An opportunity fund has invested £439 million in Liverpool-headquartered developer-operator Downing as part of a multi-million UK student housing joint venture.
European Property Investors Special Opportunities IV (EPISO 4) has acquired a 90% interest worth £439 million in the joint venture, which owns a 2,756-bed portfolio of six halls in some of the most prestigious university cities across the UK.
The joint venture has committed to forward purchase two more residences next year, including a prime 32 storey, 578 bed scheme in the heart of Vauxhall London, taking the total number of beds to 3,644.
Downing will retain a 10% 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. The management team at its Downing Students has more than 30 years of operational experience in student accommodation and has a track record of achieving strong occupancy and student satisfaction rates.
The fund investment will provide Downing with a strong platform for future growth. The company has an active development pipeline, with a number of outstanding student accommodation developments in key university cities across the country due to reach completion over the next five years.
The company, which has operated in partnership with universities across the UK over a number of years, enjoys long-standing nomination agreements with leading universities, alongside a strong profile driven by deep networks in a number of international student markets including China, India, Canada and the USA.
“We are delighted to have completed this agreement with Tristan and look forward to working with them on this portfolio. This partnership further establishes Downing as a major player in the student accommodation sector. Our market-leading portfolio and existing immediate pipeline of developments gives us a strong presence across the UK’s leading universities cities.
“We are proud of our Downing Students brand which has become a hallmark for high-quality, well-managed, innovative developments which offer outstanding pastoral care. Our experienced team will remain involved in the successful management and operation of over 5,000 beds.
“This agreement provides Downing with the capital needed to continue to invest in and grow our student accommodation portfolio. We have a vibrant development pipeline – with key schemes due for completion across the UK’s most prestigious university cities. We look forward to continuing to bring best-in-class student developments to the market and remain highly optimistic about the significant potential in this asset class.”
Finance Director at Downing
The eight properties are in close proximity to members of the Russell Group of the UK’s top 24 universities. Specifically, they are:
|Number of beds
|West Village (Phase I)
|For 2018 Delivery
|West Village (Phase II)
While the majority of the 3,644 beds in the future eight-property portfolio will be leased directly to students, 11% are leased directly by the universities themselves and an additional 25% are under nomination agreements with these education establishments.
Peter Mather, Managing Director of Investments at Tristan Capital, which advised the fund, said: “This joint venture allows us to access a best-in-class, newly purpose-built student accommodation portfolio, in leading university cities. Having an experienced operating partner is critical for investing successfully in this niche sector and Downing offers a wealth of experience, unrivalled industry relationships and a proven track record as a first class developer and operator.
“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 UK higher education institutions and a structural undersupply of purpose-built stock. 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.”
Senior financing for the portfolio was provided by AIG. Advising EPISO 4 on the purchase were BLP, EY and Knight Frank. Downing’s advisers were JLL, Hill Dickinson, and DLA