Urbanest offers up mammoth $2bn student accommodation portfolio

Urbanest at 142 Abercrombie St, Redfern. Picture: AAP
Urbanest at 142 Abercrombie St, Redfern. Picture: AAP

The Australian arm of student accommodation group Urbanest has been put on the block by US pension fund Washington State Investment Board for more than $2 billion in the country’s largest ever offer in the maturing property sector.

The move will mark the pension fund’s exit after more than a decade of developing, managing and expanding its operations to make it into one of the biggest players locally, and will also spark fierce competition between rival players keen to expand and international financial buyers.

The group, being advised by real estate agency Savills, has released a teaser to market, putting it ahead of a forthcoming sale by the listed Blue Sky Alternative Investments and investment bank Goldman Sachs, that are again preparing to offer their Atira business for more than $500 million.

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Canadian group Brookfield stepped away from a play for that business last year and US operator Greystar Real Estate Partners also looked at a deal, and may turn its attention to Urbanest.

The sales of both platforms are tipped to drive a wider consolidation across the sector and will fuel debate about whether some players are exiting as prices peak and a wave fresh supply hits key capitals. But these concerns have done little to cool the race for Urbanest with select international players being given access to its operations data and others expected to join the race in coming weeks.

Industry interest is likely to come from the Scape and Iglu operations which could find themselves up against international insurers and pension funds that have been buying student accommodation assets offshore.

Urbanest has an 11-year track record and there is the potential for the platform to effectively double by drawing on its ties with top universities.

Others including GSA, UniLodge, Wee Hur, and smaller operators keen to grow may also feature, but the preference is for a platform deal.

The bidders are fiercely chasing the collection of 14 assets that is weighted to Sydney and includes properties in Melbourne, Brisbane and in Adelaide.

Urbanest was considered a pioneer of the sector when it launched its model to build, own and manage facilities.

The group has almost 7500 beds extending from mid-range to fully catered options, and it offers the potential to expand.

Urbanest is forecast to spin off close to $100 million worth of income next year and its Sydney assets are particularly lucrative.

Urbanest is already considered the country’s largest platform and a rival could join with it in order to secure an unassailable position.

There is also the potential to overhaul earlier Urbanest facilities and boost their competitive position in what is becoming a busy market.

A bout of industry consolidation akin to moves in Britain two years ago has been expected and the offer could prompt more players to head for the exits.

Weaker players are finding it tougher to finance their new projects while the stronger echelon of internationally backed groups are able to bring cutting edge technologies to their operations, allowing them to grow their incomes.

Urbanest has an 11-year track record and there is the potential for the platform to effectively double by drawing on its ties with top universities.

This article originally appeared on www.theaustralian.com.au/property.