Scape closes $2bn student accommodation deal
The country’s largest owner and operator of student accommodation, Scape Australia, has defied the coronavirus crisis to close the $2bn acquisition of the rival Urbanest business and has called for “balanced consideration” in the relationship with China.
The sector is under pressure as international students are departing and universities have also been cutting back staff numbers, although Scape is bullish on the medium-term outlook, particularly if Australia contains the virus ahead of other student markets, Britain and the US.
Speaking as the Urbanest deal closed, Scape Australia executive chairman Craig Carracher, who has a long pedigree in Asia, including as a founding director of Ellerston Capital established by Kerry Packer in 2005, which expanded into China until 2008, and also as James Packer’s head of private equity in Asia a decade ago, called for co-operation with China.
Carracher says that having owned and operated numerous businesses dependent upon China’s economic emergence, COVID-19 was “no threat” to the relationship.
“How we manage the relationship, as custodians of that engagement is, however, of some moment and requires balanced consideration and a clear focus,” he says.
Carracher says there is a need to see past the “contemporary issue” to the depth and importance of the relationship and the opportunity to advance the welfare of all Australians through mature and considered leadership.
“We must trust in that leadership now to manage the message elegantly at a time when we need collaboration and cooperation among our global leaders to a global issue,” he says.
The Urbanest deal closing locks in Scape’s position as the country’s top operator. The company was oversubscribed with debt commitments from 20 banks in a process underwritten by three major banks, the Commonwealth Bank, Morgan Stanley and Singapore’s UOB.
The purchase was also backed by equity commitments from Allianz Real Estate, AXA Investment Managers – Real Assets, and APG Asset Management, despite concerns about the coronavirus crisis, which have derailed smaller property deals for shopping centres and office blocks.
An artist’s impression of the new Scape Student Living building at 393 Swanston St.
“Our private ownership of the vertically integrated company that does all the fund management, asset acquisition, development design and branded operations of the student accommodation buildings gave confidence to the equity and debt partners in the control and quality of our execution for a long term asset class,” Carracher says.
The Scape Core Fund and its capital partners, completed the acquisition of the Urbanest portfolio just months after the new vehicle was established.
Scape already runs two real estate funds developing 19 facilities with an end value of about $4bn.
The Urbanest deal includes 6805 beds across 14 operational assets in Sydney (7 assets), Melbourne (4 assets), Brisbane (1 asset) and Adelaide (2 assets), and follows Scape’s acquisition of the Atira Student Living platform last September. That added six operational assets in Melbourne, Brisbane and Adelaide housing 3510 students.
The first of the Urbanest buildings was opened in Brisbane in 2010 and was the first generation of purpose built student accommodation in Australia. The most recent buildings opened on Swanston Street in Melbourne last year and in Darling Square in Sydney in 2018.
During COVID-19, Scape was a first responder with extensive coronavirus protocols in late January, including 14-day isolation management, wellness and security apps, 24/7 concierge, hygiene and security solutions and in-building nurse support.
No positive cases have been confirmed across the Scape portfolio with more than 500 international students undertaking 14-day isolation in the Scape and Urbanest managed studios on arrival from overseas.
Scape was advised on the Urbanest transaction by Moelis Australia and Morgan Stanley.
Carracher predicts that the new combination will support Australia’s top position in the global education market as it worked through COVID-19 and the economic demands of the new world.
“We have no doubt the demand for education will continue and the need for safe and secure accommodation solutions for the globally mobile student community will be even stronger,” he says.
Scape Australia chief executive Stephen Gaitanos said the new assets would be combined with the company’s 10,000 bed development pipeline and existing 3000 bed operations in Sydney, Melbourne and Brisbane.
This article originally appeared on www.theaustralian.com.au/property.
