Real Estate News
More, different investors targeting student housing – UNITE
04 Sep 2012
UK - Student housing firm UNITE says it will increase asset sales from £80m (€101m) in the first half of the year to as much as £150m in the first half as a diverse range of investors target the sector.
Chief executive Mark Allen told analysts that first-half volumes were a positive indicator of the sector maturing.
"There's a wider range of market participants, and strong investor demand for assets with long leases to universities," he said.
"But those assets are scarce, so they're also looking at London's strong supply/demand story."
UNITE is itself concentrating its focus on the UK capital, where it foresees 3-4% rental growth and opportunities in regeneration zones with strong transport links.
Around 45% of the company's assets are now located in the capital, against a target of 60%.
Allen contrasted ongoing demand in the capital with "weakness - though not dramatic - in provincial yields".
Among competing investors targeting the London student accommodation market is private equity firm the Carlyle, which last week announced it raised £125m in bank debt to develop three London sites via a joint venture with Generation Estates.
UNITE's bearish prognosis for the provincial market - as well as for smaller and older assets - means UNITE will not increase its 16.5% shareholding in student accommodation fund USAF, which holds assets in 20 locations.
It is also in discussions with Singapore sovereign wealth fund GIC over the future of a joint venture set up in 2005 to develop assets in the Scottish and English capitals.
Despite an increase in tuition fees, Allen said the UK student accommodation sector remained strong, not least because of "double-digit demand" from overseas students.
At the same time, a newly complex and involved university application process had helped "consumerise" tertiary education.
On the supply side, he said the planning regime remained "challenging", but that the weight of equity keen to be involved in the sector would mitigate financing constraints.
In the meantime, CFO Joe Lister ruled out REIT conversion for the next few years.
"It's definitely something we're looking at, there is no medium-term imperative," he said.
Author: Shayla Walmsley