Acquired Urbanest
In one of the biggest deals of 2020, Scape became the largest PBSA provider in Australia after acquiring Urbanest's 6805 beds worth $2 billion in Sydney, Melbourne, Brisbane and Adelaide.
The deal came just months after another major $680 million acquisition of the Atira portfolio controlled by funds manager Blue Sky and investment bank Goldman Sachs. Atira’s portfolio consisted of six facilities in Melbourne, Brisbane and Adelaide along with three development sites in Sydney, Melbourne and Perth.
“We are confident that the combination of our businesses and our people will offer the Australian education market the scale required to satisfy the growing demand from our students, universities and the broader education sector to support Australia’s leading position in the global education market,” stated Scape’s executive chairman Craig Carracher.
Urbanest was owned by M3 Capital Partners' Evergreen Real Estate, which is backed by the Washington State Investment Board. The company opened its first building in 2010 which is considered to be ‘the first generation’, while more recent buildings opened on Swanston Street in Melbourne and Darling Square in Sydney and are more modern.
"We look forward to working with the Urbanest team to grow the opportunity at this exciting time for student accommodation in Australia and globally," added Carracher.
2. Blackstone Bought iQ Student Accommodation
On the 26th February 2020, it was announced that iQ Student Accommodation with more than 28,000 beds across the UK, has been sold to Blackstone for £4.66 billion. This announcement, made by Goldman Sachs Merchant Banking Division and the Wellcome Trust, marked the largest-ever private real estate transaction in the UK.
Rob Roger, CEO of iQ, stated: “I am delighted to be working with a partner of Blackstone’s calibre, as we continue to deliver our ambitious growth plans.”
Founded in 2006 and merging with Goldman Sachs' student housing business in 2016, iQ owned and operated around 4,000 beds in cities with the highest demand from students like London, Manchester, Birmingham, Glasgow, and Sheffield.
“Over the course of our ownership, iQ has become the UK’s leading provider of high-quality student accommodation. The company’s focus on customer service and continued investment in the platform has enabled iQ to become a leader in the sector and provide an outstanding experience to students. We are proud to have been part of that journey alongside iQ’s excellent management team and our valued partners at Wellcome”, stated Richard Spencer, Managing Director at Goldman Sachs.
3. Five Harrison Street Properties Sold to GSA
In another major successful deal in February, Harrison Street sold five of its properties to Global Student Accommodation (GSA). The properties sold included The Tannery, Ardcairn House, New Mill, Broadstone Hall and Kavanagh Court, with a total of 1,971 beds.
GSA bought the buildings for €400 million gaining full management and strategic control over them for the long term. Since Harrison Street and GSA became joint venture partners, additional similar transactions are expected in the future.
4. Student Roost Signs Up For Two New Schemes
Last November, Student Roost bought two new schemes in York and Bristol from Summix Capital for £70 million. The deal included a 291-bed building in Unity Street, Bristol, as well as a 368-bed property at Frederick House in York, acquired via a forward-funding agreement with developer Watkin Jones.
Commenting on the deal, Stephen Rigby, chief investment officer at Student Roost stated: "York is a very strong market for us, Bristol has been a long-standing target market, so we're pleased to acquire the sites, and we're looking forward to working with Watkin Jones again."
5. Far East Orchard Expands in Bristol
With a portfolio of 3561 beds in the UK, Far East Orchard announced its acquisition of the new PBSA in Bristol in November. The company bought the freehold property, Kings Square Studio for £39.3 million. The purchase comes as an effort toward achieving their strategy of building a lodging platform, bringing their profile to 12 properties in the UK.
The choice of the city stems from the fact that Bristol has two major universities, which means it has a sizable student population. Because it’s a strong regional city for PBSAs, Far East previously purchased 166-bed St Lawrence House and 133-bed Harbour Court, bringing their portfolio to a total of 600 beds in Bristol.
“We intend to continue building on this strategy, to take advantage of the counter-cyclical nature of student accommodation assets by building our portfolio in the UK, focusing on cities with high-tariff universities and strong student growth”, said Alan Tang, Chief Executive Officer of Far East.
6. New Schemes for 90 North in Edinburgh and Leicester
In May, Developer Aimrok managed to sell two student accommodation blocks in Edinburgh and Leicester to 90 North Real Estate Partners and Rasameel Investment Company for a total of £22 million.
"These two new properties are in core locations and provide housing to high-ranked universities in under-supplied markets. With structuring to ensure continuity of income to cover this current period of occupational uncertainty, we expect these investments to deliver strong performance.” Said John Yeens, Partner at 90 North Real Estate Partners.
The Edinburgh property, Goods Corner, located right across from University of Edinburgh's King's Buildings engineering campus consists of 108 studio beds while Dover Street in Leicester consists of 135-bed spaces. Both properties have been 100% let so far and will be managed by Homes for Students.
7. LSPIM Sold Two Leeds PBSAs for £90 Million
The student housing division of London & Scottish Property Investment Management (LSPIM) sold two of its Leeds properties on behalf of a US-based private investor to an unnamed far eastern investor for £90 million.
LSPIM developed Crown House in Sheffield and Symons House in Leeds with a total of more than 700 beds. Crown House was developed into 355 luxury studio bedrooms after its acquisition in 2015 and opened for the 2017-18 academic year. Symons House, on the other hand, opened in January 2020 after its acquisition in 2017 when it was developed into 351 student bedrooms.
"We are very pleased with the level of interest shown in these properties. We have developed a sound business model and have good relationships with both lenders and investors. As a result, these two projects - our first in the student accommodation sector - have been hugely successful for us”, commented Stephen Inglis, Chief Executive of London and Scottish Property Investment Management.
GSA’s Promising 2021
GSA started this year with a major US deal, marking its debut in the country. The company bought 27 properties, around 8,000 beds across 19 cities and 18 states.
The properties in question belong to UCLA the joint venture with University Communities and the California State Teachers’ Retirement System.
GSA plans to work with University Communities on acquiring and developing more student housing properties in the US with the help of property management company UComm, which it also acquired.
The CEO of GSA Investment Management, Will Rowson, believes that “entering the US market and building a presence is another significant step for GSA. We have been patient to source the right opportunity that fits with our investment criteria and we are very pleased to have secured a major foothold across the country. We are confident this acquisition will enable us to develop significant scale, deliver on our investor promise and, most importantly, refresh the sector with our global student experience.”
Overall, 2020 proved to be an ideal opportunity for new investors to enter the market and stable providers to showcase their resilience to the situation. Investors expect 2021 to be even more competitive as the new Covid-19 vaccine will help students and investors feel safe and invest more.