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Foreign investors buy into UK student housing

Reflecting the buoyancy of the UK’s student accommodation sector, the country’s largest developer, University Partnerships Program (UPP), has sold a 60% stake of its business, previously wholly owned by Barclays Infrastructure Fund Management (BIFM) since its management buyout in 2005.

UPP and University of York student accommodation at the University of York’s campus.UPP and University of York student accommodation at the University of York’s campus.

UPP plans to invest £1 billion over the next two years to increase its number of rooms to 35,000 and rent revenues to £140 million

The deal, with leading Dutch pension fund service provider PGGM, was finalised last month and will provide UPP with a capital base for its aggressive growth strategies.

“We are delighted to have closed this deal with PGGM Infrastructure Fund 2010 which underlines UPP’s successful on-going strategy for growth and investment across the Higher Education sector,” said Sean O’Shea, Chief Executive Officer of UPP . “This deal provides a strategic fit with our business model and provides a strong platform for future growth.”

Student housing has become one of the “most coveted property classes” during the past two years

UPP, which specialises in on-campus accommodation has an enterprise value of £1.4 billion, a portfolio of 28,000 rooms and earns £89 million a year from rent alone. It plans to invest £1 billion over the next two years to increase its number of rooms to 35,000 which should increase rent revenues to £140 million.

Student housing has become one of the “most coveted property classes” during the past two years, according to the Financial Times, and international students are thought to be driving the trend.

Despite fears among educators over visa curbs, private investors are confident that foreign enrolments will continue to grow in the UK. They also report a shortage in student housing, and claim that international students make reliable tenants who are more likely to stay in student halls for the entirety of their course than their domestic peers.

In 2010-11, there were 490,000 students living in open market rented property in the UK – up from 335,000 in 2007-08.

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