Tristan Fund makes £439m investment in U.K. student housing
An opportunity fund advised by pan-European real estate investment manager Tristan Capital Partners has invested £439 million ($592 million) in a new U.K. student housing joint venture that it has formed with Liverpool-based developer-operator Downing.
European Property Investors Special Opportunities IV (EPISO 4) has acquired a 90 percent interest in the joint venture, which owns a 2,756-bed portfolio of six halls in some of the most prestigious university cities across the United Kingdom. It has also committed to a further forward purchase of another residence in Glasgow next year and has the additional option to purchase a prime 32-story, 578-bed scheme in the heart of Vauxhall, London in 2018, taking the potential number of total beds in the portfolio to 3,644.
“Student accommodation is becoming a mature and liquid asset class and is of increasing attractiveness to institutions based on robust and growing demand for the U.K. higher education institutions and a structural undersupply of purpose-built stock,” said Peter Mather, managing director of investments at Tristan Capital. “The majority of purpose built beds are currently owned in small portfolios and there is expected to be further consolidation in the sector, which we are keen to explore.”
Downing will retain a 10 percent stake in the joint venture, which will acquire the eight assets in two tranches. Downing developed all six of the existing halls in the past two years and will deliver the two developments in Glasgow and London.
While the majority of the 3,644 beds in the future eight-property portfolio will be leased directly to students, 11 percent are leased directly by the universities themselves and an additional 25 percent are under nomination agreements with these education establishments.
The number of full-time students in the United Kingdom has increased by 21.5 percent since 2005–2006, to more than 1.7 million full-time students in 2015–2016. However, there remains a structural shortage of supply, with only 30 percent of students able to access purpose-built student accommodation. In addition, the development pipeline to 2019 is estimated at only 30,000 beds per annum, lagging the forecast increase in student numbers at 60,000 per annum.