Singapore-based private equity real estate firm Q Investment Partners (QIP) is exploring student accommodation and co-living assets in developed Asian markets such as Japan and Singapore.
While the firm is interested in looking at opportunities within these markets, it would take time before any deals would be announced, said QIP head of investment Abhinav Swamy. “The due diligence is still ongoing,” he told DealStreetAsia in an interaction.
He acknowledged that the markets within Asia are fundamentally different from the UK, where QIP has a presence in the student housing asset space. “There are certain countries within the region that have domestic, but transient populations. The students still need accommodation when they move to another city to study, so these are pockets of credible opportunities that we would be eyeing,” he said.
“This is why it is important for us to understand what the domestic markets look like, where are students going to study, and whether there are universities with established track records with increasing annual student intakes. These would make credible investment stories for us,” he added.
QIP currently has five assets of different operational stages in the UK and the US. Its purpose-built student accommodation (PBSA) assets in the UK are located in Sheffield, Nottingham, and Edinburgh, with a capacity of 782 beds.
The company had recently secured an 18 million pounds loan for two PBSAs in Edinburgh and Egham together with its joint venture partner HG Developments, a property developer in the UK. The debt financing was raised from British lender Secure Trust Bank Real Estate Finance.
The development in Edinburgh at 65 London Road is phase two of a larger project by QIP and HGD, which is already in development. The 198-bed phase one scheme at 61-63 London Road is expected to open in time for the 2021-22 academic year.
Meanwhile, the 107-bed development in Egham is re-purposed from retail space that sits in a prime location on the doorstep of Royal Holloway, University of London.
These developments form part of QIP’s 30 million pound student housing equity fund, launched last year to invest in PBSA projects. The fund, which has a four-year term and an expected net return of 13-15% a year, has a total asset value of around 120 million pounds, QIP co-founder and CEO Peter Young told DealStreetAsia in a previous interview.
Swamy declined to comment on the fund’s deployment status.
Despite its reputation as a “recession-proof” asset, the pandemic has certainly impacted UK student accommodation providers, especially as many international students chose not to come for the 2020-21 academic year due to travel restrictions or concerns about the pandemic.
According to a report by S&P Global Market Intelligence, Covid-19 had significantly affected occupancy rates across the sector during the first semester of the 2020-21 academic year. The three largest listed UK purpose-built student accommodation providers, Unite Group, Empiric Student Property and GCP Student Living, reported 88%, 70%, and 69% occupancy rates respectively.
Despite this, Swamy said QIP’s assets only reported “marginal decreases” of occupancies and are still seeing strong revenues, rental incomes and the cash flow generating ability, proving their resiliency. “We have not seen our assets being impacted to the extent of other more adversely impacted sectors due to the pandemic. This is underpinned by the strong demand – students still want to study and have face-to-face interaction.”
In fact, the M&A transaction landscape for UK PBSAs is still vibrant and is seeing increasing participation from new global institutional investors, signalling sustained confidence in the asset, he added. Citing research from real estate services firm Cushman & Wakefield, Swamy said the UK PBSA sector is now worth around 60 billion pounds and has maintained its reputation as the go-to alternative asset of choice for investors.
According to the report, UK PBSA yields have remained broadly stable over the course of 2020 in prime London and in super-prime and prime regional locations.
There was also an 8.5% increase in overall applications for the January 2021 deadline, with the rise in applications greater than what was seen during the Global Financial Crisis. The UK’s Universities and Colleges Admissions Service predicts an addition of 90,000 18-year-old domestic applicants by 2025.
“There have been a lot of positive tailwinds we are getting over the past few months, such as the reopening of the UK, the transparency provided by the UK government regarding the students’ quarantine requirements as well as educational office taking necessary measures and introducing guidelines on how the curriculum is going to be carried out. These all could hopefully take us back as near as possible to the pre-Covid environment,” said Swamy.
Singapore-based investors of student accomodation assets
|Investor||Student accomodation portfolio||New deals|
|Q Investment Partners||Portfolio of over 1000 beds and developing more projects in the UK and the US.||Secured an 18 million pounds construction debt from UK retail bank, STB, to support its latest PBSA schemes in Edinburgh and Egham via a joint venture with HG Developments Ltd in July 2021
|Mapletree Investments||Portfolio of over 51 assets of 22,000 beds in 34 cities in the UK, the US, and Canada.||Acquired two PBSA assets near Coventry University in Britain and completed its first student lodging development in the country in 2019|
|IP Investment Management||Portfolio of more than 1,200 beds in across six student housing assets in the UK||Sold a portfolio of two newly developed PBSA totaling 360 beds to Malaysia's KWAP and 90 North Real Estate Partners in 2018|
|GIC||Portfolio across the US, UK, Germany and Australia, mainly acquired through joint venture with firms including CPPIB, The Scion Group, GSA, and Unite Students||LSAV, the joint venture unit with Unite Students, acquired two assets in London for 342 million pounds in June 2021|
|Centurion||Portfolio of 20 assets in Australia, Singapore, South Korea, the UK and the USA with 6,396 beds as of Dec 2020.||Acquired 177-bed student accommodation asset in Nottingham for 15.1 million pounds|
|Singapore Press Holdings||Portfolio of 7,723 beds across 28 assetsin the UK and Germany.||Acquired seven assets in the UK for 411 million pounds in late-2019. Plans to further grow the PBSA portfolio and a possible listing of its PBSA assets.|
|Far East Orchard||Portfolio of over 3,500 beds across 12 UK properties as of end-2020.||Acquired a PBSA asset in Bristol for 39.3 million pounds in November 2020.|
Focus on living spectrum
Although most of the assets in its portfolio are PBSAs, Swamy said QIP focuses on the “living spectrum” that includes co-living properties, multi-family housing, and senior care centres.
Most recently, the firm completed an equity funding round led by Swiss lender Bank Julius Baer to fund the development of 633 S LaSalle, a 162,000 sqft, 281-bed co-living project in Chicago.
The round closed with $24.5 million raised – of which $14.5 million was from Bank Julius Baer. The asset has a gross development value of $100 million.
Commenting on the deal, QIP’s Young said the firm’s investment in developing the property is a significant step towards growing its co-living and residential housing investment practice, building on its PBSA track record.
“Bank Julius Baer’s participation in this round demonstrates the increased appetite from private banks for opportunities in the institutional-grade real estate sector, and specifically in the co-living space,” he added.
Swamy said QIP would remain committed to the living spectrum and continue to assess similar attractive deals that provide stable cash flow and a defensive strategy.
To date, QIP has managed over $500 million of real estate investments, delivering average returns of 16% per annum over a three-to-five-year investment period.
Editor’s note: This article was amended to include co-living assets as QIP’s targets.