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MULTI-MILLION POUND DEALS PROVE STUDENT MARKET REMAINS ATTRACTIVE TO INVESTORS

King Sturge team seals two student accommodation deals worth £191m

Ever-increasing university admissions and growing interest from private sector and overseas investors mean that student housing remains a lucrative asset class, according to the head of the world‘s largest sector consultancy team.

Philip Hillman, a partner at King Sturge, who heads the firm‘s 15-strong student housing group, believes the UK‘s 325,000 student beds will continue to attract levels of investment far in excess of other “traditional” property classes.

As students across the country prepare to begin a new academic year, Hillman‘s team is celebrating having secured two property deals worth a combined total of £191 million in the space of a month.

Both transactions involve fund manager Liberty Living, the first being the £152 million acquisition of student properties from Unite Group. Philip Hillman and colleague Tom Francis acted for Liberty Living in the deal, which involved 3,180 beds in nine purpose-built student halls in Southampton, Cardiff, Preston and Stoke.

Meanwhile King Sturge‘s Conal Newland and Richard Taylerson acted for City University in London, in a £39 million deal which saw Liberty Living acquiring two student residences. The deal, involving 541 student beds in Islington, is the first in a two phase disposal at the university.

“The £152 million acquisition from Unite Group is the second largest deal in the UK student sector in the past five years, the largest being the £190 million sale on behalf of Moorfield in 2006, on which we also worked,” commented Hillman.

“These deals reinforce the fact that student accommodation is proving its resilience in times of financial turbulence. It has become a recognised asset class in its own right and is continuing to out-perform most traditional property assets.

“University admissions are set to keep rising but at the same time, students are becoming more discerning about where they live. Likewise, universities are keen to attract revenue and provide the right kind of student living experience.

 “The year-on-year growth in student numbers comes at a time when the private sector is becoming increasingly excited about the prospect of working with universities. At the forefront are the likes of the University Partnerships Programme, which works with universities to design, build, fund and operate academic and residential facilities and then hands them back to the management of the university at the end of the lease. Meanwhile investment funds and increasingly, overseas multinationals, are also wanting a piece of the action.”

Hillman forecasts that London – where student rents have risen around 10 per cent in a year and where demand for housing vastly exceeds supply – will increasingly dominant the sector in years to come.

“We have seen a number of large schemes in several provincial cities in recent years but the developers will increasingly be focusing on London, simply because it is so much more profitable,” he comments.

“Much of the UK‘s existing UK student accommodation was built in the 1960s and 70s so probably around half of it is obsolete, so much of the emphasis will be on re-development rather than new build,” added Hillman. “That will be the most dynamic part of the sector in the next five-10 years.”

Hillman said the King Sturge team was also working on student housing projects at a number of sites across the UK, where there is interest from UK-based operators, housing associations, and overseas-based companies, all keen to work in partnership with universities.  

ENDS             8th September 2008

For further information please contact Neil Fraser, Sturgess Van Damme, on 01275 349 011 or email neil@sturgessvandamme.co.uk