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US PE firm invests £120m in UK student housing

The UK’s booming student accommodation sector has a new player, after US private equity firm Starwood Capital Group acquired an operational portfolio worth £120m, in partnership with European real estate investment and asset management firm Round Hill Capital.

The acquisition consists of properties in key student cities across the UK including Newcastle (pictured) Cambridge, Edinburgh and Glasgow. Photo: Neil Turner

"We believe that the UK is and will continue to be one of the top educational destinations for international students”

The deal, Starwood’s first in the UK, totals 1,595 beds in England and Scotland, adding to the 6,855 student beds under Starwood management in the US.

“We look forward to building on this transaction to establish a sizeable student housing platform in the UK”

The “six modern, purpose-built, premium student accommodation assets” are in The Haymarket in Edinburgh, Chestnut House in Cambridge, The Walls in Southampton, St James House in Glasgow and Union Square and Stepney Yard, both in Newcastle.

The ‘forward funded’ Newcastle development is slated be ready for the 2018/19 academic year.

All the existing developments have en-suite rooms and amenities including study areas, cinemas and gyms. No specific scaling up plans have been released, but emphasis is on the communal areas and facilities such as high-speed broadband with an ethos of ‘work, study, play’ in mind, the company said.

Given high demand for higher education in the UK, combined with structural supply constraints for premium accommodation and growing investment in the sector, the acquisition provided a “compelling investment opportunity” for Round Hill Capital, its CEO, Michael Bickford, said.

Zsolt Kohalmi, head of European acquisitions at Starwood Capital Group, commented: ”We are excited to work with Round Hill Capital and Nido [a former Round Hill portfolio sold to Greystar in 2015] as our partners on this investment, which boasts assets in superb locations and strong student markets that provide a high-quality offering to students.

“We believe that the UK is and will continue to be one of the top educational destinations for international students,” he added.

“We look forward to building on this transaction to establish a sizeable student housing platform in the UK.” The joint venture is understood to have an initial target of £1bn.

Starwood’s entry into the UK market comes in the context of £3.1bn investment in the UK student accommodation sector in 2016, the second-highest figure on record after 2015’s record high of just under £6bn.

Big players in the the UK student housing market currently include Canada Pension Plan Investment Board, whose first UK market foray happened in 2015 with the £1.1bn acquisition of Liberty Living, with a portfolio comprising of over 16,700 rooms in 40 residences across 17 university towns.

Meanwhile, Empiric Student Property, geared towards international and postgrad students, has 8,500 rooms and aims for 10,000 over 35 towns and cities, according to its website.

 

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