Singapore-based private equity real estate firm Q Investment Partners (QIP) has launched its largest investment fund to date, a 30 million pound (US$38.12 million) portfolio of five purpose-built student accommodation (PBSA) assets in London, Edinburgh and Bath.
Despite the current climate, the fund has attracted strong investor interest, QIP said in a statement, adding that it is targeting a net return of 13% to 15% per annum over a four-year investment period.
Says QIP chief executive officer Peter Young: “The strong, long-term drivers of the UK PBSA are widely accepted and investor sentiment for the sector remains strong despite the Covid-19 pandemic, and will likely improve as UK universities commence operations for the September 2020 academic year.”
The fund will be 80% allocated to QIP's core business plan to buy, develop, operate, stabilize, and exit a portfolio of PBSA assets in top-tier student markets in the UK. The remaining 20% will provide flexibility to take advantage of opportunities across the entire real estate life cycle and across the spectrum of debt and equity. For instance, many retail and hospitality buildings are facing operational difficulties across the UK, thereby currently presenting a unique re-purposing opportunity into PBSA for these sites, QIP notes.
Through strategic joint ventures with local partners, QIP plans to develop a portfolio of PBSA assets under one fund, targeting pre-Covid-19 investments in 15 out of a potential 77 UK student markets. These are chosen based on key fundamental investment indicators and localized drivers such as the strength of the university, the land use turnaround opportunities from retail office to PBSA, as well as specific markets that have a shortfall in supply of quality student beds against demand from students.
“The pandemic opened our minds to a broader investment approach and we quickly accepted the need to re-imagine what the new norm will be in the UK university sector and respond accordingly to build long-term student housing products that will be resilient," Young says.
“Through our land and deal access, we expect our properties to deliver inflation-beating rental income and year-on-year increments of our net operating income over the long term. This is due to the property location and value creation from the best use of the land we purchase and the robust student products created.”
Recent data on student demand and universities suggests continued market resilience. All universities serviced by QIP’s portfolio will be opening their campus for the 2020/2021 academic year.
In addition, despite concerns surrounding demand from local and international students, Britain has surpassed the United States for the first time this year as the preferred overseas study destination for Chinese students, according to a report by the Beijing-based New Oriental Education & Technology Group. The pandemic has also sparked a new wave of students looking to upskill, defer their “gap years”, and return to university.