Student accommodation one of 2019’s boom sectors
The student accommodation sector is proving to be one of the busiest areas of the year with two major portfolios on the block and international capital circling for more opportunities.
AMP Capital picked up a $700 million portfolio of student beds across the Australian National University’s Canberra campus in March, but bigger deals now loom.
In one of the latest moves, Scape Australia has struck the largest property financing deal for a purpose-built student accommodation asset in Australia, with US giant Starwood Capital to back its building at 97 Franklin St, Melbourne.
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The US group will finance the construction of what will be the world’s tallest student accommodation tower. But even this deal could be dwarfed by the portfolios that are in play.
Major players are positioning for the $2 billion Urbanest portfolio that is on the block after its US pension fund owner decided to exit this market. Also up for grabs is the $600 million Atira platform being offered by US bulge bracket bank Goldman Sachs and the troubled Blue Sky.
Scape is considered one of the prime contenders for either portfolio, but has a preference for the best-quality stock. It is setting up a core fund to acquire and hold some of the assets that are being spun out of its development pipeline, and investors are chasing these properties as they stabilise in Sydney, Melbourne and Brisbane. The inflows could turn into even larger commitments from offshore funds, which see Scape as a vehicle to expand into the hot sector.
But there will be competition. Rival operator Iglu comes with the backing of Singaporean sovereign wealth fund GIC and it is another of the strategic buyers in the market.
Others that may show interest are CLV, which itself was marketed two years ago, and UniLodge. Financial players including AMP Capital and Plenary may also be contenders. Wee Hur and Cedar Pacific also have trusts in the area.
The key will be which of the local operators has the backing to pursue an aggressive growth strategy. With local capital relatively thin, the races will probably be decided by deep-pocketed international investors.
Those hunting a bargain may target the Atira platform as they seek to capitalise on Blue Sky’s woes after Canada’s Brookfield and US player Greystar looked at the platform but didn’t complete a deal. But Goldman Sachs is not likely to accept a discount.
This article originally appeared on www.theaustralian.com.au/property.
