Fund invests £439m in student housing with Downing

A fund advised by real estate investment manager Tristan Capital Partners has invested £439 million in a new UK student housing joint venture that it has formed with the Liverpool-based developer Downing.

European Property Investors Special Opportunities IV (EPISO 4) has acquired a 90% interest in the joint venture, which owns a 2,756-bed portfolio of six halls in university cities across the UK.

It has also committed to a forward purchase of another residence in Glasgow next year and has the additional option to purchase a prime 32 storey, 578 bed scheme in the heart of Vauxhall, London in 2018, taking the potential number of total beds in the portfolio to 3,644.

Peter Mather, Managing Director of Investments at Tristan Capital, said: “This joint venture allows us to invest in best-in-class, newly purpose-built student accommodation portfolio, located 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.”

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 development in Glasgow and the potential development in London.

Simon Garnett, Finance Director of Downing, said: “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.

“This investment strengthens our position to capitalise on additional growth opportunities and will allow us to further our ambitious expansion plans.”

The number of full time students in the UK has increased by 21.5% since 2005-6 to more than 1.7 million full-time students in 2015-16.

However, there remains a shortage of supply, with only 30% of students able to access purpose built student accommodation.

The development pipeline to 2019 is estimated at 30,000 beds per annum, lagging the forecast increase in student numbers at 60,000 per annum.

Tristan Capital Partners CEO Ric Lewis said: “Student accommodation is becoming a mature and liquid asset class and is of increasing attractiveness to institutions based on robust and growing demand for more units of accommodation by 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.