Canada’s Public Sector Pension Investment Board is considering options for the future of its London student accommodation portfolio, which is valued at more than £1bn.
The C$116.8bn pension fund has invited investment banks and brokers to pitch, but it is understood that no adviser has been selected yet.
PSP is the majority owner of the business which operates as Chapter and has 4,500 student beds in the capital. Market estimates value the portfolio at £1.2bn-£1.3bn. It is managed by Greystar, which typically owns a stake of 5%-10% in the student accommodation assets it is involved with.
It is though that a sale of a 50% stake is the most likely option, but a source close to the process said that if the right offer came in then “all options were on the table” and an outright sale could be considered. If an outright sale were to take place, whether management was retained would most likely be determined by whether the purchaser already had an established management company through being active in the sector or was a newer entrant.
Greystar is likely to be keen to retain an asset management role in the business and is thought to have been exploring ways of continuing to manage assets across its portfolio on a longer-term basis by bringing in new capital partners.
While PSP is typically a long-term investor looking for the steady income streams provided by student accommodation, the surge of interest in the sector in recent years has prompted it to consider, at least in part, cashing out. A sale of a part stake would allow PSP to hedge its bets.
PSP and Greystar first joined forces in 2014 when it backed the US manager on the £190m acquisition of three London student housing schemes totalling 1,135 beds from Unite.
In March 2015, the duo bolstered the portfolio, buying an additional 2,375 London beds, previously branded Nido, from Round Hill Capital for £600m.
PSP’s latest addition is a 611-bed development in Lewisham, SE1, which was also the first UK student housing development overseen by Greystar. It opened in September 2016.
Greystar launched the Chapter brand at the beginning of 2016, targeting the top end of the student market and dropped the Nido name. The properties include gyms, bars and cinemas.
The seven Chapter properties are located in Aldgate, Highbury, Islington, King’s Cross, Lewisham, Portobello, South Bank and Spitalfields. Rents at the Chapter properties are some of the most expensive in London, attracting a largely international customer base and range from £199-309 per week.
Purpose-built student accommodation demand in the UK
- Knight Frank estimates that the UK’s purpose-built student accommodation sector could reach a total value of £45.8bn by September 2017. The number of students living in private sector purpose-built student accommodation in the UK has more than doubled since 2007.
- In the academic year 2014/2015, there were 72,000 UK students, or around 6% of the student population, living in purpose-built student accommodation, up from 34,000, or 3% of the student body, in the 2007/2008 academic year.
- Around 56% of all UK student beds in London in the current academic year are privately owned, and the remaining 44% university owned. In the regions, 40% are privately owned and 60% are owned by universities.
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